SCHOOL DISTRICT STRUCTURE, GOVERNANCE, AND FINANCES Mike Sobul, CFO/treasurer Granville exempted village schools august 16, 2017

GRANVILLE EXEMPTED VILLAGE SCHOOLS Overview Basic structure and types of schools in Ohio Overview of state funding Overview of local source funding The role of financial forecasts GRANVILLE EXEMPTED VILLAGE SCHOOLS

School District Structure There are four general classifications of public schools in Ohio Educational Service Centers (ESC) Joint Vocational School Districts (JVSD) City, Exempted Village, and Local School Districts Charter Schools ESCs and JVSDs are generally either countywide or cover multiple counties ESCs provide services to students under contract from city, exempted village, and local school districts Usually these are special services that are not economical for school districts to provide themselves JVSDs traditionally provide educational programs designed to transition students directly to employment They also offer core education and advanced technical education such as robotics and computer science GRANVILLE EXEMPTED VILLAGE SCHOOLS

School District Structure Charter schools are individual schools that can be sponsored by a public entity (another district or an ESC), a non-profit corporation, or a for-profit entity They can be either bricks and mortar schools or an online schools (such as the former ECOT) Charter schools generally have less regulation and oversight than regular school districts Are set up as alternate sources of public education and compete with local school districts for students The rest of the discussion will pertain to city, exempted village, and local school districts There is little practical difference in the three types of districts In some areas city districts have a little more flexibility than the other two GRANVILLE EXEMPTED VILLAGE SCHOOLS

School District Financial Structure School funding in Ohio is a shared responsibility between the state and the local taxpayers The relative funding split is determined by relative wealth in the school district The issue of funding disparity among districts was the subject of a series of court decisions in the 1990s and early 2000s know collectively as the DeRolph case The Ohio Supreme Court ruled that the funding system in the state was unconstitutionally reliant on local property taxes which led to inherent inequities among the ability of schools to provide education However, the Court after making the final ruling released jurisdiction over the case, essentially leaving the remedy up to the Legislature with no further oversight GRANVILLE EXEMPTED VILLAGE SCHOOLS

School District Financial Structure There are four main sources of revenue for spending Local tax dollars (property and income taxes) State aid Federal earmarked revenue Other local non-tax dollars The percentage of each source that make up a district’s total revenue is generally determined by the district’s wealth The lower the relative wealth, the higher the shares that tend to come from the state and federal government GRANVILLE EXEMPTED VILLAGE SCHOOLS

Relative Sources of Revenue--Ohio GRANVILLE EXEMPTED VILLAGE SCHOOLS

Relative Sources of Revenue GRANVILLE EXEMPTED VILLAGE SCHOOLS

GRANVILLE EXEMPTED VILLAGE SCHOOLS School Revenue The property tax system in Ohio is set up to generally prevent revenues for school districts from growing with rising property values Through a system called reduction factors, property tax rates are rolled back as valuations increase due to inflationary price increases (until the rates reach a statutory minimum, at which point revenue can grow) Only the construction of new buildings can add revenue onto districts that have not reached the statutory minimum rate GRANVILLE EXEMPTED VILLAGE SCHOOLS

GRANVILLE EXEMPTED VILLAGE SCHOOLS School Revenue As values increased in 2017 due to reappraisal, tax rates decline GRANVILLE EXEMPTED VILLAGE SCHOOLS

GRANVILLE EXEMPTED VILLAGE SCHOOLS Levy Cycles For districts like Granville, with high reliance on local property taxes to fund operations, there is little opportunity for annual revenue growth without voter passing additional levies As expenditures grow faster than revenues, maintaining cash balances becomes unsustainable without adding new revenue from additional levies This is called a levy cycle GRANVILLE EXEMPTED VILLAGE SCHOOLS

GRANVILLE EXEMPTED VILLAGE SCHOOLS Levy Cycles New Levy in 2013 New Levy Planned in 2018 With the new levy in 2013, revenues outpaced expenditures. That reversed beginning in 2017 GRANVILLE EXEMPTED VILLAGE SCHOOLS

GRANVILLE EXEMPTED VILLAGE SCHOOLS Levy Cycles Total levies in 1976 The levy cycle leads to a pattern of new levies that looks like this GRANVILLE EXEMPTED VILLAGE SCHOOLS

School District Revenue In Fiscal Year 2017 (July 2016-June 2017), public school districts in Ohio spent an average of $11,603 per pupil (excluding debt service and building construction) That year, the base funding amount determined by the state was $6,000 per pupil By definition, base funding per pupil is the amount it takes to educate a “typical” child with no special needs, including both variable and fixed costs There is additional state funding for students with learning disabilities (including physical disabilities), students in poverty, gifted students, students taking vocational education, and for transportation of students There is also supplemental state funding not based directly on student needs but rather for districts with smaller tax bases and high levels of agricultural property GRANVILLE EXEMPTED VILLAGE SCHOOLS

School District Revenue The determination of how much aid comes from the state and how much from local taxpayers is driven by a district’s State Share Index (SSI) The SSI is primarily determined by relative property valuation per pupil There can also be adjustments based on median incomes in districts The remaining $4,002 per pupil in 2018 ($6,010 - $2,008) comes from local taxpayers GRANVILLE EXEMPTED VILLAGE SCHOOLS

School District Revenue So what can cause the SSI to change from year-to-year? Each district’s state share is calculated on its wealth relative to all other districts Relative wealth is generally on a property valuation per pupil basis A district becomes relatively wealthier by: Having valuation grow at a faster rate than the state as a whole Having enrollment decline at a faster rate than the state as a whole GRANVILLE EXEMPTED VILLAGE SCHOOLS

School District Revenue Increase Decrease GRANVILLE EXEMPTED VILLAGE SCHOOLS

GRANVILLE EXEMPTED VILLAGE SCHOOLS Five-Year Forecasts By law, districts are required to do five-year financial forecasts twice per year Due May 31 and October 31 (November 30 beginning in 2019) The forecasts are for ODE to be able to monitor local district fiscal conditions If done properly, the forecasts also serve as effective planning tools for districts GRANVILLE EXEMPTED VILLAGE SCHOOLS

Simplified Five-Year Forecast Every district’s five-year forecast, along with explanatory notes, can be found on the Department of Education website GRANVILLE EXEMPTED VILLAGE SCHOOLS

GRANVILLE EXEMPTED VILLAGE SCHOOLS Five-Year Forecast Districts showing negative cash balances within two years come under more active scrutiny from the state Three-tiered level of oversight Fiscal Caution Fiscal Watch Fiscal Emergency In fiscal emergency, an oversight panel is appointed by the state that must approve all spending decisions, including hiring GRANVILLE EXEMPTED VILLAGE SCHOOLS

GRANVILLE EXEMPTED VILLAGE SCHOOLS Key Takeaways School districts are much less autonomous than other local governments There is much more state oversight and state mandated operations For many school districts, funding is on a cycle because of the importance of mostly static property taxes as a main funding source Schools are the only local government with state supported competition in the form of charter schools GRANVILLE EXEMPTED VILLAGE SCHOOLS