What has happened to State funding for the Rocky River City Schools?

The district received information from the State Office of Budget and Management (OBM) on 3/24/11 that will have a significant impact on the finances of our District.  The Rocky River City School District (RRCSD) is projected to have a $6,089,686 loss in funding from the state over the next four years.

• Based on OBM projected amounts, the RRCSD is anticipated to lose 76.1 % of State Foundation Funding.  The district had anticipated and budgeted for an annual 15% ($190,616) reduction.   The new figures represent a loss in State Foundation Funding to our District of $2,623,779 over four years while some districts received increases in funding.
• The Governor’s budget proposal calls for the Tangible Personal Property Tax reimbursement to be phased out on a much shorter timeline than what current Ohio law requires.  This is a loss of $2,698,888 to our District over four year versus our current projections.
• The Governor’s budget proposal also calls for SB3/Electric Deregulation/KwH reimbursements to be phased out immediately for the RRCSD.  This is a loss of $767,020 to our District over four years. 

The bottom line for the RRCSD is a loss of $6,089,686 over the next four years.  This is a loss of about $2,295 per pupil.

Why is Rocky River losing so much funding?

The state bases its Foundation Funding Program on a district’s capacity to raise its own taxes for education.  Those districts with a higher total adjusted assessed property value are expected to raise more of their funds for education through local property taxes.  In Rocky River’s case, the total adjusted assessed property value is $716,536,390, or $269,696 per pupil property valuation.  Given this, the state has cut our funding by 76.1%. 

For comparison purposes, Cleveland Municipal School District has a property valuation per pupil of $84,266; Bay Village’s is $195,491; Orange’s is $456,464.  A complete listing of all districts in the state is available here.

Why is Rocky River receiving such a large reduction in Foundation Funding and Bay Village is not?

The reason that Bay Village is not receiving as large a reduction in state funding is related to the amount of taxable property Bay Village has within the boundaries of their district.  Bay Village has $497,119,880 in total adjusted assessed property value.  Rocky River has $716,536,390 in total adjusted assessed property value.  

This means that Rocky River has more total land mass that can be taxed and the state takes this into account when deciding which districts are more reliant on state funding.  Thus Bay Village receives $4,093,686 of state resources for the Foundation Funding Program, which represents 14.5% of their revenues.  Rocky River receives $1,102,946 of state resources for the Foundation Funding Program, which is about 3.5% of total revenue. 

Rocky River’s cut of 76.1% of $1,193,386 in Foundation Funding is  approximately $838,914.  Bay Village had a higher amount of Foundation Funding to begin with and a lower percentage of cuts .  So, their 9.1% cut of $4,093,686 is a reduction of $347,000. 

What is the Tangible Personal Property Tax Reimbursement?

The Tangible Personal Property (TPP) tax was a tax on business inventories that was phased out, starting in 2005.  It was replaced with the Commercial Activity Tax (CAT). The state committed to make up the revenue lost to districts for a period of five years, phasing out the replacement funds over the next seven years, ending in 2017. The replacement funds came from the CAT paid to the state. Although businesses are still paying the CAT to the state, districts will not receive the benefit of these taxes, even though the tax revenue is generated directly from their own communities. The Rocky River City School District expects to lose about $2,698,888 over four years.

What is the SB3/Electric Deregulation/KwH Reimbursement?

Senate Bill 3 (enacted in June 1999) and Senate Bill 287 (enacted in December 2000) made both regulatory and tax changes for electric and gas utilities. Among those changes was the reduction in assessment rates for tangible personal property of these utilities and hold harmless payments for schools and local governments to reimburse them for the local tax losses due to the reductions in property taxes resulting from the assessment rate changes. For more information on the property tax changes and the reimbursement determinations, see the Senate Bills 3 and 287 Question and Answer Guide.  The Rocky River City School District expects to lose  $767,020 over four years from the elimination of this reimbursement.

How did Rocky River plan for projected reductions?

The Administration and Board of the Rocky River City School District has been diligently planning over the course of the past eight months for the potential loss of state funding due to the looming $8 billion estimated budget shortfall at the State level.  In the last five-year forecast update filed with the state in October 2010, the District planned for a 10% loss of state foundation funds ($127,077)  per year starting in fiscal year 2012.  As part of our most recent draft financial projections in anticipation of the State biennial budget and next five-year forecast updated scheduled for May 2011, we had anticipated a 15% ($190,616) loss per year in this funding source.  This most recent assumption was based on a range that was being talked about in local political circles and was prudent thinking at the time.   

