shaker heights city school district finalfareport04-09-09web.pdf · ruled four times in the derolph...

SHAKER HEIGHTS CITY SCHOOL DISTRICT

Finance & Audit Committee

Report

December 2008

Finance & Audit Committee Members: Paul Carleton Marilyn Eisele

F. Drexel Feeling Andrew Jackson

Kirby Freeman John Lalley

Freda J. Levenson Karen Schuele

James Rebitzer, Chair

www.shaker.org/news/financial/

http://shaker.org/news/financial/documents/F09Forecast-Oct2008WebVersion.pdf

TABLE OF CONTENTS Page No. Executive Summary……………………………………………………………… 3 I. Introduction………………………………………………………………………. 4 II. District Overview………………………………………………………………… 5

A. The Board of Education and Administration…………………………... 5 B. The School District and its Facilities……………………………………. 5 C. District Employees…………………………………………………….…. 5 D. District Revenues………………………………………………………… 5 E. District Expenses…………………………………………………………. 5 F. District Capital Outlays………………………………………………….. 6

III. District Financial Position………………………………………………………. 6 A. District Financial Present……………………………………………….. 6 B. District Financial Future-Five-Year Forecast………………………….. 6 C. Board Levy Directive…………………………………………………….. 6

D. Unexpected Economic Disruptions……………………………………… 6 IV. Alternative Levy Scenarios………..……………………………………………… 7 A. Scenario No. 1-Levy on Ballot in 2009, 2012, 2015……………..…….…. 7 B. Scenario No. 2-Levy on Ballot in 2010, 2013, 2015………………….…. 7 C. Scenario No. 3-Levy on Ballot in 2010, 2012, 2015…………………….. 7 D. Implications of Levy Delay……………………………………………… 7 V. Conclusions & Recommendations………………………………………………. 7

APPENDIX A.1 About the Members of the Finance & Audit Committee……………………… 10 A.2 District Financial Statements……………………………………………………. 12 A.3 District Budget Variance Analysis……………..……………………………….. 13 A.4 District Five-Year Forecast……………………………………………………… 14 A.4a Major Assumptions and/or Highlights of the District Forecast….……………. 26 A.5 Levy Scenario No. 1-Levy on Ballot in 2009, 2012, 2015………………………. 28 A.6 Levy Scenario No. 2-Levy on Ballot in 2010, 2013, 2015…………………….… 29 A.7 Levy Scenario No. 3-Levy on Ballot in 2010, 2012, 2015…………………….… 30 A.8 Chart-Projected Unencumbered Fund Balance-2008 through 2018…………. 31 A.9 Glossary…………………………………………………………………………... 32

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EXECUTIVE SUMMARY The system for funding public schools in Ohio today relies heavily on the local property taxpayer. Under Ohio Law, school districts must maintain a balanced budget. Other state laws, namely House Bill No. 920 (“H.B. 920”), enacted in 1976, have the effect of preventing any increase in tax revenues when property values rise. This requires school districts to pass levies to raise additional revenue. This is particularly onerous for mature residential communities such as Shaker Heights, where there is very little land available for new development, and relatively little commercial property to help absorb the tax burden. The District cannot reasonably expect additional support from the State of Ohio to help finance programs. Although the Ohio Supreme Court has ruled four times in the DeRolph vs. Ohio school funding lawsuit that the State’s method of financing schools is unconstitutional, the Court has declined to force the General Assembly to devise a new system. To complicate matters, House Bill No. 66 (H.B. 66), the state’s biennial budget for fiscal years 2006 and 2007, adopted sweeping changes in the State’s tax structure to the detriment of many school districts, including Shaker Heights. With the implementation of H.B. 66, State support for the School District has flat-lined, and is expected to decline in the upcoming 2010-2011 biennium due to the magnitude of the projected State budget deficit. Often responsible stewardship requires asking taxpayers for a new levy. Sometimes, however, the right course of action is not to ask for new resources. The current economic crisis creates enormous uncertainty about the future prospects for our citizens and our school system. In such an environment it is wise to delay new tax increases even though doing so may create vulnerabilities in the future. Based on the previous years five-year forecast, the District had projected the need for an operating levy in 2009. Fortunately, the District put several cost saving initiatives in place over the last several years. In addition, the District has benefited from several favorable, non-recurring revenue and

