Panel: Youngstown school district should borrow funds from itself

By Harold Gwin

The $9 million budget deficit projection is ‘gloomier’ than the picture painted for the commission in November.

YOUNGSTOWN — The fiscal oversight commission controlling the Youngstown city school’s finances wants the district to borrow money from itself to help cover an anticipated 2008-09 year-end deficit pegged at nearly $9 million.

The district can borrow a Tax Anticipation Note equivalent to one year’s revenue being produced by a 9.5-mill tax levy approved by voters in November — $5,291,000, Roger Nehls, commission chairman, said at a meeting Thursday.

William Johnson, district treasurer, said the traditional method of borrowing money through a TAN is to go to lending institutions, but the market for such loans right now is “terrible.”

Although Youngstown’s general fund is in the red, the district does have other available money in other funds from which it can borrow for a short term, he said, pointing out that there is $6 million in the construction bond fund, $1 million in the cafeteria fund and money in the building construction fund that could be tapped.

Any money borrowed from those accounts would have to be repaid, as that money is earmarked for specific programs. It can’t just be diverted to another use such as paying bills or salaries, Johnson said.

The district would pay back the loan to itself at an interest rate of about 2 percent, Johnson said, noting that bond counsel is reviewing the idea now.

Nehls said the suggestion that Youngstown borrow from itself came from the state auditor’s office, which pointed out that the district has available funds it could use and then repay from the tax levy proceeds. The levy will remain in place for four years.

The state is having its own fiscal issues and is anticipating a substantial budget shortfall this fiscal year, and the state auditor wants to reduce Youngstown’s reliance on state solvency loans to keep the district’s budget in the black, Nehls said.

The auditor’s office has suggested that, if Youngstown borrows $5,291,000 from itself, the state will cover the rest of this year’s deficit with a $3.7 million solvency loan, Nehls said.

Youngstown has already borrowed some $25 million in no-interest solvency loans over the past two years to balance its budgets and will have repaid all but $5.2 million of that amount by June 30, 2009.

Nehls said the $9 million budget deficit projection is “gloomier” than the picture painted for the commission in November.

At that time, Johnson had projected that passage of the tax levy and the implementation of $2.9 million in proposed spending cuts would reduce this year’s red ink to just over $6 million.

Johnson said Thursday that the state’s review of subsidy funding for the district’s 7,253 pupils earlier this month changed the forecast to show a deficit of nearly $9 million. The biggest change was a $2 million jump in money going out to charter, open-enrollment and voucher schools that have pulled children out of the city schools, he said.

Youngstown has been in state-declared fiscal emergency since November 2006.

gwin@vindy.com