NORTHWESTERN DISTRICT — The Northwestern Local Schools District is under a designation of fiscal caution by the state, but district personnel have concrete plans to rectify it without state intervention.
Caution is the first stage in the Ohio Department of Education’s series of financially troubling designations — fiscal watch and fiscal emergency are the two after it.
Northwestern Superintendent Jeffrey Layton explained that Northwestern received its designation because of a projection of a deficit in its five-year forecast.
Projected deficit spending of between 2-8 percent in the five-year forecast results in fiscal caution, as set in motion by the state superintendent of public instruction, according to Layton.
"This means," he said, "that the district must come up with a plan to reduce the deficit spending, then revise the five-year forecast accordingly."
After the projected deficit is rectified, the state "can lift the fiscal caution designation the following year, which could be in the 2018-2019 school year," Layton said.
Changes are already in motion the five-year forecast made by Layton and Treasurer Lesa Forbes. These are anticipated to be documented to the state by the end of January.
Layton outlined a number of reasons for the projected deficit, as well as the plan to eliminate it and increase revenue to the district.
Infrastructure repairs, including to the heating, ventilation and air conditioning system; maintenance; and updates over the past three years and completion of upgrades over the next two years constitute a significant expenditure for the district, according to Layton, as have "sizable increases (in) medical insurances ... an anticipated 13 percent increase in insurance premiums for the 18-19 school year."
Added expenses have been coupled with a reduction in local home valuations, according to Layton, who listed other causes for financial difficulty, including one districts have been confronting for years. Layton describes it as "reduced state funding support, combined with unfunded mandates."
Additionally, he said, "increased soft costs" have made a negative impact on the budget, for example reduced state funding to educational service centers, including Tri-County ESC, which offers consortium services to districts in Wayne, Holmes and Ashland counties.
"(This) resulted in increased costs to local schools, (including) Northwestern," Layton said.
Layton also cited funding of charter community schools at the expense of local public school funding and the greater need for services — intervention specialists, aides and administrative supports and personnel — for children with special needs.
The board may have to consider increasing the millage on the permanent improvement levy, Layton said.
"Our five-year, 2.8-mill permanent improvement levy is up for renewal in Nov., 2018," he added. "This PI Levy was first passed in 1989 and has never increased."
The plan was to continue renewing at the same 2.8 millage, but, because the district has "never asked for an increase," Layton said, "… this PI levy has not kept up with inflation at all in its 30 years."
Should finances "get too tight before this goes on the ballot in November," he said, the district may have to turn to increasing the millage.
Layton also wanted to point out that "even with the emergency levy that (the) Northwestern community approved two years ago, our district’s school tax millages have actually decreased since 2005."
"This is because we essentially replaced an expiring 3.3 mill bond levy with the 2.9 mill emergency levy that took effect this past year," Layton said.
The strategy for solving the potentially developing financial issues has several prongs.
Paying off the construction and renovation project with the Ohio Schools Facilities Commission — "due to be paid off on or before December, 2024," Layton said — is one of them.
In Layton’s projection for the future, he can envision "feasibly replac(ing) the OSFC facilities bond with another emergency levy in December 2024 and hav(ing) sufficient operating revenue, while further reducing tax millages for our community."
But solving the fiscal problem could also mean "potential cost-reduction measures," including scaling back on HVAC work, considering more shared services with other districts, subcontracting some services, increasing employee contributions to insurance, slowing bus and van replacements and technology improvements and even considering staff layoffs.
Also on the table are increasing incoming open enrollments — a stable 220 over the past three years — and continued grant-writing efforts.
According to the Ohio Department of Education website,the ODE may "visit and inspect" a district under fiscal caution, help it implement proposals and make recommendations concerning proposals made by a district’s board.
Additionally, based on Ohio Revised Code, If the state superintendent deems a district is not making appropriate corrections to its fiscal condition, he could recommend to the state auditor the district be moved to fiscal watch in order to "prevent further fiscal decline."
Layton clarified that Northwestern is "not near that point," in which the state would intervene in district operations.
"We would have to be in a much worse situation before they sent in a team to advise and help with interventions," he said. "They just want to ensure that we have a plan in place to reduce or eliminate the October five-year forecasted budgeted negative spending."
Reporter Linda Hall can be reached at lhall@the-daily-record.com or 330-264-1125, ext. 2230. She is @lindahallTDR on Twitter.