Further, the District had already anticipated losses from the personal property tax phaseout as was scheduled in current Ohio law starting in fiscal year 2014 of $503,154, and then further reductions until the entire reimbursement was phased out in fiscal year 2018.  The recent State budget proposal proposes to completely phase out this revenue source over the next two years, which is much swifter than anyone had anticipated.   

As a result of the above planned funding cuts, the District aggressively worked to lower personnel costs in the form of measured reductions in staffing levels over the last two years in addition to securing recent concessions from bargaining and non-bargaining employees alike to the tune of $1.6 million over the next two years.  For fiscal year 2010, the  forecast reflected a reduction of non-instructional aides in the amount of 1.96 full-time-equivalent (FTE) positions as a cost-saving measure that will not negatively impact the District’s educational program in a significant manner. Further, the forecast called for a reduction in the following FTE’s for FY 11: Interpreters/Tutors – 1.90, High School Media Specialists - 1.0, High School Special Education Coordinator – 1.0.  The duties previously performed by these employees were reassigned to existing staff members.  All other controllable areas of the District’s operational budget were kept relatively flat for the next  several years with some modest increases budgeted for utilities and other non-controllable expenditures such as property tax collection fees assessed by the County for example.

What actions are Rocky River administrators and Board of Education members taking to address these state reductions?  

• The District continues to review and implement budget reductions.  Further personnel and programmatic cuts are being considered at this time.
• District administrators advocate for the RRCSD in meetings with our state legislators and the newly appointed Director of the Office of 21st Century Education, Robert Sommers.
• Parents and community members are being asked to contact their state legislator immediately to voice their concerns about these cuts and the impact they will have on our District.
• The Rocky River Board of Education and Dr. Shoaf will hold a meeting for parents, staff and community members to share information about the proposed budget cuts.  We have invited Governor Kasich, State Senator Patton and State Representative Baker to the meeting.  The meeting is scheduled for 4/19/11 at 7 PM in the Goldwood Room, Goldwood Primary School, 21600 Center Ridge Rd., Rocky River.
•  

Will Senate Bill 5 offset the budget reductions?

The reductions offered in Senate Bill 5 are long term and will be realized over a period of years.  The district may/will find relief in the new legislation once all of the requirements are clarified and are fully implemented. 

At this time it is not clear as to the amount of reduction that will be realized as a result of the new legislation.

What happens if Senate Bill 5 is sent to a referendum?

The referendum process has many steps and is rather complex, but here is a summary description of the referendum process in Ohio: 

A referendum is a method by which Senate Bill 5 (if passed into law) can be submitted to the voters for  approval as a statewide ballot issue.  The referendum process starts with filings with the Ohio Secretary of State and the Ohio Attorney General.  These two steps are technical in nature and lead to the development of a Senate Bill 5 referendum petition by the group proposing the referendum on Senate Bill 5.  Once the Senate Bill 5 referendum petition is drawn up, it must be signed by a total number of 6% of the total voters in the last gubernatorial election (Confirmed on Secretary of State website:  231,147 signatures).  Signatures must be obtained from at least 44 of the 88 counties in Ohio.  From each of the 44 counties, there must be signatures equal to at least 3% of the total vote cast at the last gubernatorial election.  There are procedures to challenge the authenticity of the Senate Bill 5 referendum petition signatures which culminate with the Ohio Supreme Court addressing any such challenges.  The Senate Bill 5 referendum petition must be then filed with the Secretary of State on June 29, 2011 to ensure placement on the November 8, 2011 ballot.  If this occurs, Senate Bill 5 will not go into effect unless it is approved by a majority of the voters on November 8, 2011.    

What can I do to help?

Parents and community members are urged to contact their state legislators immediately to voice their concerns about these cuts and the impact they will have on our District.   

Please address the following issues with our state legislators:

• Request a more balanced approach to state funding for our schools.
• Ask to slow down the accelerated loss of the Tangible Personal Property Tax and the SB3/Electric Deregulation/KWH reimbursements. 

Ohio State Representative Nan Baker, District 16

Phone: (614) 466-0961; Email: District16@ohr.state.oh.us

Ohio State Senator Tom Patton, District 24

Phone: (614) 466-8056; Email: SD24@senate.state.oh.us

Why don’t we use money from the recent bond issue?

Funds raised through a bond issue can, by Ohio law, only be used for permanent improvements such as renovations, roofs, windows and HVAC systems.  These funds can not be used for operating expenses.