1. Cleveland Municipal School District
Five Year Financial Forecast
October 2015 plus Update
As of January 1, 2016

2. Five Year Forecast - Contents
Major Assumptions
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
Major Assumptions

4. Major Assumptions Revenue:
Property Tax Collection Rate - The forecast assumes the total collection rate will remain at same level as 2015 or 86.3%. A 1% change in the collection rate represents $2.6 million.
Cuyahoga County will complete it’s triennial update in All property values will be updated for the 2016 collection year. The residential valuation is forecasted to decline 1.5%. The commercial rate is forecasted to remain the same.
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 FY16–20.
Enrollment – The forecast assumes no change in overall enrollment.

5. Major Assumptions continued
Expenditures:
Staffing assumptions:
Forecast assumes movement from differentiated compensation based on projections.
Forecast assumes all union agreements as currently defined - 1% increase in FY16, 0% in FY17-FY20
Forecast assumes 230 separations in FY17-20
Healthcare rates are forecasted to increase an average of 9.5% in FY16 – FY20.
Forecast assumes $3.6 million of strategic investments per year.
Forecast assumes a loss of $2.5 million of Title IIA which shifts 27 teachers to the General Fund in FY 16-20
Forecast assumes additional dollars for new schools/school improvements. $8.5 million FY16-20.
Forecast assumes $16 million of continued aggressive fiscal management to gain efficiencies per year in FY16-20.
Forecast assumes charter enrollment will decrease 400 in FY16 and then no change for FY17-FY20.
FY16
FY17
FY18
FY19
FY20
G F
5,190

6. Cleveland Municipal School District
General Fund Revenues

7. Cleveland Municipal School District FY 2015-2016
Simple Chart on where the districts funding comes from
We rely on the State of Ohio for most of our funding.
A slight shift has taken place since passage of the levy where local taxes was around 23%
Notes:
From May year forecast
Columbus FY14 – FY15
State 35% - 38%
Property Tax 54% - 52%
FY15 $798 mill
Cincinnati FY14 – FY15
State 34% - 36%
Property Tax 54% - 53%
FY15 $502 mill
Toledo FY14 – FY15
State 67% - 67%
Property Tax 26% - 27%
FY15 $324 mill
Akron FY14 – FY15
State – 53% - 56%
Property Tax – 36% - 34%
FY15 $311 mill

8. 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 # 12 under property tax reimbursements
In FY15 the district received $203.7 million in real property taxes.
In FY16 the district is forecasting $201.7 million in in real property taxes.
FY17 – FY20 – assumes the worst case scenario – that the current 15 mill levy would not be renewed
The forecast assumes same collection rate as collection year 2015
Estimates include a slight increase for property tax abatements coming off the books
Ohio law requires a reappraisal every six years. Cuyahoga County will complete it’s triennial update in 2015, with the next reappraisal scheduled for the year This triennial update will affect property taxes beginning in Jan 2016
The residential valuation is forecasted to decline 1.5%. The final results of the triennial update will not be known for another month.
A 1.5% reduction in residential valuation will reduce taxes by $600k.
We have no information on commercial valuations other than the Cleveland Clinic will be removed from taxable property to tax-exempt property.
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.“
Because of this ruling the commercial valuation will be decreased by more than $400 million in 2016.
In 2012 Property value decreased $800 million which had a very negative impact on the levy.

9. Cleveland Municipal School District Property Taxes – Current Collection Rate
The district’s current collection rate in 2015 has decreased to 79.6%
The forecast assumes the same collection rate through 2020
The average current collection rate in the last 25 years is 87.6%
The average current collection rate in the last 10 years is 82.2%
Because of this Board of Tax appeals ruling on the Clinic the commercial valuation will be decreased by more than $400 million in This has negatively affected the collection rate and skewed these numbers as the clinic was billed but not paying.
The residential current collection rate has increased each year since It was 72.4% in 2012, 81.4% in 2013, 82.4% in 2014 and 83% in 2015.
Calendar Year

