Prepared Notes for Board Meeting

October 12, 2009

Marc A. Schare

614 791-0067

marc9@aol.com

The five year forecast, depending on who you ask, is either a perfunctory document that we are required to produce each year that signifies exactly nothing, or a roadmap to the district’s financial future that we can follow if we like where it takes us, or change course if we don’t.

Wherever you fall on that spectrum, we should at least acknowledge where the forecast says the current course takes us.

This forecast tells us that assuming November’s levy is successful, it would take around 9 additional mills in 2012 to balance the resulting 24.2 million dollar deficit in FY14 with a zero balance or around 12.8 mills to balance 2014 with the recommended 30 day cash balance. As this would be sufficient to balance through 2014, an additional levy in 2013 would be likely under these assumptions. A two year levy cycle would be much higher and a three year levy cycle would appear to be out of the question.

The forecast also tells us that at a time when revenues are jeopardized due to the phase out of tangibles, we are increasing expenditures at over 5% annually.

Certainly, those that believe that the forecast is unimportant have history, at least recent history on their side, however, if we look at the specific downside risk and the upside potential for places where forecast assumptions in this forecast might be incorrect, you might just as well conclude that the forecast presented tonight is perhaps even more optimistic than it should be.

For example, I agree with the treasurer that we have significant downside risk at the state level. First, does anyone really believe that the state will keep their promise to reimburse tangible personal property tax in the next biennium and, if so, how is that going to occur? Jennifer Economus says that the total cost to the state of continuing the reimbursement is 500 million dollars for the biennium that the state simply does not have and is unlikely to get, and if they did get it, would they give it to rich suburban school districts? Second, we are more dependent on guarantee amounts than ever. If the state minimizes or discontinues the guarantee due to lack of funds, Worthington could take a multi-million dollar hit. Another possible downside risk concerns the numerous state mandates that we may be subjected too. Newspapers articles across the state quote worried and frustrated administrators wondering how they will pay for the mandates with no new money from the state. In our case, if the state should mandate class sizes as suggested by HB1 and if we do not get an exemption, the result would be, and I don’t use such words lightly, cataclysmic.

The forecast is not without possible upside. First, if the state recovers, eventually, the new funding formula might bring additional revenue and we might be off the state guarantee in 4 or 5 years. There is talk (and a bill) of removing the mandate for all day kindergarten although the bill is silent on whether it restores our ability to charge tuition. If that should happen, we would have to make a decision whether to continue the K+ program. Another upside is the likelihood is that Worthington’s result on the state report card will exempt us from some of the more costly mandates. Another possible pessimistic projection is the 20% annual increase in tuition to charter schools, an amount which I doubt is sustainable. Finally, in the last few years, health care has come in way below projections and we could also have a tsunami of staff retirements, potentially saving us money on salaries and benefits.

On balance, I believe we have far more risk to the downside than upside potential which makes the forecast frightening enough for this Halloween season. The policy question before us is whether we want to move to mitigate these risks and if so, how do we do this and when do we start?