Starting next school year, the Chagrin Falls Exempted Village School District faces deficit spending as expenditures increase and revenue decreases. Without the passage of a levy or making cuts to their budget, the district’s five-year forecast projects a negative balance of almost $1 million by 2024.
While the district projected deficit spending in November for the 2019-20 school year, they managed to achieve a surplus of more than $300,000 for the year with the forecast showing total expenditures at about $31.9 million and an ending cash balance of $13.5 million. District Treasurer Ashley Brudno said during the regular May 20 Chagrin Falls Board of Education meeting that this is due to several factors like new construction, higher delinquency collection and cost savings affiliated with the COVID-19 school closures.
“[In November], we were expecting our expenditures to be exceeding our revenues,” Mrs. Brudno said of the 2019-20 school year. “Now, we do have a slight positive, we have a slight surplus. You’ll see that that quickly changes moving into next year.”
For 2021, the forecast projects an estimated deficit of nearly $2.4 million with an ending cash balance of $11 million, she revealed in the forecast. By 2024, the district could face deficit spending up to more than $5 million with an ending cash balance of more than $900,000 in the negative if nothing is done to address this.
“When we’re talking about a five-year forecast, I always have to point out that this represents what we know now, and our finances and circumstances are changing constantly as the last couple of weeks have certainly demonstrated to us,” Mrs. Brudno pointed out, noting drastic changes to the district’s budget after Gov. Mike DeWine’s $300 million cut to school funding, which left the district with a nearly $534,000 (32 percent) cut to their state revenue.
“Within this forecast, we make a lot of assumptions, there [are] a lot of things that are not yet known, tons of variables that go into how we estimate these numbers,” she added, “and changes in those or assumptions that do not come out the way we expect can certainly change the numbers – and change the numbers significantly.”
Mrs. Brudno said revenues are expected to decline “significantly” next year.
“With COVID-19 affecting our economy, our tax collections will go down,” she said. “Collection rates are now expected to be much lower than what we were expecting back in November. As the economy hopefully picks up, slowly, we do see some increases in those collections going forward.”
As for state revenue projections, “it’s anybody’s guess,” Mrs. Brudno said.
While the equity of the foundation cuts is still in discussions across the state to potentially ease the percentage taken from wealthier school districts, she said the Chagrin Falls schools should still expect to lose the $534,000 in foundation funding.
“As of right now, we have heard nothing about where that’s going to go,” she said. “I have it modeled that we will experience the same cut and we will experience the same level of funding. I have received no reliable information on whether or not that’s going to happen.”
Board member Kathryn Garvey pointed out that once any state funding is taken away from the district, “it’s very unlikely for us to get any of those funds back.”
Looking at expenditures over the next five years, this is expected to increase over time, Mrs. Brudno said, but at reduced dollar amounts due to the $300,000 of planned cost savings the district has already implemented as well as the board’s looking to switch insurance models to potentially save up to another $1 million.
The board is at a standstill with levy scenarios in order to remedy this deficit spending with a potential levy hitting the upcoming November ballot. Board members agreed they need more information on what to expect of the upcoming elections, noting a strong divide in voters for the presidential election as well as safety concerns with the COVID-19 health crisis.
Board member Mary Kay O’Toole said she would propose the 3.85 mill levy for this fall to replace millage expiring this December to keep the “no additional tax” promotion and to avoid losing collection if they were to wait until spring.
Board Vice President Greg Kanzinger said that while he originally supported asking for just the 3.85 mills, thinking it could stretch three years, after the state budget cuts he’s not so sure.
“Right now, with what I’ve seen of how we would have to cut $650,000 from the budget, I think it would be extremely tight,” he said. “I think it would change some programming for the worst, if not much worse, in the district. If we can’t find other ways of cutting money where I don’t think it’s going to affect the programming significantly, then I think we would need to ask for more than 3.85 (mills).”
He suggested potentially adding another millage to replace the money lost from the state. Mrs. Brudno said during a regular meeting in early May that 1 mill is about $545,000 for the school district with current collection rates.
“The millage amount really follows the decision of timing,” board member Sharon Broz said, explaining that a fall levy would determine lower millage and spring levy would require a higher millage.
“Where I’m at right now is I really would like to understand what an election in November looks like,” she said. “I feel like we need to have that conversation, really, before we can take this one much further.” She added that the levy committee will also need to know more about how they can campaign if the board opts to put a levy on the November ballot with uncertainty surrounding the pandemic.
Board President Phil Rankin and Superintendent Robert Hunt agreed that understanding the political “arena” would aid their decision.
Mrs. Garvey said she would try to bring in an expert on politics for an upcoming BOE meeting to give the board more insight or advice on the upcoming election.