10. Cleveland Municipal School District Property Taxes – Total Collection Rate
86.3%
Current Collection Rate
This chart shows the current collection rate along with delinquent collections or what is referred to as the total collection rate.
The average total collection rate in the last 25 years is 93.8%
The average total collection rate in the last 10 years is 89.5%
The Five Year Forecast assumes this same rate for all years – A 1% change in the collection rate is valued at $2.5 million
Calendar Year

11. Cleveland Municipal School District State Aid
Revenue (In Millions)
State Foundation
This make up almost 61% of total revenue in the General Fund.
FY16 – FY20 estimates are based on the new biennial budget - House Bill 64
The foundation formula also provides for a Transitional Guarantee which guarantees that no district will receive less in total FY 2016 funding than it did in FY 2015 by distributing the difference between the FY 2015 total funding (guarantee base) and the FY 2016 total calculated amount. Although the formula guarantees at least the FY 2015 total funding, it also caps the FY 2016 calculated funding at 7.5% above the FY 2015 funding level.  Enrollment is a key factor for FY17-FY20
This forecast assumes flat overall enrollment.
Enrollment is made up of CMSD students and Cleveland students attending a charter school or a scholarship students.
HB64 will give an additional $100 per student each year of the formula.
Fiscal Year

12. Cleveland Municipal School District Property Tax Allocation – State Hold Harmless Reimbursements
State Hold Harmless reimbursements from the State
A last minute change to House Bill 64, the biennial budget, eliminated $13.9 million of tangible personal property tax reimbursements the district was expecting.
This will affect the five year forecast by $62.4 million
Property tax reimbursement again assumes the worst case scenario that the levy would not be extended.

13. Cleveland Municipal School District Other Revenue
Revenue (In Millions)
The highlights on this page include:
Other revenue (in blue) include
Includes a spike in 2018 of $6.7 million. This is for anticipated reimbursement from e-rate - increase their wireless capacity and improve internal wiring at district schools
Other Taxes and Rebate (in red) includes
$2.5 million in rebates from the IRS
400 k admissions tax from the Rock Hall
$11.6 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 – AS you can see from the chart Medicaid has a spike in FY16 and FY17.
The district recently received good news from Healthcare Process Consulting that we will be receiving $16.7 million for back claims for the period 7/ /2009. These dollars should be received by the end of this year.
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 addition to this the district will receive back claims from 2012 of $3.4 million. We were expecting these dollars last year.
In FY 2017 the district should receive $3.1 million representing back claims from 2013
Advances estimated at $4 mill per year

14. 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

15. Cleveland Municipal School District
General Fund Expenditures

16. 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%.

17. Cleveland Municipal School District Salaries
The number of employees are forecasted to remain the same through FY20
Forecast includes estimates for the differentiated compensation system
Forecast includes a 1% increase in base pay in FY16, 0% in FY17-FY20
Forecast assumes 230 separations in FY17-20 – employees replaced

18. 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 9.5% in FY16-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

19. Cleveland Municipal School District Purchased Services
Expenditures (In Millions)
Purchased Services
Utilities - The utility forecast for FY16 totals $13.6 million and increases to $14.3 million in FY20.
Student Transportation - Student transportation of $11.5 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 $140.9 million in FY16 and rise to $148.0 million in FY20. Charter enrollment is forecasted to decline 400 in FY16 and then stay the same through FY20. HB64 will give Charters an additional $100 per student each year of the formula.
Current charter enrollment is 17,291

20. 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 $11.1 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 $1.7 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

21. General Fund Expenditures
This slide shows the total expenditures in the General Fund
Expenditures are forecasted to increase an average of 3.5% per year
Increase is mostly caused by health care costs and Charter school tuition costs
*Projected

22. Cleveland Municipal School District
Five-Year Forecast Summary

23. Cleveland Municipal School District October 2015 Five-Year Forecast (in millions of dollars)
Five Year Forecast Summary
The district started the year with $88.5 million in cash – we are estimating that we will end the year with $82 million in cash and $66 million in unencumbered cash
The forecast shows a positive unencumbered cash balance through FY17
The forecast also shows the district must extend the levy.

