It has been 11 years since the North Olmsted City School District has requested new operating dollars. But after stretching funds for all that time, the issue will come back to voters this spring.
During two school board meetings conducted in December and early January, members unanimously passed two resolutions to send an 8.5-mill operating levy request to the Cuyahoga County auditor to eventually place on the May 4 ballot. The five-year levy would generate $7.2 million per year.
The last operating levy voters passed, in 2010, was for 7.9 mills and took three attempts. In the years since, schools Superintendent Mike Zalar said, the district has managed funds well in the face of declining revenue streams and increasing expenditures.
“We’ve been discussing the need for additional revenue for the last couple of years,” Zalar said. “I think the district has done a great job in being good stewards of the district’s resources...The normal levy cycle is three to five years because costs continue to rise. There’s inflation, cost of living, health care, all the various expenditures we have as a district. Nothing really goes down ever. It’s clear we have a need.”
The board felt 8.5 mills was the right amount to take to voters after careful consideration. During recent meetings, it had looked into millages ranging from 4.9 to 11.0. Once it reviewed the district’s most recent five-year forecast, presented by treasurer Kate Henes on Nov. 5, the need for a higher millage became clear.
Without new operating revenue, the district, which has already been deficit spending, will end fiscal year 2022 with a budget deficit of $6.4 million. By the start of fiscal year 2025, which begins July 1, 2024, the district would be $15 million in the red.
“The need is definitely there for the district, so the board looked at higher millage options and lower millage options,” Zalar said. “They thought that the 8.5 was really the minimum amount of millage that we could request at this time. We felt like that’s where our sweet spot was.”
Fiscal year 2021 ends on June 30, and the district has projected having $5.4 million more in expenditures than revenue. At the current spending pace, there’s a two-year window in which it can operate without new revenue before cash reserves run out and deficits balloon.
Henes’ November presentation also showed how expenditures will continue to rise. State aid has fallen by over $896,000 in the past two years, and will remain around that level for the duration of the five-year forecast. State funding makes up 23% of the district’s yearly budget, and will remain around $7 million annually through 2025. Tax revenue makes up 76% of the district’s budget and those numbers are projected to remain relatively flat over that same period.
Staff salary and benefits combine to make up 86% of the district’s expenses and have continued to rise. Then there’s the COVID-19 pandemic, which has cost the district around $1.2 million this school year to keep schools safe and sanitized for 3,600 students.
The ongoing pandemic and its impact on the economy made the school board’s decision to go forward with a levy proposal a tough one. The board had initially discussed a new levy in July 2020, weighing millages of 4.9, 5.9 and 7.4, but opted to hold off due to COVID.
“We know the timing’s going to be challenging,” Zalar said. “We know many of our families have been impacted significantly due to COVID. So we know it’s going to be a very difficult ask, but at the same time, we know the need is real and we don’t have a lot of good options. We feel this is a reasonable request.”
The proposed levy itself would not entirely cover spending deficits, however. Zalar said the district will be looking into additional revenue sources to help close the gap, including an Early Retirement Incentive (ERI) for eligible employees, allowing the schools to hire less-experienced replacements at lower base salaries.
This year, there are 15 eligible employees. By 2023, that number jumps to 20. In Zalar’s presentation to the board on Dec. 3, he noted that if 75% of eligible employees take advantage of the ERI, the district could save upwards of $640,000 per year.
Another long-term savings is likely to come from the closure of Spruce Primary School, 28590 Windsor Drive. Currently the district’s smallest school, Spruce houses 203 students, and was originally slated to close in January 2020. It was postponed once the pandemic hit, and likely won’t cease operations until the 2022-23 school year.
Zalar said there will be an initial financial hit related to changing transportation costs and redistricting, but over the long haul the closure of Spruce would save $500,000-$800,000 annually.
“Given our financial needs and all the uncertainty that’s been injected via COVID, we felt the time just isn’t right right now,” he said.
If voters reject the levy, the district can reintroduce it in November. Ultimately, deep cuts to school programming could become necessary if it doesn’t eventually pass.
“Everything would be on the table,” Zalar said. “We’d have to have a conversation around what our priorities would be. Our highest priority is the classroom and our academic programming. That’s where you start and that’s what you want to preserve, and you work outwards from there.”
Levy details will continue to be discussed through the spring.
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