“In business, all expense projections and all revenue projections must account for inflation.” ―Hendrith
Vanlon Smith Jr. With the pandemic easing, a new threat looms on the horizon for area school systems–inflation–and Springfield Local Schools is no exception.
At the May 24 meeting, school treasurer Ryan Lockwood presented the five-year budget forecast for the district. He noted two areas of concern–the passage of House Bill 126 and the increased costs of supplies.
HB 126 largely eliminates the district’s ability to contest property tax valuations, and school officials are very limited on their ability to dispute valuations.
According to the legislation, boards of education may not file complaints against the valuation of real property unless the property sells for 10 percent and at least $500,000 more than the county auditor’s full market value.
This significantly limits school boards, preventing them from filing complaints on more than a handful of sales annually. Because the vast majority of properties are valued lower than $500,000, they will never approach the filing threshold of an increase of $500,000.
The law also prohibits school districts and other political subdivisions from appealing county board of revision decisions to the Ohio Board of Tax Appeals.
“It’s a real mess,” Mr. Lockwood said, and believes the problem is exacerbated by the Lucas County auditor, whom he alleges is “not following the state prescribed method of valuing properties at their market sale prices.”
As a result, many properties are being undervalued, despite their higher selling prices. “The district will have a difficult time moving forward with collecting additional property tax revenue.”
Also impacting revenues is the funding formula change. “State revenues are down significantly for fiscal year 2022,” Mr. Lockwood said.
But one of the greatest challenges to the district is economic inflation, which reared its head in early 2022.
“Economic inflation and the supply chain shortage crisis have had a great impact on purchases the district makes on a daily basis,” he pointed out. “Transportation, food service and maintenance/custodial have been hit particularly hard with product and equipment shortages.”
Mr. Lockwood is grateful for summer with school not in session, but worries about the upcoming school year and the cost of fuel to operate the bus fleet.
“Current fiscal year to date expenditures are above the previous fiscal year,” he said, and attributes it to general inflation, higher audit costs and higher auditor/treasurer fees on property tax revenues.
The treasurer includes in his budget forecast an increase in the cost for employee benefits. “Future increases can be attributed to more individuals taking healthcare, increased salaries causing increases in retirement benefits and cost increases in plans.”
Also impacting the budget is the food service fund, which has in the past required transfers from the general fund to remain positive. He said there will be “another food service transfer of approximately $300,000 based on current food service encumbrances as of May 2022.”
In addition, the high school athletic fund will need more than $15,000 from the general fund to close with a zero balance, he explained.
For the current fiscal year, Mr. Lockwood reported total revenues of $41.51 million with expenditures of $40.54 million.
At the current rate, he projects expenses will exceed revenues in 2023 and continue through 2026. In that year, expenses will outpace revenues by $4.94 million.
