FIVE YEAR FINANCIAL FORECAST MAY 2012 Cleveland Municipal School District The primary goal of the Cleveland Municipal School District is to become a premier school district in the United States of America. 1

Five Year Forecast - Contents 2 Major Assumptions General Fund Revenues General Fund Expenditures Five Year Forecast Summary

Cleveland Municipal School District 3 Major Assumptions

4 Revenue: Forecast assumes that the property tax current collection rate will remain at 78.87%. In 2012 Cuyahoga County will complete the six year reappraisal of all property. The impact on the district should be minimal. Forecast uses the bridge formula to determine state funding in all years. Forecast assumes the Average Daily Membership for K-12 to be: FY12 – 40,758 FY13 – 38,854 FY 14 – 37,548 FY15 – 36,300 FY 16 – 35,448 Forecast assumes that Charter School ADM will increase 1,100 students each year. Forecast assumes no new levy revenue.

Major Assumptions continued 5 Expenditures : Forecast assumes a total of 2,591 classroom teachers in FY13 (2,316 are budgeted within the General Fund). Forecast assumes April layoffs are permanent. Forecast budgets 50 less employees each year in FY Healthcare rates are forecasted to increase 7.7% in FY13 and 9.7% in FY Forecast assumes all union agreements as currently defined. Charter School Pass-Through increases $8.4 million each year. Forecast assumes costs and savings from Employee Separation Plan. One-time or temporary budget closure recommendations were limited to less than 25%.

Cleveland Municipal School District 6 General Fund Revenues

Cleveland Municipal School District FY

Cleveland Municipal School District Local Taxes – Property Tax Revenue 8

Cleveland Municipal School District Property Taxes – Current Collection Rate Current Collection Rate Year 9

Cleveland Municipal School District Property Taxes – Total Collection Rate Current Collection Rate Year 10 Lien sale scheduled for May 30, 2012

Cleveland Municipal School District State Foundation Revenue Revenue (In Millions) Fiscal Year 11

Cleveland Municipal School District State Foundation Revenue – Excluding Charter School Portion Revenue (In Millions) Fiscal Year 12

Cleveland Municipal School District Education Jobs 13

Cleveland Municipal School District Property Tax Allocation – State Hold Harmless Reimbursements 14

Cleveland Municipal School District Other Revenue Revenue (In Millions) 15

Cleveland Municipal School District Total Revenue – Excluding Charter School Portion Revenue (In Millions) Fiscal Year 16

Cleveland Municipal School District 17 General Fund Expenditures

Cleveland Municipal School District Where the Money Goes 18

Cleveland Municipal School District Salaries 19

Cleveland Municipal School District Fringe Benefits 20

Cleveland Municipal School District Purchased Services Expenditures (In Millions) 21

Cleveland Municipal School District Supplies, Textbooks, Equipment, and Other Expenditures 22

Cleveland Municipal School District Total Expenditures– Excluding Charter School Portion 23

Cleveland Municipal School District 24 Five-Year Forecast Summary

Cleveland Municipal Public Schools October 2011 Five-Year Forecast (in millions of dollars) 25

Revenue Update FY12 26 General Property TaxRevenue Adjustment(3,599,362) Personal Property TaxRevenue Adjustment48,852 State FoundationRevenue Adjustment1,387,568 Education JobsNew Revenue461,441 Homestead TaxRevenue Adjustment(155,000) Other Revenue IRS RebateNew Revenue4,542,408 E-RateNew Revenue3,000,000 TIF Receipts/MiscRevenue Adjustment461,890 Total Change6,147,797

Expenditure Update FY12 27 Salaries WagesLabor Negotiations/ Budget Adjustment (3,011,431) Benefits STRS/SERSLabor Negotiations/Budget Adj(3,600,000) Health CareLabor Negotiations(725,000) Unemployment CompensationLabor Negotiations/Budget Adj(2,275,000) Workers CompensationBudget Adjustment1,200,000 Separation PayBudget Adjustment580,000 Purchased Services Charter School TuitionBudget Adjustment2,400,000 Other Purchased Services - (Utilities, Tuition paid to other Districts, Professional Services) Operational Efficiencies/ Budget Adjustment (3,975,000) Supplies and MaterialsOperational Efficiencies(650,000) Subsidy to Food ServiceBudget Adjustment(2,000,000) Advances-OutOperational Efficiencies(1,500000) Total Change(13,556,431)

Cleveland Municipal Public Schools October 2011 Five-Year Forecast Adjusted (in millions of dollars) 28