expense items since the last levy in 2006. As a result, the District faces these economic challenges from a position of strength. That strength has enabled the District to delay plans to place an operating levy on the ballot in 2009. Similarly, based on the current strong financial condition of the District, the Finance & Audit Committee has concluded that the decision to delay placing an operating levy on the ballot in 2009 would be an act of prudent financial management and responsible stewardship on the part of the District. The Committee’s conclusion is predicated upon current conditions and expectations. The deterioration of either of these would necessitate the Committee reconsider its conclusion about the timing of the next operating levy. The Committee notes that delaying the levy request until after 2009 makes it imperative the Shaker Community approve a levy in 2010. Further, the Committee believes the District’s policy of placing an operating levy of less than 10 mills on the ballot every three years may need to be revised in the near future, as the District’s revenue sources continue to shift toward local taxation because of reduced state funding. While it has been the historical practice of the District to limit the operating ballot issues to no more than once every three years at a rate less than 10 mills, the current economic prospects dictate that this practice be reconsidered. Indeed if conditions deteriorate markedly in the near term it may be necessary for the District to request a levy in late 2009. The following report details the Committee’s deliberations and conclusions.

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I. INTRODUCTION Assuring that its schools have necessary financial resources is one of a local board of education's most important responsibilities. To meet this responsibility, the Shaker Heights Board of Education conducts a continuous assessment of both current revenues and expenditures and projections for the future. In October 2002, the Shaker Heights Board of Education established a Finance & Audit Committee consisting of nine members, including two members of the Board of Education, to help assess the District’s financial needs. Although the membership of the committee has changed since 2002, the members, both past and present, were selected because of their broad range of expertise in accounting, economics, finance, public finance, law, and higher education. All are District residents. Brief biographical sketches of the current committee members are included in Appendix A.1 of this report. The Committee was charged with the following tasks: • Review the annual audited financial statements

with management, including major issues regarding accounting and auditing principles and practices as well as the adequacy of internal controls that could significantly affect the District’s financial statements;

• Review an analysis prepared by management

and the external auditor of significant financial reporting issues and judgments made in connection with the preparation of the District’s financial statements;

• Review major changes to the District’s

auditing and accounting principles and practices as suggested by the external auditor or management;

• Discuss with the external auditor the matters

required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees relating to the conduct of the audit;

• Review with the external auditor any problems

or difficulties the auditor may have encountered and any management letter

provided by the auditor and the District’s response to that letter. Such review should include any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information;

• Meet at least annually with the chief financial

officer (Treasurer) and separately with the external auditor, if the committee deems it necessary; and

• When requested by the Board, review the

soundness of all financial assumptions relied upon in determining the fiscal necessity and timing of any levy.

Consistent with its charge, the Committee has met twenty-one times since its creation in late 2002, including at least once per year with the District’s Auditor of State representative. Included were three meetings this fall during the months of October, November and December to study the District’s financial projections and review related financial information. The Committee has issued three previous reports. The first report in December 2002, recommended an operating levy that passed with a vote count of 5,657-For vs. 2,987-Against for a 65.4% approval rate in May 2003; a second report in May 2004, recommended a bond issue that was approved by the voters with a vote count of 12,441-For vs. 5,946-Against for a 67.7% approval rate in November 2004; and a third report in December 2005, recommended an operating levy that passed with a vote count of 5,579-For vs. 3,697-Against for a 60.1% approval rate in May 2006. The Committee’s current focus is on operating needs and its charge is to: • Review the assumptions in the District’s most

recent five-year forecast; • Study the financial projections and examine

related documents concerning the District’s finances; and

• Conclude as to the necessity of placing an operating levy on the ballot in 2009.

Details of the Committee’s observations and conclusions follow.

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II. DISTRICT OVERVIEW A. The Board of Education and Administration The Board of Education of the Shaker Heights School District (the "Board") is a political and corporate body charged with the responsibility of managing and controlling the affairs of the District, and is, together with the School District, governed by the general laws of the State of Ohio (the "Ohio Revised Code"). The Board is composed of five members who are locally elected to overlapping four-year terms. The Board elects its President and Vice President annually, and appoints two officials: the Superintendent, who serves as the Chief Executive Officer, and the Treasurer, who serves as the Chief Financial Officer. B. The School District and its Facilities The District is located in Shaker Heights, Ohio, Cuyahoga County. The District operates five elementary schools (K-4 and Pre-K in one of the schools), one upper elementary school (5-6), one middle school (7-8), and one high school (9-12). The District’s four support facilities include an administration building, a transportation center, a warehouse and maintenance vehicle garage, and a media and technology services facility. The District’s facilities include 900,000 square feet in buildings and 95 acres of grounds. The District’s 50 buses transport 2,400 public and private students per day. The District’s technology infrastructure consists of a fiber optic network that includes 33 servers supporting 1,295 in-house District computers in addition to remote access through a firewall-protected security system. The District covers approximately 7.5 square miles, including all of the City of Shaker Heights and a portion of the City of Cleveland in the Shaker Square area, and is located approximately ten miles southeast of downtown Cleveland. C. District Employees In fiscal 2008, the District’s instructional and support facilities were staffed by 303 classified (non-teaching) employees, 470 certificated full- and part-time teaching and tutoring personnel, and 34 administrators who provide services to 5,500 students. The District’s teachers and certain educational specialists are represented by the Shaker Heights Teachers’ Association (“SHTA”).

