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

2. 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

3. 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

4. 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

5. 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

6. 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

7. Relative Sources of Revenue--Ohio
GRANVILLE EXEMPTED VILLAGE SCHOOLS

8. Relative Sources of Revenue
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9. 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

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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. School District Revenue
Increase Decrease
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18. 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

19. 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

20. 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

21. 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