Bexley Schools Treasurer/CFO Kyle Smith updated the Board of Education during its April Board meeting about the current school-funding proposal passed by the Ohio House of Representatives and how it could significantly impact Bexley Schools in a negative manner.
The current proposal essentially removes funding methods for the School Fair Funding Plan that was passed in 2021 and guarantees funding at Fiscal Year 2025 levels. Secondly, and most alarmingly, Treasurer Smith said, is a provision to clawback school district cash reserves in districts that have cash balances in excess of 30%.
Support for the clawbacks came about, Treasurer Smith said, when legislators looked at Ohio school districts’ cash reserves at a particular point in time and “proclaimed that schools should not be permitted to carry large cash reserves.” He said legislators may have done so without fully understanding how schools are required to manage their funds for extended periods of time or that many spend down their reserves over the time of their levy cycle.
At the period in time legislators reviewed Ohio school districts’ cash reserves, Bexley Schools’ cash reserve was at about 55% of our total Fiscal Year 2024 expenditures.
The following are points Treasurer Smith presented to the Board regarding why this proposal is damaging for Bexley Schools and Bexley residents.
- The proposal erodes local control and our ability to address the minimal funding we currently receive from the state.
- Bexley Schools manage revenue based upon our levy cycle, which is a process by which school districts propose and receive voter approval for property tax levies to fund their operations. School districts would no longer be able to depend on well-planned and properly timed levies as done in the past and could be forced to request more levies.
- While our November 2024 incremental levy took an approach to spend down our cash reserves over a five-year period, this proposal would negate the community’s majority vote from that ballot issue. Without the levy-approved funding and with a requirement to spend down our cash, we may have to go back to our voters sooner than we had hoped because we would have to address future negative cash balances more quickly.
- Over the last 17 years, Bexley Schools’ cash balance has fluctuated with 25% swings over a 12-month period beginning to end. Legislators, unfortunately, are only looking at a low moment in time and not honoring our need to predict and plan ? and maintain a cash balance.
- Revenue from Bexley’s school district income tax has seen volatility at multiple points in time. In 2024, we saw a reduction of 18% from the previous fiscal year, equaling a $2.1 million loss in revenue. This fluctuation caused a reduction in our cash reserve, which could have resulted in a 4.7% decrease in spending or the loss of 16 staff members if we had reacted to balance our budget immediately.
- Within the last 5 years, we have seen significant delays – in the millions – in revenues. Unexpected delays can have a drastic impact on our ability to pay employees and bills in a timely manner.
“I fully recognize that property taxes for individuals are also our concern,” Treasurer Smith also told the Board, “And I’m not saying that there’s no room for that discussion.” In fact, he referred to Bexley’s state Senator Herschel Craig’s Senate Bill 22 that Mr. Smith believes is a sensible approach to property tax relief for those who need it.
“To take an approach to cut local funding off from our students at a faster rate than their little legs are growing is incredibly irresponsible, in my opinion,” Treasurer Smith said.
The Ohio Senate will present its budget proposal soon and once passed by the Senate, any differences with its bill and the House budget bill will be ironed out in a joint Conference Committee. Upon agreement, the legislation would go to the Governor for signature. The state’s budget must be approved by July 1.
For more of a detailed explanation on why cash balances are important for school districts, read a 2022 whitepaper from the Ohio Association of School Business Officials. Treasurer Smith was a collaborator in this work.