The District’s teaching staff average 16+ years of experience. Classified employees of the District are represented for collective bargaining purposes by two unions, Ohio Association of Public School Employees (OAPSE), Local #149 (secretarial-clerical), and National Conference of Firemen and Oilers, Local #200 (custodial, maintenance, transportation and cafeteria staff). D. District Revenues The two main sources of revenues for school districts in Ohio are local property taxes and State support through the State Foundation program. The District’s revenues for fiscal 2007-08 (see Appendix A.2) included approximately $69.5 million from property taxes (including the state reimbursement for Homestead and Rollback and Public Utility reimbursement payments) which represented 78.6% of the District’s General Fund revenues. This is compared to $60.8 million, or 78.0% for fiscal 2004-05. The State contributed $15.3 million, or 17.3% of total General Fund revenues in fiscal 2007-08, as compared to $14.9 million , or 19.1% just three years earlier in fiscal 2004-05. Property taxes are levied on residential and commercial real estate, as well as on commercial tangible personal property (primarily machinery and equipment and furniture and fixtures). Of the District’s property tax revenues, approximately 80.3% or $55.9 million are derived from the taxation of residential real estate. This heavy reliance on residential property taxes is due to the limited amount of commercial property that exists within the District boundaries. E. District Expenses In virtually all school districts the largest category of operational expenditures is personnel. Historically, 80% to 85% of school district budgets in Ohio consist of salaries and related employee benefits. For the fiscal year ending June 30, 2008 (see Appendix A.2), salaries and benefits approximated 80.1% of total general fund expenses in the District. Negotiated collective bargaining agreements determine salary and related fringe benefit payments for nearly all District employees. The current contracts, which expire in fiscal 2010,

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generally call for 1.0%, 2.0%, and 3.0% cost of living adjustments in fiscal years 2007, 2008, and 2009 respectively, in addition to annual experience and degree level increases. The two major fringe benefit costs are the state-mandated retirement contributions and health insurance costs. F. District Capital Outlays The District has historically funded its major capital improvements and repair needs through the issuance of taxpayer approved bonds. The last three bond levies were approved in 2004 ($23.5 million), 1996 ($12.7 million), and 1990 ($10 million). All authorized bonds have been issued and the combined currently outstanding balance ($30.2 million) of these general obligation bonds is serviced by a dedicated property tax approximating 3.97 mills. The District contemplates continuing the practice of utilizing either a bond or a permanent improvement levy as a means for financing its future capital needs. III. DISTRICT FINANCIAL POSITION A. District Financial Present Due to positive variances in both revenues and expenditures specifically during the last two years, the District’s June 30, 2007 and 2008 unencumbered general fund balances approximated $13.6 million and $20.1 million, respectively, representing 17.5% and 24.7%, respectively of fiscal 2007 and 2008 expenditures. The 2008 yearend fund balance represents both the highest dollar value as well as the highest percentage of expenditures ever realized by the District. The unencumbered fund balances (cash less encumbrances) at June 30, 2007 and 2008, increased $4.7 and $6.5 million, respectively over the prior years. Such balances were $4.2 and $3.3 million higher, respectively than projected for the years, due to favorable variances from budgeted revenues and expenditures as delineated in Appendix A.3. Of the combined total $7.5 million favorable budget variance generated in the last two fiscal

