Tipp City Exempted Village Schools Miami County Assumptions for Five-Year Financial Forecast Projected Fiscal years July 1, 2014 through June 30, 2019 Forecast provided by: Tipp City Exempted Village School District Gina M. Helmick, CPA, Treasurer/CFO
Tipp City Exempted Village Miami Schedule of Revenues, Expenditures and Changes in Fund Balances For the Fiscal Years Ended June 30, 2012, 2013 and 2014 Actual; Forecasted Fiscal Years Ending June 30, 2015 Through 2019 Actual Forecasted Fiscal Year Fiscal Year Fiscal Year Average Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2012 2013 2014 Change 2015 2016 2017 2018 2019 Revenues 1.010 General Property Tax (Real Estate) $10,334,351 $10,378,752 $11,258,637 4.5% $12,066,900 $12,127,235 $12,187,871 $9,412,015 $6,575,220 1.020 Tangible Personal Property Tax 2,636 2,636-50.0% 1.030 Income Tax 1.035 Unrestricted State Grants-in-Aid 6,764,439 6,967,515 7,207,304 3.2% $7,505,000 $7,617,575 $7,731,839 $7,847,816 $7,965,533 1.040 Restricted State Grants-in-Aid 39,131 37,385 55,352 21.8% $34,000 $34,680 $33,986 $33,307 $32,641 1.045 Restricted Federal Grants-in-Aid - SFSF 245,338 245,338-50.0% 1.050 Property Tax Allocation 2,639,007 2,251,166 2,376,873-4.6% $2,442,091 $2,454,301 $2,466,573 $2,437,192 $2,049,378 1.060 All Other Revenues 881,845 744,909 888,808 1.9% $870,000 $870,000 $870,000 $870,000 $870,000 1.070 Total Revenues 20,906,747 20,627,701 21,786,974 2.1% $22,917,991 $23,103,791 $23,290,269 $20,600,330 $17,492,772 Other Financing Sources 2.010 Proceeds from Sale of Notes 2.020 State Emergency Loans and Advancements (Approved) 2.040 Operating Transfers-In 835 2.050 Advances-In 46,000 11,896 20,700-0.1% 5,000 5,000 20,000 20,000 20,000 2.060 All Other Financing Sources 12,032 27,504 81,606 162.6% 67,000 10,000 10,000 10,000 10,000 2.070 Total Other Financing Sources 58,032 39,400 103,141 64.8% 72,000 15,000 30,000 30,000 30,000 2.080 Total Revenues and Other Financing Sources 20,964,779 20,667,101 21,890,115 2.2% 22,989,991 23,118,791 23,320,269 20,630,330 17,522,772 Expenditures 3.010 Personal Services 13,497,202 12,375,391 12,521,016-3.6% 12,871,250 13,128,675 13,391,249 13,659,073 13,932,255 3.020 Employees' Retirement/Insurance Benefits 4,368,586 4,083,678 4,198,302-1.9% 4,304,660 4,735,126 5,208,639 5,729,502 6,302,453 3.030 Purchased Services 2,818,778 2,721,223 2,171,137-11.8% 2,351,286 2,586,415 2,845,056 3,129,562 3,442,518 3.040 Supplies and Materials 539,670 473,907 521,494-1.1% 616,558 635,055 654,106 673,730 693,941 3.050 Capital Outlay 29,784 33,461 46,037 25.0% 83,556 166,063 171,045 176,176 181,461 3.060 Intergovernmental Debt Service: 4.010 Principal-All (Historical Only) 4.020 Principal-Notes 4.030 Principal-State Loans 4.040 Principal-State Advancements 4.050 Principal-HB 264 Loans 56,830 58,319 59,846 59,846 61,414 63,023 64,675 4.055 Principal-Other 4.060 Interest and Fiscal Charges 20,949 25,445 23,917 23,916 22,350 20,740 19,088 4.300 Other Objects 316,243 333,753 1,008,185 103.8% 1,170,356 1,217,170 1,265,857 1,316,491 1,369,151 4.500 Total Expenditures 21,570,263 20,099,192 20,549,935-2.3% 21,481,429 22,552,265 23,619,715 24,768,297 26,005,542 Other Financing Uses 5.010 Operating Transfers-Out 12,000 2,549 76,814 1417.4% 45,000 45,000 45,000 45,000 45,000 5.020 Advances-Out 11,896 20,700 5,000-0.9% 5,000 20,000 20,000 20,000 20,000 5.030 All Other Financing Uses 5.040 Total Other Financing Uses 23,896 23,249 81,814 124.6% 50,000 65,000 65,000 65,000 65,000 5.050 Total Expenditures and Other Financing Uses 21,594,159 20,122,441 20,631,749-2.1% 21,531,429 22,617,265 23,684,715 24,833,297 26,070,542 6.010 Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses 629,380-544,660 1,258,366-27.8% 1,458,562 501,526 364,446-4,202,968-8,547,770-7.010 Cash Balance July 1 - Excluding Proposed Renewal/Replacement and New Levies 1,296,917 667,537 1,212,197 16.5% 2,470,563 3,929,125 4,430,651 4,066,204 136,763-7.020 Cash Balance June 30 667,537 1,212,197 2,470,563 92.7% 3,929,125 4,430,651 4,066,204 136,763-8,684,534-8.010 Estimated Encumbrances June 30 36,648 52,496 37,608 7.4% 38,000 38,000 38,000 38,000 38,000 Reservation of Fund Balance 9.010 Textbooks