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Recap: Nov. 2023 Five-Year Forecast

Recap: Nov. 2023 Five-Year Forecast

The Lakota Board of Education adopted the District’s most recent five-year forecast, as presented by Treasurer/CFO Adam Zink at the school board’s Nov. 20 special meeting. Despite uncertainties in factors like local tax revenue tied to the state’s pending HB187 legislation, the forecast projects an 11th consecutive year of balanced budgets through FY24.

While the May 2023 forecast projected deficit spending beginning in FY24, the latest report delays deficit spending by another year until FY25. For such a scenario, Zink estimates that Lakota will maintain 151 days of cash balance, significantly above the 90-day minimum required in Lakota’s board policy and the 60 days recommended by the Government Finance Officers Association (GFOA). 

“My cautionary note is that yes the budget looks good in terms of reserves, but deficit spending is still deficit spending and it’s not sustainable over the long run,” said Board President Lynda O’Connor. “And I’m really proud of the record of 11 years of a balanced budget.”

“The thing that I think Lakota should take away is that we have growth,” said Zink, noting the impact of factors like projected enrollment increases and new construction. “We have growth in our students. We have growth in our community. We all know that can cause different areas of concern.”

“This forecast also reflects our commitment to the educational success of our students. I believe that is very important,” added Zink in reference to notable expenditure increases in curriculum resources each year of the forecast. “We are working very diligently for the district and for the community to maximize our operating revenues in order to be able to fund these types of initiatives for our students.”

The bi-annual forecast, presented and submitted to the State each May and November, assists with long-range financial planning. It provides a snapshot of both historical data and the next five years, based on current and projected revenue and expenditure assumptions. Among the highlights on the revenue side: 

Revenue Assumptions

  • The blended 31.8% property tax increase across Class I (residential) and Class II (commercial industrial) for tax year 2023 will result in an estimated $4.4 million increase in local revenue during FY24 and FY25.
  • State funding levels based on the current biennium budget and HB33, and assuming an estimated year-over-year enrollment increase of about 150 students. 
  • Interest rates holding at increased level realized at the end of FY23. 
  • New for this forecast is the assumption of an additional $1 million in other revenues for “indirect costs”- or costs incurred by the District for functions not funded by the general fund.

Revenue Challenges

  • The forecast overlaps the next tax reappraisal coming in 2026.
  • The forecast spans the unknown outcomes of two biennium state budgets. 

Zink went on to explain the predicted impact of the triennial update on local homeowners’ property taxes as well as Lakota’s revenues. It’s estimated that for a home with an appraised (not assessed) value of $100,000 in tax year 2022, for example, the potential 37 percent increase in local property taxes would mean an increase of approximately $73 per year (assuming full homestead and rollback). 

However, it’s important to note that this full 37% increase is not passed on to the school district due to HB920, which re-calculates the effective millage against the new tax base. According to Zink, “[HB920] basically rolls the millage down as the tax base goes up or rolls the millage up as the tax base goes down.” In other words, the millage is adjusted to collect the same amount as the year prior, with the exception of Lakota’s 6.5 inside mills. 

While Zink pointed out that Lakota’s recent spending trends are “smoother than most districts with very few peaks and valleys,” the forecast does predict some notable cost increases over the next five years. 

Expenditure Assumptions

  • Approved wage increases in current collective bargaining agreements through FY24. 
  • A return to Lakota’s 10-year average of 7% annual increases in healthcare costs, following the current year’s jump of 25%. 
  • ESSER funds that previously supported specific staff positions and will fall back into Lakota’s general fund to maintain.
  • Six additional teaching positions each year to account for the estimated student growth.
  • Class sizes that continue to meet board policy requirements. 

Expenditure Challenges

  • The unknown impact of future contract negotiations for bargaining units.
  • Student enrollment trend uncertainties. 
  • Unpredictable healthcare rates.
  • A new curriculum review cycle that increases costs for the annual purchase of updated materials to support individual subject areas. 

“A new addition to our forecast is our curriculum rotations,” Zink explained. “I’ve increased the forecasted expenses in this area and this is anticipated to produce improved results on our state report card. That’s an investment that we’re making in our students.”

Superintendent Dr. Elizabeth Lolli explained that most districts establish an annual adoption rotation for refreshed resources and tools - each year tackling a different subject area. This schedule ensures the district has the budget to support cyclical updates to teaching materials at least every six years. 

“The district does not have a rotation right now, so the curriculum department has been working on creating a rotation for curriculum adoptions,” said Lolli, explaining that Lakota’s unusual need to refresh materials for two subject areas this year - both math and reading - was directly tied to Ohio’s new requirement to adopt the “Science of Reading” curriculum. 

For more information and resources, view the November 2023 Five Year Forecast or watch the Nov. 20 special board meeting to view Lakota’s full five-year forecast presentation.  

  • finance