The Oregon City Schools District, according to an updated five year forecast, shows its expenses will soon exceed its revenues.
District Treasurer Jane Fruth, at a public information meeting on July 25, called the forecast “a snapshot” of projections of the school district’s revenue and expenses in the next five years based on the current budget.
“It’s a moving target,” said Fruth. “I suppose I could change this every day. But the reality is, that’s how fluid things can be in our district.”
The district currently has cash balances, she said.
“But now’s the time to start talking and planning for what could be coming down the road,” she said.
In fiscal year 2013, expenditures will exceed the revenue the district receives, causing a spending deficit, she said.
“We’re going to be spending more than we’re taking in. That’s going to start working on our cash balances. We get into serious trouble with negative cash balances in fiscal year 2015,” she said.
Most of the district’s educational operating expenses come out of its $40 million general fund, which is comprised of real estate tax revenue, state foundation monies, and property tax allocations.
Fruth noted that there was a drop in residential property valuations in the auditor’s recent reappraisal of real estate in Lucas County.
The valuation of real estate in the Oregon City School District dropped by an average of 14.5 percent, said Fruth.
“However, our loss was 7 percent because agricultural values are coming up and it shelters our values. It helps everyone in this room in the sense that we won’t have a significant deterioration in our valuation,” she said. Commercial real estate has been reduced by 3 percent, she added.
Fruth said property taxes, despite the devaluation of real estate by an average of 14.5 percent, will not be reduced that much.
“I imagine when I said your values went down 14.5 percent, you’d think, `Great, my property taxes will go down by that amount.’ But that’s not going to happen because of House Bill 920,” said Fruth. HB 920, put into effect at a time of high inflation, puts a cap on how much money can be generated by a property tax levy. No matter how property values change, the tax dollars generated stay the same every year.
“Levies can only collect the amount that is voted upon,” said Fruth. “There’s not automatic growth in the levies.”
The 5.9-mill levy passed in 2008 can’t go up because voters only approved 5.9 mills. “So the school district will in fact lose the revenue on that millage,” she said.
The district will also lose money from FirstEnergy’s closure of three of its four generators at its Bay Shore power plant in Oregon, from state foundation monies, electric deregulation payments, and property tax allocations.
The district received $7.8 million in property tax allocations in 2012, but that amount will shrink.
“They will be slowly taken away over time,” she said, since the state no longer requires companies to pay tangible personal property taxes.
“As you look at the forecast, that is why we have a flat or declining real estate tax revenue stream,” she added. “We are constantly fighting to replace monies lost.”
“These are the trends. Not a lot of good news,” she said.
Regarding the district’s expenses, 56 percent of the general fund goes toward salaries and 23 percent go toward fringe benefits.
Salary projections include a 2-percent increase in steps per year. There are no raises in the base salaries, she said.
The 79 percent of expenses for teacher salaries and benefits is less than the state standard of 85 percent.
“We’re below industry standards,” said board member Jeff Ziviski. “This shows we’re working together as a district to make sure we’re spending the monies wisely and we’re keeping the salaries low.”
Fruth said the district has cash reserves for the next school year.
“We’re okay right now, but we have to start talking and planning on what we’re going to do because in fiscal year 2015, we’re in the negative, in 2016, it’s even worse,” she said.
The only way to get additional revenue, she added, is “if the state coughs up money, we ask for more [levy], or find our own by reducing services.”