and Instructional Materials 9.020 Capital Improvements 9.030 Budget Reserve 9.040 DPIA 9.045 Fiscal Stabilization 9.050 Debt Service 9.060 Property Tax Advances 9.070 Bus Purchases 9.080 Subtotal 10.010 Fund Balance June 30 for Certification of Appropriations 630,889 1,159,701 2,432,955 96.8% 3,891,125 4,392,651 4,028,204 174,763-8,722,534- Revenue from Replacement/Renewal Levies 11.010 Income Tax - Renewal 11.020 Property Tax - Renewal or Replacement 2,836,795 5,673,590 11.300 Cumulative Balance of Replacement/Renewal Levies 2,836,795 8,510,385 12.010 Fund Balance June 30 for Certification of Contracts, Salary Schedules and Other Obligations 630,889 1,159,701 2,432,955 96.8% 3,891,125 4,392,651 4,028,204 2,662,032 212,149- Revenue from New Levies 13.010 Income Tax - New 13.020 Property Tax - New 13.030 Cumulative Balance of New Levies 14.010 Revenue from Future State Advancements 15.010 Unreserved Fund Balance June 30 630,889 1,159,701 2,432,955 96.8% 3,891,125 4,392,651 4,028,204 2,662,032 212,149- ADM Forecasts 20.010 Kindergarten - October Count 20.015 Grades 1-12 - October Count State Fiscal Stabilization Funds 21.010 Personal Services SFSF 21.020 Employees Retirement/Insurance Benefits SFSF 21.030 Purchased Services SFSF 21.040 Supplies and Materials SFSF 21.050 Capital Outlay SFSF 21.060 Total Expenditures - SFSF See accompanying summary of significant forecast assumptions and accounting policies Includes: General fund, Emergency Levy fund, and any portion of Debt Service fund related to General fund debt
FINANCIAL FORECAST Introduction All Boards of Education are required by Ohio Revised Code to submit a five-year forecast to the state each year no later than October 31 of each fiscal year and to update the forecast if necessary between April 1 and May 31 of each fiscal year. Forecasts are living documents in that they are based on current assumptions and may and do change. Tipp City EVSD s current forecast was compiled based on current economic conditions, taxing conditions and state funding issues as well as input from the district s administration regarding district s needs. Purpose The three main purposes of the forecast are Executive Summary To provide the Board of Education a means for long range financial planning To serve as a basis for certification of 412 certificates To provide the Ohio Department of Education and Ohio Auditor of State a vehicle to identify school districts who may be in financial distress The updated forecast includes the following new assumptions Update to include fiscal year 2014 s actual figures Tax revenue estimates for 2015 include latest estimates from the Miami County Auditor. Salary and benefit estimates to include all staffing changes for fiscal year Implications of current forecast The district s ending 2014 cash balance was higher than projected due to additional transportation funding, lower than projected special education costs, the realization of savings on personnel costs due to attrition and cost containment in building/department budgets Fiscal year 2015 s and 2016 s budget reflects a positive cash flow as expenditures are in-line with funding Beginning in fiscal year 2017 the district s expenditures exceed estimated revenue The district will continue to see its cash balance drop beginning in 2017 as is the case with a normal the levy cycle The district s current assumptions and operations cannot be sustained beyond 2018 The district s ability to continue operations with the renewal of both emergency levies in 2016 will not be sufficient to fund operations; additional funds or cost or saving measures will be required. Tipp City Exempted Village School District Financial Forecast October 2014 Page 1