years, $2.5 million is attributable to the receipt of OfficeMax tangible personal property tax litigation settlement payments pertaining to two prior tax years. The State has ruled against OfficeMax on two additional tax years of delinquent personal property tax. OfficeMax, however, has filed an appeal with respect to such rulings. In the event the original State ruling holds, the District’s share of such payments would approximate $3.8 million and $3.1 million, respectively, for the two tax years in question, thereby enhancing the District’s fund balance. B. District Financial Future-Five-Year Forecast The District’s financial forecast reveals the need for additional revenues. District expenditure levels are expected to continue to increase at a compounded annual growth rate of 3.5 percent (after taking into account the projected planned cost reductions of $3 million per year, compounded, beginning in fiscal 2011) during the next five years, while revenues are expected to decline at a compounded rate of 1.1 percent. The District’s current five-year forecast, Appendix A.4 in this document and also located at http://shaker.org/news/financial/documents/F09Forecast-Oct2008WebVersion.pdf on the District’s website, was adopted in October by the Board of Education. Major assumptions and/or highlights of the forecast are detailed in Appendix A.4a. C. Board Levy Directive The District’s Administration has operated the District and prepared its long-term financial planning strategies around the Board’s levy directive that the District not be on the ballot more than once every three years for an operating levy at a rate less than 10 mills. As is reflected in the District’s current forecast, the District’s historical levy cycle would indicate that the District be on the ballot in 2009 for an operating levy. D. Unexpected Economic Disruptions Given the financial turmoil in the U.S. and world markets coupled with the favorable unencumbered general fund balance as of June 30, 2008, the Committee discussed at length the pros and cons of alternative levy scenarios prepared by the Treasurer.

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IV. ALTERNATIVE LEVY SCENARIOS A. Scenario No. 1- Levy on Ballot in 2009, 2012,

2015 Scenario #1 (Appendix A.5) is the option of placing an operating levy on the ballot in 2009. Since property taxes are assessed and collected on a calendar basis, any successful ballot initiative in calendar 2009 will result in tax collections that begin in January 2010. Thus, the Board could elect to go on the May, August or the November ballot in calendar 2009, and there would be no difference in the amount of new taxes collected if the issue was approved by the voters. Thus, Scenario #1 is to place a levy on the ballot in May, August or November of 2009, and then again in 2012 and 2015. B. Scenario No. 2- Levy on Ballot in 2010, 2013,

2015 Scenario #2 (Appendix A.6) defers the levy from the initially proposed three-year cycle date of 2009 until 2010. Subsequent levies would take place in 2013 and in 2015. C. Scenario No. 3- Levy on Ballot in 2010, 2012,

2015 Scenario #3 (Appendix A.7) reflects the same deferral of the levy from 2009 until 2010, and then two years later in 2012, and then again three years later in 2015. Scenario #2 entails a loss of revenues relative to Scenario #1 of nearly $18 million (about $9 million per year a levy is delayed-from 2009 to 2010 and from 2012 to 2013). Scenario #2 is not feasible because the loss of revenues results in a deficit fund balance beginning in 2013 (see Appendix A.8). Scenario #3 entails only a loss of approximately $9 million of revenue relative to Scenario #1 (delay of only one levy-from 2009 to 2010), and is feasible because fund balances remain positive, although smaller than under Scenario #1. D. Implications of Levy Delay The obvious benefit of deferring the levy until 2010 is the reduced tax burden placed on the citizens.

Some of the risks of delaying the levy until 2010 are:

• The deferral reduces the margin of error within the District’s five-year forecast and reduces the reserves available to be used in the event of unexpected negative occurrences. Low reserves increase the consequences of failing to pass future levies.

• The deferral of the operating levy would likely also result in a deferral of the capital levy that had been anticipated to be placed on the ballot in 2010. By 2010, the current existing capital levy funds will be expended, thereby potentially increasing equipment purchases and/or building repair and maintenance expenses in the General Fund.

• The deferral may disrupt the District’s ability to enter into certifiable long-term contracts.

V. CONCLUSIONS & RECOMMENDATIONS 1. The Committee concluded that the

forecast assumptions utilized in the District Forecast are reasonable.

These assumptions necessarily involve predictions about uncertain future revenues and costs. Noteworthy assumptions include:

• The level of financial support from the State of Ohio.

• Realized property tax revenues. • The rate of growth of health insurance,

energy costs, and other operating costs. • Expenditures for special education and

other unfunded or underfunded State and Federal mandates.

• Ability to realize $3 million in cost reductions per year.

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2. The Committee concluded that given the current economic condition, postponing the levy until 2010 is prudent and responsible.

The District’s historical practice of placing an operating levy on the ballot every three years would entail a levy in 2009. Current economic conditions dictate that this practice be reconsidered. The District’s strong reserve position, built through recent cost savings initiatives and favorable non-recurring revenue items, provides the basis that enables the District to delay an operating ballot issue beyond 2009. This conclusion is predicated upon current conditions and expectations, the deterioration of which would necessitate the District reconsider the timing of the next operating levy.