24. Cleveland Municipal School District October 2015 Five-Year Forecast (in millions of dollars)
If the levy is renewed the forecast will look much better

25. Cleveland Municipal School District
Five Year Forecast Update as of 1/1/16

26. Cleveland Municipal School District
Update to Revenue as of 1/1/16

27. Revenue Update
Error in Model
Property Tax Triennial Update

28. Error in Model
The district was notified by PFR CFO on 10/23/15 that an error was discovered in the model that was used to compute the State Foundation estimates. This change reduces cash balance by $5.3 million over 5 years.

29. Property Tax Triennial Update Assessed Value
Note: 5.3% of commercial decrease – Cleveland Clinic
Change %
Property Valuation
2013
2014
2015
2016
2015 to 2016
Residential
2,169,817,680
2,145,454,810
2,127,960,040
2,091,147,610
(36,812,430)
-1.7%
Commercial
2,484,935,110
2,511,033,840
2,558,282,800
2,224,577,210
(333,705,590)
-13.0%
Public Utility
273,122,230
300,460,010
320,762,670
333,848,530
13,085,860
4.1%
4,927,875,020
4,956,948,660
5,007,005,510
4,649,573,350
(357,432,160)
-7.1%

30. Property Tax Triennial Update Millage
Inside
Voted
Effective Millage
Year
Residential Millage
2015
2016
4.00
1968 and 1970
31.70
10.32
10.46
1983
9.00
4.84
4.91
1996
13.50
11.84
12.01
2012
14.00
68.20
45.00
45.38
Commercial Millage
17.74
18.35
6.05
6.26
11.65
12.05
53.44
54.66

31. Property Tax Triennial Update Cuyahoga County Estimate
Overall Cuyahoga County billing down $18.0 million in 2016.
Cuyahoga County billing down $15.0 million in 2016 for the General Fund.
Cuyahoga County billing down $0.4 million in 2016 for the Partnering Community Schools.
Cuyahoga County billing down $2.3 million in 2016 for the Bond Retirement Fund.
Cuyahoga County billing down $0.3 million in 2016 for the Permanent Improvement Fund.

32. Cleveland Municipal School District October 2015 Five-Year Forecast – Updated for Revenue Changes (in millions of dollars)
If the levy is renewed the forecast will look much better

33. Cleveland Municipal School District October 2015 Five-Year Forecast – Updated for Revenue Changes 3/4/16 (in millions of dollars)
If the levy is renewed the forecast will look much better

34. Cleveland Municipal School District
Update to Expenditures as of 1/1/16

35. Expenditure Update 2% increase in Wages – General Fund
FY16 Budgeted Salaries
$308,466,742 x .02 = $6,169,335
$6,169,335 x % = $7,122,497
$5.1 or 72% represents CTU
$2.0 or 28% represents all other

36. Expenditure Update
Charter School Tuition – Latest ODE estimate is $136.6 million.
Cadillac Tax – Delayed by 2 years
Food Service Subsidy

37. Cleveland Municipal School District October 2015 Five-Year Forecast – Updated 2% - 0% CTU (in millions of dollars)
If the levy is renewed the forecast will look much better

38. Cleveland Municipal School District October 2015 Five-Year Forecast – Updated 1% - 1% CTU (in millions of dollars)
If the levy is renewed the forecast will look much better

39. Cleveland Municipal School District October 2015 Five-Year Forecast – Updated 0% -2% CTU (in millions of dollars)
If the levy is renewed the forecast will look much better

40. Cleveland Municipal School District October 2015 Five-Year Forecast - Updated (in millions of dollars)
If the levy is renewed the forecast will look much better
Note a 2% wage increase for CTU would be $5.1 million annually

41. Cleveland Municipal School District
Questions