FINANCIAL FORECAST District Considerations Development of an operational plan or vision for the district that addresses the need for ongoing community support in the terms of levy passage for staff salaries and benefits, operations, permanent improvements and possible building or major renovations to district s current facilities Ability to maintain or implement new strategies that promote a positive cash balance including revenue generation and or cost saving measures without detriment to academic programs Monitoring and projection of enrollment figures including open enrollment to assist in projecting state revenue assistance Revenue/Expenditures Overview 2015 2016 2017 2018 2019 Beginning Cash Balance $ 2,470,563 $ 3,929,125 $ 4,430,651 $ 4,066,205 $ (136,762) Revenue $ 22,989,991 $ 23,118,791 $ 23,320,269 $ 20,630,330 $ 17,522,772 Expenditures $ 21,531,429 $ 22,617,265 $ 23,684,715 $ 24.833,297 $ 26,070,542 Excess (Deficit) $ 1,458,562 $ 501,526 $ (364,446) $ (4,202,967) $ (8,547,770) Ending Cash Balance $ 3,929,125 $ 4,430,651 $ 4,066,205 $ (136,762) $ (8,684,532) $30,000,000.00 $25,000,000.00 $20,000,000.00 $15,000,000.00 $10,000,000.00 $5,000,000.00 $- $(5,000,000.00) $(10,000,000.00) $(15,000,000.00) 2015 2016 2017 2018 2019 Revenue Expenditures Excess Ending Cash The district will be reliant on its cash reserve balance to maintain operations through 2017. This is generally the case through a levy cycle as revenue collections do not keep pace with expenditures or the cost of doing business. Budgeted revenue is heavily reliant on the local revenue base and the need for additional revenue solutions will need Tipp City Exempted Village School District Financial Forecast October 2014 Page 2
FINANCIAL FORECAST to be addressed prior to 2018. Expenditures are holding firm with no increase in staff except for the addition of staff for all-day kindergarten, additional nursing staff, and the need for a part-time mechanic, additional aide support for special needs students and the leveraging of attrition in the certified staffing levels. Health care costs will be a major consideration in 2016 and beyond as the health care industry responds to the Affordable Care Act. The expectation is these costs will be passed on to the user. Since salary and benefits account for more than 80% of the district s budget, these costs will need to be monitored. Revenue Assumptions Both of the district s emergency levies expire in tax year 2016, with the last collection being in fiscal year 2018 or August 2017. This revenue accounts for approximately 25% of total revenue, and expiration will result in a negative cash balance in fiscal year 2018. State budgeted revenues represent approximately 44% of total revenues. The current state biennium budget runs through 2015. After this point, the estimates are ambiguous at best due to change in administration as well as the ever changing condition of state funding and funding models. Property Tax Allocation, 11% Restricted Grants, 0% Unrestricted Grants, 33% General Fund Estimated Revenue - FY15 $22,989,991 Other Revenue, 3% Property Taxes, 53% Property Taxes Unrestricted Grants Restricted Grants Property Tax Allocation Other Revenue Line 1.010 General Property Tax (Real Estate) Property tax values are established by Miami County Auditor based on new construction. A complete reappraisal or update is completed every three years. Tax Year 2013 was a reappraisal year for Miami County, and an update will be done in tax year 2016. During a normal cycle we would expect these values to increase, however, over the recent past values have declined. Current values have seen a decrease in residential values by 8% with an increase in agricultural values of 45% for an overall decrease in value of approximately 7%. The reduction in values does affect the district s inside millage. For tax year 2013, the loss in value resulted in a loss to the district of approximately $100,000. Although declines in property values do affect inside millage the voted millage is protected by HB920. HB920 adjusts tax rates for increases/decreases in values. In effect, should values decrease Tipp City Exempted Village School District Financial Forecast October 2014 Page 3
