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Akron schools face deficit

By John Published: May 24, 2011

By John Higgins
Beacon Journal staff writer

The Akron school district's finances will plunge from a surplus of nearly $34 million to a nearly $11 million deficit in two years.

That's treasurer Jack Pierson's projection for the next five years, which the school board accepted on Monday.

The district has managed to push off the date when the district falls off the cliff for the last few years by making cuts and avoiding the ballot.

''I'm not talking about a levy,'' said Superintendent David James. ''I'm talking about budget reductions. I'm talking about shared services and consolidations.''

The district plans to eliminate 60 jobs, mostly from vacant jobs not being filled, by the beginning of the next school year. James believes layoffs won't be necessary.

James wouldn't comment on whether the district would
put a levy on the November ballot.

That will have a lot to do with the fate of Senate Bill 5, which among other things, would require public employees to contribute a minimum of 15 percent of the total cost of health care.

The district's employees contribute zero percent.

''That would be a big savings, about $7 million [a year],'' said Pierson. ''The question is when does it go into effect. It still hasn't been settled.''

Opponents to Senate Bill 5 are collecting signatures to place an issue on the November ballot repealing the new law.

Pierson expects the issue will be on the ballot. But even if it survives appeal, he said it's not clear if it would affect existing contracts or only new ones.

''Different attorneys have weighed in differently in different discussions we've had, so we don't know,'' Pierson said.

At this point, Pierson's not counting on that revenue.

Senate Bill 5 isn't the only unknown in Pierson's calculations.

The state operates on two-year budgets crafted by governors with four-year terms, but school districts must project income and expenses for five years.

Akron receives about 63 percent of its money from the state, and the legislature is still debating Gov. John Kasich's first two-year budget.

The district already is spending more than it's taking in.

This school year, costs exceed revenues by almost $9 million, but the district started the fiscal year with a $42 million surplus built up from the passage of the last levy passed in 2006.

Next year, the district will overspend by about $11 million, reducing the surplus to $22 million.

But the next year, costs will exceed income by $33 million gobbling up what remains of the surplus and leave Akron about $11 million in the hole.

The deficit balloons to $56 million in the fourth year of the forecast and $106 million in the fifth year.

The economy hasn't done much for the district's tax base.

Pierson expects a 10 percent decrease in revenue from property taxes in 2012 up from a 4 percent decrease projected in October. He is projecting commercial property to stay flat.

The biggest loss in revenue in the 2012-2013 school year, however, comes from the loss of federal stimulus money to retain teaching jobs a one-year drop from $6.6 million to zero and another loss of almost $6 million from the loss of a local business tax on machinery, office equipment and inventory.

The state has been reimbursing districts at 100 percent to make up for the elimination of that tax. Akron received almost $17 million from the state for this school year.

Under the original legislation, the state was going to begin reducing the reimbursement this year. The Strickland administration decided to make districts whole for the lost taxes until the 2013-2014 school year and then begin phasing it out.

Gov. John Kasich's proposed budget eliminates all reimbursement after the 2012-2013 school year.

Next year, Pierson estimates Akron will receive about $11 million in reimbursement. The following year, it will be $5.5 million. The next year the state will contribute nothing to make up for the lost business tax.

Targeting expenses

The biggest increases in expenses are in pension and health insurance costs for employees and for utilities and transfers of funding to other districts because of open enrollment, charter schools and private schools accepting vouchers.

All but one of the district's unions have agreed to a one-time, 2 percent payment this year and no wage increase next year. The board wasn't ready to vote on a tentative agreement Monday night with the last union, which represents educational aides.

Pierson has projected no wage increases over the five-year period except for increases to teachers who have obtained advanced degrees and for years of service. Administrators will have frozen wages during the next school year.

The unions also have agreed to health-care concessions, such as deductibles and prescription co-pays that will save the district an estimated $2 million in the 2012-2013 school year.

''That will help,'' Pierson said. ''Overall the insurance is going up by 5 percent next year and 9 percent the year after.''

Voters approved a 7.9-mill operating levy in 2006.

Pierson estimates that each mill of a levy request would generate $2.7 million in additional revenue, with an approved levy collecting only half that amount in the first fiscal year.


John Higgins can be reached at 330-996-3792 or jhiggins@thebeaconjournal.com. Read the education blog at http://education.ohio.com/.

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