Official foresees fiscal emergency

School officials weren't surprised the state rejected its fiscal recovery plan.
By HAROLD GWIN
VINDICATOR EDUCATION WRITER
YOUNGSTOWN -- City schools Treasurer Carolyn Funk expects the state to downgrade Youngstown's financial status to "fiscal emergency" before the district is able to turn its financial picture around.
The state put the district into "fiscal caution" in March after school officials announced they anticipated a $4 million general fund budget deficit this year and an $11.9 million deficit next year.
The state auditor's office said Monday that it will downgrade that rating to "fiscal watch" within the next few days because the district failed to submit an acceptable financial recovery plan.
The state's action didn't come as a surprise because the district knew its plan didn't take it completely out of deficit spending, Funk said at Tuesday's board meeting. She added she anticipates the district to be downgraded further to fiscal emergency next year.
The projected $11.9 million deficit exceeds the fiscal emergency's trigger point of a deficit reaching or exceeding 8 percent of the district's general fund, she said.
Considering levies
The board is considering asking voters to approve both a 12-mill, five-year emergency levy that should produce nearly $6 million in new revenue and a 2.5-mill permanent improvement levy that should produce $1.25 million more.
But that won't be enough to cover the deficit.
It will take the district, which is making cuts in spending and reducing staff and the number of its buildings, about four years to totally eliminate the deficit, Funk said.
She predicted the state will put Youngstown in fiscal emergency for about one year and then improve that rating to fiscal watch and finally fiscal caution as finances improve.
That scenario will fail, however, if voters turn down any proposed levy issues. Should that happen, there's no indication how long Youngstown might remain in fiscal emergency.
Under that rating, the state would appoint a fiscal adviser to oversee district spending and a five-member Financial Planning and Supervision Commission would take over some or all of the board of education's powers to devise a recovery plan.
Earlier deficit
Youngstown was put in fiscal emergency in 1996 when it was unable to deal with a deficit that exceeded $40 million. It took three years to recover, Funk said.
Should any proposed levy fail in November, the district can seek passage again in the May 2007 primary election, Funk added.
Youngstown has made $8.5 million in cuts for next year with the elimination of about 100 jobs to cut the projected deficit to $11.9 million.
The state is aware of the district's labor contract constraints, Funk said, pointing out that the Youngstown teacher contract mandates a minimum staffing level of 740 teachers and its American Federation of State, County and Municipal Employees contract mandates a minimum of 57 bus drivers. Those types of constraints make further cutbacks difficult, she said.
Both of those contracts are up for negotiations next year, she continued.
Losing pupils
A loss of pupils has hurt the district's finances, too, she said, noting that about 3,000 pupils have left the district over the past several years.
Youngstown is losing $18 million a year because charter schools have siphoned off city pupils, she said.
Funk told the board she will ask permission in July to borrow more than $8 million against anticipated district real estate tax revenues so the district will have cash to start the 2006-07 school year.
That debt will be repaid with tax revenue next June, she said.
gwin@vindy.com