1. Cleveland Municipal School District
Five Year Financial Forecast
October 2016

2. Five Year Forecast - Contents
General Fund Revenues
General Fund Expenditures
Five Year Forecast Summary
The Ohio revised code requires a board of education to submit a 5 year forecast along with assumptions to the Ohio Department of Education prior to October 31st of each fiscal year and to update this forecast between April 1 and May 31 of each fiscal year.

3. Cleveland Municipal School District
General Fund Revenues

4. Major Revenue Assumptions
Cuyahoga County completed it’s triennial update in All property tax estimates use current valuation figures.
A current collection rate of 86.9% for property taxes is assumed through 2021.
On 11/6/12 residents passed a 4 year 15 mill levy with collection beginning January The forecast assumes the levy will expire December 31, 2016.
State Funding – House Bill 64, Ohio’s Biennial Budget, was signed into law by Governor Kasich on June 30, The forecast is using the most recent state budget formula for FY17 – FY21.
Enrollment – FY16 final overall funding enrollment was 55, The forecast assumes no change from this enrollment for FY17 - FY21.
CMSD – 37, (66.1%)
Cleveland Scholarship – 1, (3.4%)
EdChoice/Jon Peterson/Autism Scholarship (0.3%)
Community School – 16, (30.2%)
All property tax estimates use current valuation figures from the 2015 triennial update.
A current collection rate of 86.9% for property taxes is assumed through 2021.
The forecast assumes the 15 mill levy will expire December 31, 2016.
The forecast is using the most recent state budget formula for FY17 – FY21. (it assumes there will be no change to the state formula)
The forecast assumes no change in total enrollment. The FY16 K-12 funding enrollment was 55,995. This # is made up of all Cleveland resident students attending CMSD, charter schools or students who receive vouchers. – If the district increases by 500 students but charter students decline by 500 students than the funding remains the same.

5. Cleveland Municipal School District FY 2016-2017
We rely on the State of Ohio and property taxes for most of our funding.
Notes:
From May year forecast
Columbus FY16 Estimated
State – 38%
Property Tax %
FY16 $798 mill
Cincinnati FY16 Estimated
State 36
Property Tax 49%
FY16 $528 mill
Toledo FY16 Estimated
State 65%
Property Tax 25%
FY16 $369 mill
Akron FY16 Estimated
State – 58%
Property Tax – 33%
FY16 $333 mill

6. Cleveland Municipal School District Local Taxes – Property Tax Revenue
Local Property Taxes
Each chart shows 3 years of history and 5 years of projections.
This forecast includes 14 of the 15 mill levy passed by taxpayers on November of 2012 – a portion of the 14 mills is also shown on slide # 10 under property tax reimbursements
The district receives approx. $62 million per year in the General Fund on the levy that is scheduled to expire this calendar year.
This forecast assumes the worst case scenario – that the current 15 mill levy would not be renewed
In FY16 the district received $200.6 million in real property taxes.
In FY16 the district is forecasting $179.6 million in in real property taxes.
Estimates include a slight increase for property tax abatements coming off the books
Cuyahoga County completed it’s triennial update in 2015, with the next reappraisal scheduled for the year Cuyahoga County completed its triennial property tax update.
Residential valuation decreased 1.7% from 2015 to
Commercial valuation decreased 13.0% or from 2015 to The majority was caused by changing the Cleveland Clinic and the Global Center for Health Innovation from taxable to tax exempt.
Public Utility property valuation increased 4.1% from 2015 to 2016
In The state's Board of Tax Appeals ruled in favor of the nonprofit Cleveland Clinic Foundation, holding that property on the Clinic's main campus in and around the Taussig Cancer Center along with property it owns along Cedar Road in Beachwood qualifies for tax-exempt status should be exempt from property taxes.
The board held that the Cleveland Clinic was a charitable institution, as defined in the Ohio Revised Code. As such, the property qualified for the tax exemption under state law if it was found to be used to further charitable, educational or public purposes and "not with the view to profit.“
In 2012 Property valuation decreased $800 million which had a very negative impact on the levy.

