Prepared Text for Board Meeting – October 22, 2007

Marc A. Schare 614 791-0646 Home

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Tonight, we approve a new five year forecast, an October ritual for school districts across the state. Everyone in this room has heard all the arguments about the usefulness of the projection, why they are important or why they are useless and how much attention should be paid to them.

One thing I think we can agree on is that the forecast represents the best guess at the moment for where things will wind up a year, two years or three years out. Having made our best guess, the next logical question is – are we going where we want to be going and, if not, what can we do about it. We’ll explore these questions a little later but for now, we need to get our collective heads around the notion that the projection is not something that we have to sit idly by and watch – it can be changed through actions taken by the district and it most certainly can be altered by actions taken by the taxpayers.

We can also agree on what the document says and how it compares to the previously adapted forecast of May 21. In a nutshell, it tells us that the Worthington School District has pulled off an amazing feat for public education in Ohio. We have a balanced budget for the two years that include actual figures for 2006-2007 and projected figures for 2007-2008. A three legged stool illustrates how this happened. The first leg belongs to our friends in the Ohio Legislature who reimbursed us for losses in the tangible personal property tax and showed wisdom in continuing the transitional aid guarantee. The second leg belongs to the Worthington Taxpayers who approved our bond levy in 2006 and the third leg belongs to Superintendent Conrath and her administrative team who worked long and hard to control expenses while improving our product. In fact, during the period from 2004-2005 to 2006-2007, using actual figures, expenses were flat, and I’m guessing there are not a lot of school districts who could make the claim.

We can also agree, I hope, on what the forecast says about the next levy which is, after all, a topic of some interest to a significant portion of Worthington. Based on a positive fund balance of 12.5 million dollars in FY10, not including a contingency of 3.1 million dollars, there is no justification for a tax issue of any kind in calendar year 2008. The earliest we should consider a tax issue would be 2009 which means that Worthington would have gone 5 years between tax increases for operating levys. Assuming most voters buy into the concept of “reasonable levys at reasonable intervals”, the modest amount, between 6 and 7 mills, that we would need to ask for in 2009 should pass easily.

So much for the sweetness and light portion of the forecast review. After 2 years of flat expenses, our forecast shows expenses increasing at an escalating pace, 6.7% in 2008-2009, 4.9% in FY10, 5.6% in FY11 and 5.9% in FY12. This translates to deficit spending of 3.8 million in FY08 escalating to a one year deficit of 24.3 million in FY12 and will absolutely explode after that. In fact, a back of the napkin calculation shows that a hypothetical 2012 levy assuming neutral state budgets, no increase in appraisal, a continuation of the expense trajectory at 6% and a 7 mill 2009 levy would result in Charlie, Geoff or Julie having to run for reelection while explaining the requirement for around 15-16 mills in 2012. Going back to our three legged stool, the state is doing its part in keeping us even, the taxpayers would be doing their part in passing a 7 mill 2009 levy but the third leg, expenses, is threatening to bring down the stool.

So what is driving the increase in expenses? The primary cost driver seems to be the health care plan that this board approved a month or so ago. We have also changed our assumptions for Purchased Services from a 2% inflationary increase annually to 5% and our assumptions for supplies from 2% annually to 3%. Finally, there is an assumption of new staff members which reflect our slight up tick in enrollment. Note that I am in no way saying that the forecast is wrong, or if Jonathan’s 2% guess is better than Jeff’s 5%. I am only reacting to what the document says.

There is another question we need to look at. Even if everything in this forecast is reasonable and conservative, can Worthington afford our product? Many of our seniors received word that their social security increase this year will be 2.3%. In the 7^th annual “State of Poverty” report by the “Center for Community Solutions”, the median real income, adjusted for inflation, declined in the Worthington School District by 13% between calendar year 2000 and calendar year 2004, the latest year for which they provide this information. If our expenses are outstripping the ability of our residents to pay, the levy issue is not reasonableness nor will it be whether our salaries are competitive with other districts, the issue will be one of affordability and sustainability, pure and simple.

Since my role as a board member is not to micromanage the situation, or so I’ve been told, I come here this evening to both cheer the district for its conservatism over the last few years and to sound the alarm. I fear the path we are on, as documented by the forecast, will prove to be unsustainable and while we won’t feel the pinch for a few years yet because the first eye popping levy isn’t until 2012, if we wait 2 or 3 years to alter course, it may be too late.

One final point about this document. I want to commend our new treasurer for putting together this work in such a short period of time. Worthington residents who have reviewed previous forecasts recognize that this forecast is in a new format and much if not all of the work is original, so I also need to thank the treasurer for the dozens of hours he’s spent supplementing and explaining the material. The document provides significantly greater detail in the revenue area than previous forecasts and is more accurate in the salary area as well. Unfortunately, this format of the forecast provides significantly less detail in the discretionary part of the budget, specifically purchased services and supplies, thus providing less transparency. While I understand the efficiencies that may result in not having the compile this information in the future, it is still a step backward for those of us who might want to understand in greater detail what the district is doing with taxpayer money and I hope that the district will work to find the balance between the efficiency that we want and the detail that brings with it true accountability.