FINANCIAL FORECAST effective tax rates are increased to allow the tax levies to collect the same revenue as when the levy was originally voted in. These conditions are reflected in the tax revenue estimates. Fiscal year 2015 s estimates are based on estimates prepared by the Miami County Auditor. In fiscal year 2016-2019 estimates include increases of.05% or less based on little to no growth in values or new construction. In fiscal years 2018 and 2019 tax revenue estimates shows significant reductions as both emergency levies expire in tax year 2016. Both levies are expected to be renewed or replaced by the Board based on need. The revenue from renewal of these levies is reflected in Line 11.020. Although these revenues are reflected in Line 11.020, the renewal of these levies will not be sufficient to keep the district out of a deficit balance. Below are real estate tax historical values and rates. 2013 2012 2011 2010 2009 Total Res/Ag Valuation $ 359,283,290 $ 379,420,610 $ 379,527,660 $ 376,528,220 $ 387,490,750 Inside Millage 5.40 5.40 5.40 5.40 5.40 Continuing 16.19 14.98 14.94 14.95 14.60 21.59 20.38 20.34 20.35 20.00 Emergency (2009) 0.00 0.00 2.60 2.60 2.59 Emergency (2009) 0.00 0.00 7.10 7.10 7.09 Emergency (2012) 10.15 9.63 0.00 0.00 0.00 Emergency (2013) 5.25 0.00 0.00 0.00 0.00 15.40 9.63 9.70 9.70 9.68 Sub-Total Operating 36.99 30.01 30.04 30.05 29.68 Bond (2000) 4.32 4.18 4.18 4.18 4.2 Permanent Improvement 1.76 1.63 1.63 1.63 1.59 Total Millage 43.07 35.82 35.85 35.86 35.47 Tipp City Exempted Village School District Financial Forecast October 2014 Page 4
Line 1.035 Unrestricted State Grants-in-Aid FINANCIAL FORECAST Unrestricted State Grants-in-Aid includes basic foundation funding, open enrollment payments and casino tax revenue. Foundation Funding Fiscal year 2015 s basic foundation estimates were based on the most current School Finance Payment Report, SFPR. The new state funding model combines different elements of a district s demographics to derive a state share percentage, or the rate at which the state has determined is their share of the cost to education a student. These demographics include the districts per pupil valuation as compared to the state s median valuation, and a wealth index. The wealth index is the percentage of the district s median compared to the state s median income. The district s current per pupil valuation is 113.07% greater than the state average and the district s median taxpayer income is 121.02% greater than the state s median income. The state evaluates both of these indexes to determine the state share index. If the valuation indicator is lower than the income indicator, the state uses only the valuation indicator to calculate the state share percentage. Additional factors also impact state basic foundation funding including special education, transportation, etc., however core pupil funding is the main funding factor accounting for 76% of state basic foundation funding. 2015 s projections were based on the current state funding model, and include the implementation of all-day kindergarten. Numbers including valuations, income levels and current enrollment figures which calculate funding are still based on 2014 s levels. These will be updated we believe sometime in December of 2015. Fiscal year s 2016-2019 estimates were increased by 1.5% which approximates the average historical growth in per pupil aid. Open Enrollment The district has an open enrollment policy that accepts students from adjacent school districts provided Tipp City has the capacity to accept these students without detriment to academic programs. Fiscal year 2015 s estimates are based on little to no change in the current number of open enrollment students in/out. The district currently received more than $600,000 in 2014 for open enrollment students. Casino Tax Revenue The district received its first payment of casino tax revenue in January 2013. Ohio s first casinos opened in May 2012 in Cleveland and Toledo. A casino in Columbus opened in October 2012 and a casino in Cincinnati opened in February 2013. Each casino is required to file and remit taxes to the state of Ohio daily. Revenue accumulates in the Casino Tax Revenue Fund. By the 15th day following the end of a calendar quarter, money is transferred from the Ohio Casino Tax Revenue Fund into the several funds including 34% to the County Student Fund. Money is distributed from this fund to all school districts in Ohio based upon student populations as certified by the Ohio Department of Education. Money is remitted directly to the school districts by January 31st and August 31 st of each year. The estimate for years 2015-2019 was flat lined as recent casino tax revenue has declined. Tipp City Exempted Village School District Financial Forecast October 2014 Page 5
