The latest information from Governor Kasich's Biennium Budget Proposal has rendered this statement incorrect - very much so.
The Ohio Office of Budget and Management has released more detail about the adjustments to the Personal Property Tax (PPT) Reimbursement, which I explained in the earlier article, "A Bullet Dodged."
The cut is significantly larger than expected.
This document explains how the new PPT Reimbursement numbers were derived, which are detailed here. The strategy is that Ohio's school districts would be divided into two categories:
- Districts which don't rely much on the PPT Reimbursement, meaning that less than 2% of their total funding comes from the PPT reimbursement. For these districts, the PPT Reimbursement program is over - they'll get no more money from this program. In Franklin County, Bexley and New Albany fall into this category.
- All other districts. This is obviously where we fall, as for us the FY11 PPT Reimbursement of $12 million represents 8% of our $152 million in total funding. For such districts, the PPT is phased out at a rate of no more than 2% of total funding each year. How long the phase out will take varies for each district, with the period being longer if the PPT Reimbursement is a large fraction of total fund.
For example, Marysville Local Schools receives 16.5% of its total funding from the PPT Reimbursement (because of the Honda plant), so at a reduction rate of 2% more each year, it will take eight years for their reimbursement to end.
Since 2% of our total funding is a bit more than $3 million, the phase out schedule would work such that the $12 million for FY11 would be reduced to $9 million for FY12, then to $6 million for FY13, and finally $3 million for FY14 - and that would be it. Graphically, it looks like this:
|Click to enlarge|
It was already all but certain that even with the passage of the 6.9 mill Permanent Operating Levy this year, there would have to be another levy on the ballot again in 2013. We're already deficit spending, with our cash reserves diving toward zero. A 6.9 mill levy this year will slow the cash burn, but not end it - and that was true before this PPT Reimbursement cut was announced.
Our Five Year Forecast already had a much less aggressive phase-out of the PPT Reimbursement built in, plus assumptions that the next contract with the unions would be for three years, with base pay increases of 1% in FY12 (actually 0.5% because the unions have agreed to a base and step freeze for calendar 2011, meaning step increases automatically resume Jan 2012), 1% in FY13, and 1.25% in FY14. Although it would be beyond the scope of a three year contract, the Five Year Forecast assumes 1.5% base pay increases for FY15.
Note that the passage of SB5 changes all these assumptions about compensation agreements with the unions. I'll not attempt to address them in this article as there is still much to absorb about the final form of this law.
My unofficial, personal analysis of the numbers - ignoring the effect of this PPT Reimbursement phase-out acceleration for the first pass - is that: a) if we stick to the spending plan in the current Five Year Forecast, then the 2013 levy would need to be on the order of 8.8 mills to keep us from running out of cash before FY15 (when yet another levy would be needed).
If we pile on this acceleration of the PPT Reimbursement phase out, the 2013 levy would need to be on the order of 14 mills. That's how big a deal this is.
So if we assume that the 2011 levy passes, and another one is put on the ballot on 2013, and it passes, how much do we have to cut back on spending to keep the 2013 levy from being larger than say 7 mills?
My estimate is that we would have to cut the FY12-FY15 annual spending growth from the 4.25% compound annual growth rate now in the Five Year Forecast to something on the order of 2.5%. In dollar terms, that would mean reducing spending as follows:
FY12 from $166.7m to $166.2m (-$500,000)
FY13 from $175.9m to $169.6m (-$5.3m)
FY14 from $183.3m to $174.1m (-$8.2m)
FY15 from $191.3m to $178.7m (-$11.6m)
Graphically, it looks like this:
|Click to Enlarge|
In other words, after passing 7 mill levies in 2011 and 2013, we would still need to take a total of $25.6m out of our FY12-FY15 spending plan to stay solvent.
But note that this still isn't a spending cut. It's a significant reduction in the rate of spending growth.
Our total spending as a district would still increase at a rate of 2.5% per year. The question is whether even that is affordable to the people of our community.