Loan repayment prevents balanced books

By Harold Gwin

Youngstown schools may have to borrow an additional $10.4 million this year.

YOUNGSTOWN — The chairman of the state fiscal oversight commission controlling city school district spending said Youngstown has been able to reduce its spending to match its income.

However, the district still has a substantial debt to repay the state for assistance rendered in avoiding year-end budget deficits, said Roger Nehls.

The deficit is now the debt, he said, after an Auditor of State financial forecast for the current fiscal year ending June 30, 2009.

The Financial Planning and Supervision Commission was set up after the state placed Youngstown city schools in fiscal emergency in November 2006. The district ran a $15 million deficit that year and a $10.4 million deficit last year.

It’s borrowed $25 million from the state to cover that red ink but has also been making extensive cuts to reduce spending.

“It’s clear the district has reduced its spending to match its income,” Nehls said after the forecast presentation by Tisha Turner of the state auditor’s Local Government Services Section during a commission meeting Thursday.

The bottom line shows nearly $106.8 million in total revenue, while spending is estimated at $117.8 million. The expenditure side of the ledger, however, includes $12.7 million in state solvency loan repayment.

Without that debt payment, the budget would be balanced, Nehls said.

As it stands now, the district will have to borrow about $10.4 million more from the state to cover the loan repayment and end this fiscal year in the black. The interest-free loans are repaid over a period of two years.

Additional revenue is needed for the district’s fiscal recovery, he said, renewing a call for passage of a proposed 9.5-mill, four-year levy on the November election ballot.

That levy would produce about $5.3 million a year in new revenue, and four years of the tax would be sufficient to pay off the state solvency loan debt and get the district back into the black, school officials have said.

A total of $7.5 million of the state debt was repaid last year.

Nehls said additional spending cuts will still be required by the district, even if the levy passes, to ensure that Youngstown doesn’t return to deficit spending.

School officials have said more reductions are forthcoming.

The auditor’s financial forecast shows the district has cut its payroll by $5 million from last year, primarily through the elimination of 176 positions. That list includes 33 administrative and 143 teacher and other posts. Fringe-benefit costs have been reduced by about $1 million.

Youngstown is paying out $27.5 million in tuition costs to charter schools, open enrollment schools and voucher schools this year, but school officials said that number could increase based on projections that the district could lose 300 or more additional pupils to those programs this year.

A loss of 300 would boost the year-end deficit by about $1.5 million, raising the amount the district would have to borrow from the state.

gwin@vindy.com