3. The Committee cautioned that by postponing the 2009 levy makes it imperative that the School District Community approve an operating levy in 2010. The State of Ohio’s historic inability to adequately fund public schools is likely to persist into the foreseeable future. The current budget crisis in the State will likely lead to a reduction in state support for schools in the near future. Absent significant new state or federal support, the District will have to pass a new operating levy in 2010. Indeed, the projected lower reserves due to the levy delay, make the consequences of failing to pass a levy in 2010 especially severe and may require larger and more frequent levies in the future.

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APPENDIX

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APPENDIX A.1 ABOUT THE MEMBERS OF THE FINANCE & AUDIT COMMITTEE

Marilyn Eisele is the chief financial officer of

Five Star Technologies, Inc., an advanced materials company. Eisele has advised and assisted numerous technology startup companies with the development and execution of evolving business models, strategic directions, financing, and business processes. She has served as a CFO for more than fifteen years to a variety of both public and private companies. After obtaining her undergraduate degree from Bowling Green State University, Eisele was with PricewaterhouseCoopers for fifteen years where she specialized in mergers and acquisitions and high-growth businesses. She and her husband, Mark, have had three children in the Shaker public schools and in private schools.

Kirby Freeman is an experienced banker having served in the commercial banking divisions of ShoreBank-Cleveland, Huntington National Bank and Key Corp. Mr. Freeman currently serves as Loan Officer/Portfolio Manager of the Growth Capital Corp. in Cleveland. A graduate of Howard University with a bachelor’s degree in print journalism, he also holds an MBA in finance from New York University’s Stern School of Business. He worked as a reporter for Reuters News Agency before focusing his career in finance. Mr. Freeman worked for nearly five years at Standard & Poor’s as a bond analyst in New York City, where he gained experience in rating school districts and become familiar with Ohio school finance. Mr. Freeman also serves as Board Chair for The Greater Cleveland Health Education & Service Council, and on the loan review committee of the Cleveland Citywide Development Corporation.

Andrew Jackson currently serves as the Senior Vice President & Executive Director for the Commission on Economic Inclusion of the Greater Cleveland Partnership. Prior to that Mr. Jackson served as a lead client partner for Accenture, in the Automotive and Industrial Equipment group, where he gained more than 22 years of experience in providing business integration and technology consulting solutions for leading Fortune 500 companies. As the service line champion for the Finance and Performance Management discipline, he specialized in strategic visioning, re-engineering, and delivery of complex financial management solutions. He is a past member of the Accenture Board of Partners and was one of 26 Board members involved in orchestrating the Initial Public Offering (IPO) for Accenture in 2001. Mr. Jackson and his wife are the parents of a student at Shaker Heights High School.

Paul Carleton launched his investment banking career with McDonald & Co., in 1978 and became manager of the firm's Corporate Finance

Department five years later. In 1989, he formed The Carleton Group, an investment banking firm specializing in mergers, acquisitions and financing. After four years, the firm was consolidated to form Carleton, McCreary, Holmes & Co., providing expertise in mergers, acquisitions, and financing expansions of middle-market companies, which was ultimately purchased by Key Bank. Mr. Carleton and his wife have had children in the Shaker public schools and in private schools. He served in 1989, 1992, and 1994 as a member of the School District's Citizens' Finance Review Committee, the predecessor to the Finance & Audit Committee. James Rebitzer, Committee Chair, is Mannix Professor of Economics and chair of the economics department at the Weatherhead School of Management, Case Western Reserve University, with expertise in organizational economics, economics of the labor markets, health economics and the economics of negotiation and conflict resolution. Prior to coming to Cleveland, he was a faculty member at MIT’s Sloan School of Management and at the University of Texas-Austin. Dr. Rebitzer holds a bachelor’s degree from the University of Illinois at Urbana, and a doctorate from the University of Massachusetts at Amherst. He and his wife have two daughters who both graduated from the Shaker Schools in 2006 and 2008, respectively.

Karen Schuele is the Dean and Director of Graduate Business Programs of the Boler School of Business at the John Carroll University. Prior to that, Dr. Schuele served as an associate professor in the Department of Accountancy at the same university. She holds a bachelor’s degree from Case Western Reserve University, a master’s from the University of Texas-Austin, and a doctorate from Kent State University. Prior to joining the John Carroll faculty, she worked for two years at Price Waterhouse, now PricewaterhouseCoopers. Dr. Schuele is a past board member of the executive board of the Ohio Society of Certified Public Accountants.

