Five-year financial forecast shows district spending in the red starting in 2019

By Candace Barczyk

The Vermilion Local School District is currently in good financial shape, however, treasurer Justin Klingshirn reported to board members at their Monday, Oct. 8 meeting that the district in the future will have to cut expenditures, add revenue, or both, to be fiscally solvent. The board approved the district’s five-year forecast as part of Monday’s agenda items.

Klingshirn gave board of education members a primer on the source of its revenue and expenditures. Local property taxes account for 51.1% of the district’s cash flow. Klingshirn stated Vermilion’s property values are just shy of where they were before the market crash in 2008.  Vermilion’s property tax collection rates were 7% higher than average in 2018, and 4.1% higher in delinquent collections. Despite this, Klingshirn said property tax revenue has increase .87% in the last five years and has decreased by 1.5 percent in the last ten years.

The second source if income is through restricted and unrestricted grants in aid through the state. Restricted grants can only go for their purpose, such as economic disadvantaged funding or career tech funding. Unrestricted state foundation money has no limitations on where it can be spent, and this money accounts for 18.6% of the district’s cash flow. The district is on, and has been for many years, a guarantee foundation funding formula. This formula is used to determine the district’s ability to raise local revenue, and is based on the three-year average property value, median income, and wealth index. In FY 2019, the district received a 26.9% grant from the state, which amounts to $1,624 per student. In FY 2017, that amount was $1,720, or a 28.7% grant.

All other revenue, 7.8%, accounts for the district’s remaining cashflow. This includes tuition, transportation, interest on investments, etc. This line item is slated to increase two percent over the course of the forecast.

As for expenditures, personnel services, or salaries, are the biggest expenditure at 49% of the budget. This consists of salaries and wages, overtime, severance pay and supplemental time. Despite

Negotiated increase, Klingshirn said these costs remain flat. In line with that is the second largest expenditure, employee retirement and insurance, which is scheduled to increase 4.6 percent over the next five years. This consists of all retirement, early retirement, Medicare, unemployment, early retirement incentives, and all health-related insurances. Klingshirn reported a zero percent increase in health insurance premiums from 2018 to 2019, and the district receives various discounts for drug-free workplace, going green, etc.

The final bulk of expenditures is in purchased services, such as utilities, services for operations, and open enrollment out. In FY 18, Vermilion paid more than $1.2 million in student transfers out.

“The district is in good financial health,” said Klingshirn. “The district will need to watch its spending carefully to mirror its revenue.”

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