The school district has not had a new operating levy passed since 1996.
By SHERRI L. SHAULIS
VINDICATOR TRUMBULL STAFF
NILES -- Still reeling from the state's announced reductions in funding, city schools are now faced with the task of finding a way to get back in the black.
State Auditor Betty Montgomery declared the 3,057-pupil Niles City School District in fiscal watch Monday after predicting a $2.92 million shortfall in the district's general fund.
The announcement comes less than one week after school officials learned they would lose more than $152,000 in state funding.
"Placing the district in fiscal watch is best for the students and taxpayers in the city of Niles," Montgomery said. "The forecasted deficit, if not dealt with properly, could threaten the future solvency of the district."
School officials already knew they were facing a $660,000 deficit in its $22 million general fund budget by the end of this school year, and in January requested a cash advance from the state to cover the shortfall.
Though Montgomery offered praise for school officials' earlier efforts to reduce spending and avoid a deficit, Superintendent Patrick N. Guliano expressed frustration at trying to balance a budget when so many factors are beyond local control.
"What really kills us is that we are so dependent on state funds," he said, noting 60 percent of Niles schools' funding comes from the state.
Source of funds
Unlike some districts in the state, Niles relies little on funds generated by tax levies. In November, a 5.1-mill renewal levy was passed by voters.
The levy generates about $1.3 million each year, but none of that is new money for the school, Guliano said. Rather, it continued collections of money originally approved in 1988.
Before that, voters approved a 2.4-mill levy to cover construction costs for the new middle school. None of that money is used for the day-to-day district operations, Guliano said.
The last levy passed in the district to generate new funds was passed in November 1996.
The fiscal watch also exists because the district has seen increases in the cost of insurance and special education, as well as a decline in local revenue because of delinquent taxes, Guliano said.
The hard thing, he noted, is that the district will need to make cuts but can't start until the end of the school year.
"When you start a school year with a certain level of staffing, you need to maintain that level," he said. "It's not like we can go in now and say, 'We need to cut a teaching position.' Those things all have to be done prior to the start of the school year."
Under fiscal watch, the district must develop and submit a financial plan to eliminate the projected deficit to the Ohio Department of Education within 60 days. ODE must evaluate the plan for approval within 90 days.
What caused problem
The fiscal watch status was triggered by the forecasted operating deficit's being more than 8 percent of the school system's general revenue fund for the last fiscal year, according to the auditor's report.
The school system had total revenues in the current fiscal year of $21.6 million. It had total expenditures of $24.6 million, leaving revenues minus expenditures at a little more than $3 million.
The school district had $855,000 in cash balance this past July 1, leaving a cash deficit of $2.169 million by June 30. But about $758,000 in encumbrances pushes the total deficit to $2.927 million, the auditor's report said.
Among the reasons for the projected deficit, state auditors said, could be health care costs for employees. Health care charges for employees were increased 11 percent effective May 2002, and the school district anticipates a 35-percent increase in May.
"We are doing research on what we can do to help the situation," Guliano said. "We are just going to have to take it one day at a time."
XContributor: Vindicator correspondent Jeff Ortega in Columbus