John F. Lalley has, since October 2006, been an Operating Finance Principal with Kirtland Capital Partners. A graduate of the University of Notre Dame with a bachelor’s degree in accounting, John is also a Certified Public Accountant. His entire thirty-year career has been spent serving or working for manufacturing and distribution companies. Most recently he was a Director in a small consulting firm providing

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financial and accounting advisory services to middle market companies. Prior to that he was the chief financial officer of a $250 million multi-national metals manufacturer. He started his career as an auditor at Ernst & Young, and then joined a major money center bank as Vice President - Senior Business Analyst, where he assisted on leveraged and asset-based loan transactions. He is active in the community having served as Chair of the League of Women Voters-Shaker Heights committee that reviewed the School District’s finances in conjunction with the District’s 2006 operating levy. He and his wife have two daughters who both graduated from the Shaker Schools in 2005 and 2007, respectively.

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Two Board of Education members are also serving on the Committee:

F. Drexel Feeling, the current President of the Shaker Heights Board of Education, is an attorney and partner with the International law firm of Jones Day. Mr. Feeling holds a bachelor’s degree in electrical engineering from the University of Pennsylvania, a master’s in electrical engineering from Wright State University, and a law degree from The Ohio State University. He is active in the community having served on the boards of a number of local non-profit

organizations. He and his wife have four children who have attended the Shaker Schools-a 2006 graduate, a senior and a sophomore at Shaker Heights High School, and a Lomond Elementary School student. Freda J. Levenson is an attorney and volunteer. A graduate of Shaker Heights High School, Wellesley College, and the University of Michigan Law School, Ms. Levenson is a former litigation partner at the Chicago law firm of Altheimer & Gray, a long time adjunct professor at the Case Western Reserve University Law School and Presidential Fellow in Case’s SAGES program. She was elected to a fourth four-year term on the Shaker Heights Board of Education in 2007 and is a past trustee of the Shaker Schools Foundation. Through her several years as the Board’s legislative liaison and as a member of the National School Boards Association’s Federal Relations Network, Ms. Levenson has developed considerable expertise in school funding. She has four children – two 2001 graduates, a 2004 graduate, and a Middle School student.

APPENDIX A.2SHAKER HEIGHTS CITY SCHOOL DISTRICT

General Fund-Financial StatementFiscal Year Ending

June 30, 2008

FS12Jun08Web/SummaryF083/23/2009

Year-To-Date June Year-To-Date JuneActual F08 Actual F07 $ Inc(Dec) %Inc(Dec) YTDBud.F08 $ Inc(Dec) %Inc(Dec)

REVENUE:Real Estate Taxes $57,741,784 $55,305,159 $2,436,625 4.4% $58,676,677 ($934,893) -1.6%Personal Property Taxes 2,769,698 2,054,296 715,402 34.8% 623,105 2,146,593 344.5%Investment Earnings 1,716,106 1,058,966 657,140 62.1% 900,000 816,106 90.7%Other Local 1,912,581 1,290,464 622,117 48.2% 1,485,750 426,831 28.7%State Foundation 14,565,095 14,496,300 68,795 0.5% 14,500,000 65,095 0.4%Homestead Exemption & RollBack 7,441,196 6,492,760 948,436 14.6% 6,900,000 541,196 7.8%Other State 2,288,035 2,143,596 144,439 6.7% 2,505,321 (217,286) -8.7%Federal-primarily Medicaid 26,828 0 26,828 #DIV/0! 30,000 (3,172) -10.6%Transfers & Advances In 0 0 0 #DIV/0! 0 0 #DIV/0! TOTAL REVENUE 88,461,323 82,841,541 5,619,782 6.8% 85,620,853 2,840,470 3.3%

0 0 0 0 0

EXPENDITURES:Salaries & Wages 48,994,404 46,854,441 2,139,963 4.6% 48,419,000 575,404 1.2%Fringe Benefits: Health Insurance 7,538,409 7,855,513 (317,104) -4.0% 8,804,000 (1,265,591) -14.4% Retirement Expense 7,515,432 7,604,157 (88,725) -1.2% 7,873,000 (357,568) -4.5% All Other Fringes 1,307,080 1,442,120 (135,040) -9.4% 1,487,800 (180,720) -12.1%Total Fringe Benefits 16,360,921 16,901,790 (540,869) -3.2% 18,164,800 (1,803,879) -9.9%Purchased Services: 0 0