7. Cleveland Municipal School District Historic Assessed Valuations
Current Collection Rate
In 2015 the county completed its triennial update
The overall assessed valuation in the district is $4.6 billion. Assessed value is 35% of the estimated true value.
This chart shows the last 10 years - the tax base has declined from $6.5 billion in 2006 to $4.6 billion in 2015 or $1.9 billion - $5.4 billion in market value (33 % is from TPP)
We have had a shift in our tax base over the last 10 years where we now have more commercial value than residential value.
Residential has declined 33.9 % since 2006
Commercial has declined 9.7% since 2006
TPP was phased out than eliminated
Public Utility has increased 5.0% since 2006
The districts assessed value has not been this low since 1991 – so in 25 years the tax base in Cleveland has not grown – yet something that cost $1.00 in 1991 costs $1.77 today
Tax Year

8. Cleveland Municipal School District Property Taxes – Current Collection Rate
Collection rates increased 7.3% in 2016 when compared to 2015 but this was mostly because the county removed the Clinic and the Global Center for Health Innovation from the equation.
The forecast assumes the same collection rate through 2021
Current residential tax collection rate was 83.9 in 2016
Current commercial tax collection rate was 90.3 in 2016
Current Public Utility tax collection rate was 100 in 2016
The residential current collection rate has increased each year since It was 72.4% in 2012, 81.4% in 2013, 82.4% in 2014, 83.1% in 2015 and 83.9% in 2016.
The average current collection rate in the last 25 years is 87.2%
The average current collection rate in the last 10 years is 82.0%
Calendar Year

9. Cleveland Municipal School District State Aid
Revenue (In Millions)
State Foundation
This make up almost 61% of total revenue in the General Fund.
The amount of state funds that a district receives is based on a formula that takes into account the student enrollment and the property wealth of the district.
FY17 – FY21 estimates are based on the new biennial budget - House Bill 64
FY17 includes an adjustment of $15.5 million for FY16.
This forecast assumes flat overall enrollment.
Currently we are receiving approx. $7,900 per student.
Potential revenue in FY19, FY20 and FY21 is $487.8, $505.3 and $514.5
The district will not be on the guarantee but will be on the formula for all future years except FY18 where the district will be capped.
Enrollment is made up of CMSD students and Cleveland students attending a charter school or a scholarship students.
The current funding enrollment amount is 55,995.
The funding FTE was adjusted 1,343 students on August 26, 2016.
It is critical that we credit for every student we have!!!!!!!
HB64 will give an additional $100 per student each year of the formula or $5.6 million. The other increases are mainly caused by wealth impact in the current formula.
The drop in valuation in 2016 will impact us in FY18 – FY21.
FY16 and FY17 is based upon Tax Year 2012, 2013 and 2014 or collection year
FY18 and FY19 is based upon Tax Year 2014, 2015 and 2016 or collection year
FY20 and FY21 is based upon Tax Year 2016, 2017 and 2018 or collection year
A new bi-enniel budget will begin July 1, 2017
Fiscal Year

10. Cleveland Municipal School District Property Tax Allocation – State Hold Harmless Reimbursements
State Hold Harmless reimbursements from the State
Page 10 - House Bill 64, the biennial budget, completely phased out the tangible personal property tax for the district.
Property tax reimbursement again assumes the worst case scenario that the levy would not be extended.

11. Cleveland Municipal School District Other Revenue
Revenue (In Millions)
The highlights on this page include:
Other revenue (in blue) include
Other Taxes and Rebate (in red) includes
$4.6 million in rebates from the IRS
400 k admissions tax from the Rock Hall
$9.1 million from various Payment in Lieu of Taxes
Flats East Bank, VA Hospital, Third Federal, lower Euclid, Old Arcade, Colonial Arcade, Steelyard, Pierres Ice Cream
Interest rates continues to be historically low – the forecast includes a slight increase
Medicaid – The district received 24.7 million in FY16 which included back claims for the period 7/ /2009.
This represents services provided between the old CAFS (Community Alternative Funding System) shutdown and the new MSP (Medicaid Schools Program) program startup. This is far more than what we thought we would ever receive. We were originally told that there was a possibility to go back all the way to 7/1/05 and receive this back claiming but the most likely back claiming period would be 10/1/07 - 9/30/09. In 20 years of Medicaid billing our consultant HBS had never seen a Federal Medicaid Program allow retroactive claiming back past more than 2 years.
In FY 2017 the district should receive $5.3 million which includes a settlement from FY14. The district is forecasting $3.5 million from FY18-FY21.
Advances estimated at $4 mill per year

12. General Fund Revenue
The slide shows the total revenue in the General Fund
The green line assumes that the levy is extended
The red line assumes the levy is not extended
*Projected

13. Cleveland Municipal School District
General Fund Expenditures

14. Major Expenditure Assumptions
No changes in total or charter enrollment for FY18-FY21.
Maintains current staffing levels (5,290 FTEs on the General Fund) with 230 teacher separations in FY18-21.
No projected impact of ESSA changes.
No salary increases budgeted for any employees in FY18-21.
Maintains current TDES compensation approach for teachers but still includes a 2.0% increase in salaries in FY17 for CTU members.
Healthcare rates are forecasted to increase 10.4% per year in FY18-21.
$15 million additional investments in schools’ purchasing power, capital projects, bus replacement, etc.

