State to cut school subsidies

By Harold Gwin

The state is changing the way it funds charter and open-enrollment schools.

YOUNGSTOWN — The state is proposing to cut $25 million in subsidy funds to the city school district next year, but that’s really not bad news.

William Johnson, district treasurer, told the city school board’s finance committee Wednesday that Gov. Ted Strickland intends to change the way funding is delivered to charter and open-enrollment schools next year.

The state has been channeling money through the city school district’s general fund budget to those schools, which take children out of the Youngstown system.

Now the state intends to pay these funds directly to those other schools, and that money will no longer flow through Youngstown’s budget, Johnson said.

That means a drop in state receipts from $78 million this year to $53 million next year, but the loss will be offset by a resulting drop in district expenditures, he said, explaining that the subsidy payments will no longer come out of Youngstown’s general fund for those schools.

The $25 million in state subsidy funds follows children who enroll in charter or open-enrollment schools, and the governor’s plan is to require those schools to show evidence that they are enrolling Youngstown children in order to get their subsidies.

Up until now, Youngstown has been required to track all of those children (2,743 in charter schools and 773 in open-enrollment schools this year) to be sure that those claimed by the charter and open-enrollment schools are really Youngstown kids, Johnson said. Tracking these kids created an additional cost for the city schools.

Youngstown will actually benefit from the change, he said, explaining that the “purchased services” line item in the budget that covers those subsidies going to other schools will drop about $27 million.

The change gives a truer picture of the city district finances, Johnson said.

Youngstown has been in state-declared fiscal emergency since November 2006 when the district revealed it was running a general fund deficit.

Johnson is working on a new five-year fiscal forecast that shows no red ink at the end of any year through 2013.

The district, however, won’t truly emerge from a budget deficit until 2012.

It still owes the state $5.2 million in a solvency loan borrowed at the end of last year and plans to borrow $3.5 million more from the state this year.

The district also is borrowing $5.2 million from its own bond fund this year to help avoid any red ink.

The debts to the state will be fully repaid in fiscal 2011. The money the district borrowed from itself will be repaid at the rate of $1,340,000 a year for four years, ending in fiscal 2013.

Beginning in 2012, the district will still owe itself $2.68 million on the bond fund loan, but spending for the year will be $5.7 million less than revenue received, more than enough to cover the debt.

gwin@vindy.com