Utilities 1,472,132 1,798,420 (326,288) -18.1% 1,918,000 (445,868) -23.2% Out-of-District Tuition 4,193,627 4,230,330 (36,703) -0.9% 4,537,000 (343,373) -7.6% Pupil Transportation 1,368,012 1,434,516 (66,504) -4.6% 1,514,000 (145,988) -9.6% All Other Purchased Services 4,764,999 3,199,042 1,565,957 49.0% 3,771,000 993,999 26.4%Total Purchased Services 11,798,770 10,662,308 1,136,462 10.7% 11,740,000 58,770 0.5%Materials & Supplies 2,528,089 2,022,272 505,817 25.0% 2,390,000 138,089 5.8%Capital Outlay 617,795 311,566 306,229 98.3% 450,000 167,795 37.3%Other-primarily Cty.Aud.&Treas.Fees 1,095,366 983,164 112,202 11.4% 1,140,000 (44,634) -3.9%Transfers & Advances Out 175,000 125,000 50,000 40.0% 154,000 21,000 13.6% TOTAL EXPENDITURES 81,570,345 77,860,541 3,709,804 4.8% 82,457,800 (887,455) -1.1%

0 0 0 0 0

Net Revenues/(Expenditures) 6,890,978 4,981,000 1,909,978 38.3% 3,163,053 3,727,925 117.9%

Cash, Beginning of Period 16,993,812 12,012,812 4,981,000 41.5% 16,993,812 0 0.0%

Cash, End of Month 23,884,790 16,993,812 6,890,978 40.5% 20,156,865 3,727,925 18.5%0 0 0 0

Less O/S Encumbrances 3,387,587 2,976,233 411,354 13.8% 2,976,233 411,354 13.8%Less Budget Reserve 353,070 353,070 0 0.0% 353,070 0 0.0%

0

Fund Balance, End of Month $20,144,133 $13,664,509 $6,479,624 47.4% $16,827,562 $3,316,571 19.7%0 0 0 0.0% 0 0 0.0%

Total General Obligation Debt Outstanding $25,230,569 $27,530,569 0

October ADM Enrollment-K Final Total 5,482 5,577Per Pupil Expenditure $14,880 $13,961

APPENDIX A.3SHAKER HEIGHTS CITY SCHOOL DISTRICT

General Fund-Budget Variance AnalysisFiscal Years Ending

June 30, 2007 and 2008

BudVarSumRev.03-20-09 1230pm/VarianceAnalysis3/23/2009

% of 2 Yr.Total

FYE 2007 FYE 2008 Combined Rev/Exp Major Variance ExplanationsREVENUE VARIANCE:Property Taxes-OfficeMax Settlement Payments $800 $1,700 $2,500 1.5% OfficeMax tax litigation settlement paymentsProperty Taxes-All Other 865 53 918 0.5%Interest on Investments 373 816 1,189 0.7% Increasing interest rates resulting in higher returnsSp.Ed.Catastrophic Aid Reimbursement 450 (253) 197 0.1% Higher, then lower % reimbursement rate applied by StateTuition Income-timing (48) 309 261 0.2% Timing difference in receiptPrescription Drug Program Rebates 44 21 65 0.0% Rebate program in arrears beyond original projectionRefund of Natural Gas Deposit 0 61 61 0.0% Change in Consortium management of programAll Other 107 133 240 0.1% Various increases/decreases from expected, net Total Revenue Variance 2,591 2,840 5,431 3.2%

EXPENDITURE VARIANCE: (net of change in encumbrances)

Salaries & Wages 747 (575) 172 0.1% Replacement salary savings/Increased Sick Leave Sev. & OvertimeFringe Benefits (54) 1,775 1,721 1.1% Reduction in health care claims costs & retirement costsPurchased Services: Utilities 624 417 1,041 0.7% Mild winters and market rate declines from pre-season projections Out-of-District Tuition 430 254 684 0.4% Slowing growth of outsourcing of services Pupil Transportation 152 68 220 0.1% More in-house transportation route utilization All Other Purchased Services-primarily R&M (652) (1,126) (1,778) -1.1% Increase in Repairs & Maintenance due to decline in Capital Fund sourcesTotal Purchased Services 554 (387) 167 0.1%All Other 375 (337) 38 0.0% Total Expenditure Variance 1,622 476 2,098 1.3%