15. Cleveland Municipal School District Where the Money Goes
Salaries and Benefits make up the largest piece of the Budget. They account for 61%. Charter school tuition is 19% while all other costs is 20%.

16. Cleveland Municipal School District Salaries
Forecast includes a 1% increase in base pay in FY16, 2% in FY17 and 0% in FY18-FY20 - $7.1 million including benefits
The number of employees are forecasted to increase up to 94 in FY17 - FY20
Forecast includes estimates for the differentiated compensation system - $3.7 - $4.5 million per year
Forecast assumes 230 separations in FY17-20 – employees replaced - $4.3 - $5.6 million in savings per year

17. Cleveland Municipal School District Fringe Benefits
Fringe benefits are made up of the following:
Pension Benefits – The employer contribution rate is 14% to STRS and SERS
Medical Benefits – The district pays premiums to Kaiser and is self-insured for Aetna and Medical Mutual.
Medicare benefits – The district pays 1.45% of for all employees starting after April 1986
Workers Compensation
Unemployment Compensation
Severance Payments – The district is responsible to pay any outstanding vacation benefits and a portion of the sick balance if an employee retires.
The health care rate has been forecasted to increase an average of 10.2% in FY17-FY30. These estimates were provided to us from the Hylant group. Note Healthcare was up 12% in FY15 Down 1% in FY14
In total it is estimated that the district will spend $91.1 million in healthcare insurance - $20.1 million on Health Span premiums. It is also estimated that the district will spend $13.6 million on Aetna, $53.6 million on Medical Mutual and $3.3 on Dental insurance and $500 in vision insurance of which the General Fund will pay for 83%.
Employee contribution - $8.5 million

18. Cleveland Municipal School District Purchased Services
Expenditures (In Millions)
Purchased Services
Utilities - The utility forecast for FY16 totals $13.4 million and increases to $13.8 million in FY20.
Student Transportation - Student transportation of $14.9 million in FY 16, includes RTA costs ($4m), Cabs and vans, and payments to parents in lieu of transportation ($1m).
Other Purchased Services -
This category includes:
Funding for repairs and maintenance of buildings ($2.0 million)
Outside legal fees ($2.3 million)
Tuition expenditures ($34.5 million) (students who reside in the District and are educated by other agencies) (Special Education and court placed) –
Cleveland Scholarship program ($13.7 million)
Open enrollment costs ($2.8 million) –
Other professional and the technical services ($19.9 million –
Rentals ($4.8 million) ($ lease; $502k CSU campus international; 900k school/opening closing movers; $346k copiers)
Postage $.3 million)
Garbage removal ($.2 million)
Telephone services ($.9 million)
Increase in other purchased services are due to:
HRIS System - $7.6 million
Strategic Investments - $3.6 million
Budget not spent
Charter School Pass-through - Charter school tuition is for students who reside in the District and attend a charter school. This cost is estimated to be $135.4 million in FY16 and rise to $142.2 million in FY20. Charter enrollment is forecasted to stay the same through FY20. HB64 will give Charters an additional $100 per student each year of the formula.
Current charter enrollment is 16, (as of May 2016)

19. Cleveland Municipal School District Supplies, Textbooks, Equipment, and Other Expenditures
Supplies – Textbooks – Equipment and Other Expenditures page 20
Supplies and Textbooks
The current budget estimate for supplies and textbooks total $12.6 million. This includes items such as Instructional supplies, office supplies, library books, new textbooks, parts for bus repairs and fuel.
instructional supplies - $ 1.7
office supplies - $.9
New textbooks - $2.7
library books - $.2
fuel $2.0
Equipment
Equipment purchases are projected to be at $4.1 million for FY16-20.
Other Expense
This category of expenditures includes paying the county $5.1 million to collect taxes, debt payments and insurance premiums (liability/property) ($1.2 million).
Transfers and Advances – an estimate of $5.0 per year
Insurance 1.0 mill
4.0 million - advances

20. General Fund Expenditures
This slide shows the total expenditures in the General Fund
Expenditures are forecasted to increase
Increase is mostly caused by health care costs (avg 8.2 million increase each year) and Charter school tuition costs (1.7 million increase each year)
*Projected

21. Cleveland Municipal School District
Five-Year Forecast Summary

22. Cleveland Municipal School District October 2016 Five-Year Forecast (in millions of dollars)
If the levy is renewed the forecast will look much better

23. Cleveland Municipal School District
Questions