"We don't have a spending problem. We have a revenue problem."
That is what Mentor Schools CFO Dan Wilson told the district's Citizens Financial Advisory Committee earlier this month when discussing the 2012-2013 annual appropriations.
Mentor Schools Board of Education President Alan Mihok repeated the message during the Board meeting last night in which they approved the aforementioned appropriations.
This year, Mentor Schools is anticipating $89 million in revenue, Wilson said. That's down from $101 million in revenue during the 2006-2007 school year.
Another way to look at it -- the school district has almost the exact amount of revenue it had during the 2003-2004 school year, despite passing a $15 million levy in 2005.
So why is revenue shrinking?
Wilson cited two reasons for the loss of money -- a still struggling economy and changes to state tax and funding policies.
The weak economy has impacted the school district in several different ways. First, the district is having more trouble collecting money from delinquent real estate taxes, Wilson said.
As of now, Mentor Schools is trying to get more than $2 million it is owed in property tax appeals from the state. Wilson said, pragmatically speaking, he doesn't expect the district to get more than $800,000 of that.
Additionally, Wilson said he wasn't sure precisely how the Federal Health Care Reform act would impact school districts. However, he said it would cost Mentor Schools at least $250,000.
Furthermore, this recession recovery -- already marked as the weakest the country has experienced since World War II -- is also marked by an uncharacteristic increase in inflation, Wilson said.
He added that each one percent rise in inflation translates to another $1.02 million in expenses for the district.
However, the single biggest blow to school revenues in the last eight years has been changes to state tax and funding policies, Wilson said.
Those changes include .
All totalled, these policy and tax changes will cost Mentor Schools $10 million this year and have cost the district more than $30 million since the 2005-2006 school year, Wilson said.
A PowerPoint presentation detailing Wilson's figures has been attached to this story as a PDF.
One silver lining that has helped Mentor Schools stave off returning to the ballots for another levy is that the district has seen a decrease in student enrollment.
Moreover, with a decrease in students, the district has been able to reduce its staff and, thus, save money.
(Wilson said that 85 percent of Mentor Schools' budget goes to salary and benefits so it is almost impossible for the district to spend less money without decreasing staff.)
In the 1999-2000 school year, the district had 10,269 students; this school year, fewer than 8,000. That is a 22 percent drop in enrollment.
During the same span of time, the district has gone from 1,125 staff members (that includes teachers, administration and support staff like cafeteria workers and bus drivers) to 896.25 -- a 27 percent drop.
To clarify, Mentor Schools had reduced staff via buyouts and by not replacing retiring or leaving employees, Wilson said.
The school district still sees an annual drop in enrollment, Superintendent Matt Miller said. However, that drop is getting smaller. So while the district still intends to reduce staff in proportion with its student body, those reductions will likely be less dramatic in coming years.
However, there is no indication that the drops in revenue will also taper, Wilson said.
"We still think that it's a likelihood that more bad things will happen than good things to the budget," he said.
This school year's appropriations
All of this preface brings us to this year's appropriations.
The Board approved appropriations of $102 million, a 6 percent raise from last school year's appropriation.
Wilson said that the 6-percent bump could be explained by four different factors -- most of them out of the district's control.
First, Wilson said it is common for districts to experience 4.5 percent inflation from year to year. Additionally, the district saw 0.4 percent increases in out-of-district tuition costs and subsidies for school fees, athletics and food services, respectively.
Finally, the district is paying for two years worth of textbooks and technology for classrooms with this year's appropriations, resulting in another 0.9 percent increase.
Wilson noted that the district hopes to underspend the budget, as it did last year by more than $4 million.
The district is working on this year's budget, as well as its 5-year financial outlook.
Wilson said, when it is finished, Mentor Schools hopes to provide a plan that would allow them to go into the 2014-2015 school year without going into the red.
"We passed our last new levy in 2004," Wilson said. "A new levy usually lasts four years before a district has to go back to the ballot. We're up to nine so we're still doing better than most."
Casino tax revenue impact
Finally, Wilson said Mentor Schools expected to receive its first batch of casino tax revenue in January 2013.
At the moment, school districts expect to receive $20 to $30 per student -- translating to $160,000 to $250,000 per year.
However, Wilson is not convinced school districts will actually see a bump in revenue and has not counted it into this year's budget.
"Call me skeptical but I've seen this play where they give us lottery money with one hand and have a corresponding reduction with the other," Wilson said.