Line 1.050 Property Tax Allocation FINANCIAL FORECAST Included in this estimated are reimbursements received from the State of Ohio for tax credits given for owner occupied residences and business credits. Also included in this estimate are state reimbursements for Tangible Personal Property tax losses. 2015 s estimates for property tax reimbursements were based on figures provided by the Miami County Auditor. Subsequent year s estimates were increased by.05% the estimated average year over year growth. The tangible personal property tax reimbursement estimate was based on prior year s collections. This reimbursement is only available to current qualifying tax levies. Due to the unknown passage of rates/amounts of the two emergency levies, the reimbursement for these levies was removed from the forecast in conjunction with their expiration. Additionally, the full tax reimbursement will be totally phased out in October 2018. As a result, all reimbursements were removed from the forecast in 2019. The district received more than $800,000 in reimbursements during 2014 with $60,000 of these being generated from the district s emergency levies. Expenditure Assumptions Principal - Other, 0% Capital Outlay, 0% Supplies and Materials, 3% Purchased Services, 11% Benefits, 20% General Fund Estimated Expenditures - FY15 $21,531,429 Interest & Fiscal Charges, 0% Other Objects, 6% Personal Services, 60% Personal Services Benefits Purchased Services Supplies and Materials Capital Outlay Principal - Other Interest & Fiscal Charges Other Objects The forecast includes a salary base increase of 2% for staff in 2016 through 2019. Insurance benefits continue to rise not only due to the cost for coverage, but also due to the Affordable Care Act. In 2015, the district was fortunate to only receive a.5% increase in health care premiums and a zero increase in dental premiums. This was due in whole from low claims cost. This trend is not expected to continue in 2016 as the costs associated with implementation of the Affordable Care Act will be fully felt in 2016. Tipp City Exempted Village School District Financial Forecast October 2014 Page 6
FINANCIAL FORECAST The district is most able to control costs at the supply/material level. These costs account for 3% of the general fund budget. So, while controllable, they have a small effect on the district s budget. Despite this, the forecast includes a 3% increase in this line item for 2016 through 2019. The district is also forecasting the purchase of a bus in years 2016-2019. This will be in addition to the bus that will be purchased out of permanent improvement funds. To address the district s aging bus fleet, the purchase of two buses per year is needed. Line 3.010 Personal Services The forecast includes an addition of 2% to base pay for all staff. 2015 s estimates include severance payments for staff that will be retiring; the hiring of additional kindergarten staff to accommodate all day kindergarten, the hiring of one full-time nursing staff, the addition of a part-time mechanic, and a small increase in personnel costs for aide s to assist special needs students. Also included are the cost savings of approximately $165,000 realized from attrition of veteran staff and their replacement with newer members, and reductions made to workdays for some classified staff. Line 3.020 Employees Retirement/Insurance Benefits This line item includes insurance, retirement, Medicare and worker s compensation insurance. An increase in retirement is required due to an increase in salaries as the district must deposit 14% of includable compensation to either the State Teachers Retirement System or the School Employees Retirement System. Health care costs have also caused this line item to increase. 