Revenue Update FY13 29 General Property TaxRevenue Adjustment(3,149,000) State FoundationRevenue Adjustment1,538,957 Homestead TaxRevenue Adjustment(200,000) Other Revenue IRS RebateNew Revenue2,716,000 Casino Tax/MiscNew Revenue699,564 Advance - InOperational Efficiency(1,500,000) Total Change105,521

Expenditure Update FY13 30 December 2011 Budget RestorationLabor Negotiations/ Budget Adjustments 2,721,826 LayoffsReduction in Force(34,074,598) Employee Separation PlanESP*(1,772,600) Title AdjustmentOperational Efficiencies4,314,721 Changes in Salary and BenefitsLabor Negotiations/ Budget Adjustments 521,698 Decrease in Non-Personnel BudgetOperational Efficiencies(1,591,671) Decrease in Purchased ServicesOperational Efficiencies(1,003,500) Increase in Charter School PaymentBudget Adjustments2,400,000 Decrease in Transfers and AdvancesBudget Adjustments(1,976,000) Strategic InvestmentOperational Efficiencies3,600,000 Total Change(26,860,124) * Final financial update to the 5-Year forecast will reflect updated projected savings

Cleveland Municipal Public Schools October 2011 Five-Year Forecast Adjusted (in millions of dollars) 31

Cleveland Municipal Public Schools May 2012 Five-Year Forecast (in millions of dollars) 32

Cleveland Municipal Public Schools May 2012 Five-Year Forecast (in millions of dollars) 33

Cleveland Municipal School District May 2012 Five-Year Forecast Summary 34 Property Taxes Current economic conditions continue to have a significant impact on tax collection rates State Foundation Revenue Projections are based on the Bridge formula. Education Jobs (Ed Jobs) A federal program to save or create education jobs for the FY 11 and/or FY 12 school years. This is one-time money that is being utilized in FY 12.

Cleveland Municipal School District May 2012 Five-Year Forecast Summary -Continued 35 Salaries and Benefits Forecast assumes 2,591 total classroom teachers in FY13. (2,316 in the General Fund) Forecast budgets 50 less employees each year in FY Forecast assumes all union agreements as currently defined. Healthcare rates are forecasted to increase 7.7% in FY13 and 9.7% in FY Charter School Tuition Charter school tuition is projected to increase $8.4 million per year over the forecast period. Financial Summary A balanced budget is currently forecasted through June 30, A $19.3 million deficit is currently forecasted through June 30, 2013.

Fiscal Caution, Watch and Emergency 36 Fiscal CautionFiscal WatchFiscal Emergency  Lower bond ratings  State control  Higher Class Sizes

Fiscal Caution, Watch and Emergency 37 Fiscal CautionFiscal WatchFiscal Emergency Fiscal Caution – may be declared when: No acceptable plan in place to avoid the potential current year deficit. Failure to submit a sufficient plan to address potential future year deficit. Auditor of State certifies a deficit between 2% and 8% of prior year general fund revenue and elects not to place District in Watch or Emergency. Fiscal Watch - May be declared, if all are met: Operating deficit for current FY certified by Auditor of State exceeds 2% but does not exceed 8%. Voters have not approved a levy that would raise sufficient funds in next succeeding year. Auditor of State determines there is no reasonable cause for deficit or that declaration is necessary to prevent further decline.

Fiscal Caution, Watch and Emergency 38 Fiscal CautionFiscal WatchFiscal Emergency Fiscal Emergency– A fiscal emergency is the last resort and most severe stage of a school district’s financial solvency problems. Following a declaration by the Auditor of State, a commission is created that may assume all or part of the powers of the board of education. The commission develops a financial plan to alleviate the school district's financial crisis.

Cleveland Municipal School District Definitions CAT Tax – Commercial Activity Tax: The commercial activity tax (CAT) is an annual tax imposed on the privilege of doing business in Ohio, measured by gross receipts from business activities in Ohio. Businesses with Ohio taxable gross receipts of $150,000 or more per calendar year must register for the CAT, file all applicable returns, and make all corresponding payments. Ed Jobs – The Education Jobs Fund: This fund was included as part of federal legislation passed on Aug 10, The program provides $10 billion for states to save or create education jobs. Ohio is estimated to receive $361 million from the program. The district is estimated to receive $17.7 million. Funds can be used in FY 11 or FY 12. State Hold Harmless Reimbursements: The provision under which the State of Ohio agreed to reimburse the Cleveland Municipal School District for any loss associated with a change in law. 39

QUESTIONS THE PRIMARY GOAL OF THE CLEVELAND MUNICIPAL SCHOOL DISTRICT IS TO BECOME A PREMIER SCHOOL DISTRICT IN THE UNITED STATES OF AMERICA. 40 Cleveland Municipal School District Five-Year Financial Forecast – May 2012