2015 estimates include a rate increase of.05%. Years 2016 to 2019 reflect a 10% increase for health care costs. This estimate was based on the most current research of where premiums will be going in the future. Dental insurance premiums show no increase as rates have been locked with our dental carrier through 2018. Workers compensation premiums are also reflecting an increase of 5% in 2016 as the district moves from a group experience rating plan to an individual rate. The remaining years are held steady as the district expects to move back into a group experience rating plan in 2016. Line 3.030 Purchased Services Purchased services include expenditures for utilities, professional development, and state foundation deductions for tuition-type students, including open enrollment, community school, scholarships and post-secondary enrollment option/college credit plus students. It also includes estimates for special education services that may need to be provided outside services provided by the Miami County and Montgomery County educational service center contracts. Estimates for this line item were based on historical trends and estimated service needs. A 10% increase was incorporated throughout the forecast to accommodate the addition of professional development cost, estimated increased special education costs, potential consultant costs, and additional wellness expenditures. Professional development costs have been included as Race to the Top dollars has been in the most part funding the District s professional development for the last 3 fiscal years. These costs will have to be absorbed by the general fund. Outside service payments for special education services are also on the rise. As is the national trend Tipp City also is seeing a small rise is those students identified, but more importantly is seeing the cost to support these students increase at a disproportionate rate. Tipp City Exempted Village School District Financial Forecast October 2014 Page 7
Line 3.040 Supplies and Materials FINANCIAL FORECAST This line is also increased for 2016 and incorporates a 3% increase over the life of the forecast. This is due to an anticipated increase in diesel fuel and instructional materials as a whole. Line 3.050 Capital Outlay Fiscal year 2016s estimate include an increase of approximately 3% during the life of the forecast and the purchase of a school bus every year from 2016 to 2019 to upgrade our aging fleet. In prior fiscal years the district has purchased one bus with its permanent funds. This however has not been sufficient to maintain a workable fleet and the addition of a purchase within the general fund is needed. Line 4.050 Principal-HB 264 Loans The District issued 15 year Energy Conservation Notes, HB264, in fiscal year 2012. Amounts on this line include principal repayment on this loan. These notes will be paid in full in fiscal year 2027. Line 4.300 Other Objects County ESC contract and county auditor fees for tax collections are in this line item. This line item shows moderate increases as the cost for special education services is not expected to decrease. Also included in this line item are transfers that will be made to the uniform school supplies fund from the general fund to cover the costs incurred from mandatory waiver of school fees, and an anticipated transfer to the nutrition services fund for deficit spending in that fund. Conclusion The district will see its revenues fall by approximately 24% from 2015 to 2019. This is due to the expiration of the district s two emergency levies The district s expenditures will climb by more than 21% from 2015 to 2019 as cost of doing business increases Cash reserves will not be sufficient to maintain operations beyond 2018 Although the district has implemented many cost saving measures including energy efficiencies, wellness programs and adherence to strict staffing levels, the district will be operating in a deficit in 2017 The forecast demonstrates the district is operating within their means and has made appropriate budgetary decisions to extend the latest voted operating funds through to their expiration Additional programs, changes in services, and/or prevention of cut to services cannot be implemented without additional funding and renewal of both emergency levies Tipp City Exempted Village School District Financial Forecast October 2014 Page 8