Net Variance Favorable/(Unfavorable) $4,213 $3,316 $7,529

Fund Balance at End of Year $13,665 $20,144

Variance as % of Fund Balance at End of Year 30.8% 16.5%

(000's omitted)

Actual vs. Budget VarianceFavorable/(Unfavorable)

APPENDIX A.4

SHAKER HEIGHTS CITY SCHOOL DISTRICT

FIVE-YEAR FORECAST

FOR THE PROJECTED YEARS ENDING

JUNE 30, 2009 THROUGH JUNE 30, 2013

IN ACCORDANCE WITH

HOUSE BILL NO. 412

October 2008

APPENDIX A.4

SHAKER HEIGHTS CITY SCHOOLSCUYAHOGA

Schedule of Revenues, Expenditures and Changes in Fund BalancesFor the Fiscal Years Ended June 30, 2006, 2007 and 2008 Actual;

Forecasted Fiscal Years Ending June 30, 2009 Through 2013

Actual Forecasted 5-Year Fiscal Year Fiscal Year Fiscal Year Average Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Average 2006 2007 2008 Change 2009 2010 2011 2012 2013 Change

Revenues1.010 General Property Tax (Real Estate) $50,972,920 $55,305,159 $57,741,784 6.5% $57,241,784 $57,239,512 $57,237,240 $57,237,240 $57,378,690 0.1%1.020 Tangible Personal Property Tax 1,661,612 2,054,296 2,769,698 29.2% 503,767 -25.0%1.030 Income Tax1.035 Unrestricted Grants-in-Aid 14,478,536 14,496,300 14,565,095 0.3% 14,500,000 13,775,000 13,000,000 13,000,000 13,000,000 -2.7%1.040 Restricted Grants-in-Aid 1,404,952 2,143,596 2,288,035 29.7% 2,717,358 3,498,102 3,623,313 3,286,678 2,968,884 3.3%1.050 Property Tax Allocation 6,332,683 6,492,760 7,441,196 8.6% 7,350,000 7,350,000 7,350,000 7,350,000 7,350,0001.060 All Other Revenues 2,072,413 2,349,430 3,655,515 34.5% 2,765,750 2,850,000 2,935,000 3,022,000 3,060,000 2.6%1.070 Total Revenues 76,923,116 82,841,541 88,461,323 7.2% 85,078,659 84,712,614 84,145,553 83,895,918 83,757,574 -0.4%

Other Financing Sources2.010 Proceeds from Sale of Notes2.020 State Emergency Loans and Advancements (Approved)2.040 Operating Transfers-In2.050 Advances-In2.060 All Other Financing Sources2.070 Total Other Financing Sources2.080 Total Revenues and Other Financing Sources 76,923,116 82,841,541 88,461,323 7.2% 85,078,659 84,712,614 84,145,553 83,895,918 83,757,574 -0.4%

Expenditures3.010 Personal Services 48,301,932 46,854,441 48,994,404 0.8% 51,337,000 53,500,000 55,391,000 57,267,000 59,261,000 3.7%3.020 Employees' Retirement/Insurance Benefits 16,251,633 16,901,790 16,360,921 0.4% 17,548,000 19,134,500 20,871,000 22,629,872 24,525,385 8.7%3.030 Purchased Services 9,832,055 10,662,308 11,798,770 9.6% 12,944,913 13,722,000 14,323,000 15,066,000 15,958,000 5.4%3.040 Supplies and Materials 2,308,308 2,022,272 2,528,089 6.3% 2,999,000 3,241,000 3,346,000 3,612,000 3,743,000 5.7%3.050 Capital Outlay 192,031 311,566 617,795 80.3% 700,000 735,000 772,000 811,000 852,000 5.0%3.060 Budget Reductions (3,000,000) (6,060,000) (9,187,513) 38.4%

Debt Service:4.010 Principal-All (Historical Only)4.020 Principal-Notes4.030 Principal-State Loans4.040 Principal-State Advancements4.050 Principal and interest-HB 264 Loan 167,192 -50.0%4.055 Principal and interest -Other4.060 Interest and Fiscal Charges4.300 Other Objects 947,577 983,164 1,095,366 7.6% 1,148,000 1,201,000 1,256,000 1,314,000 1,374,000 4.6%4.500 Total Expenditures 78,000,728 77,735,541 81,395,345 2.2% 86,676,913 91,533,500 92,959,000 94,639,872 96,525,872 2.7%

Other Financing Uses5.010 Operating Transfers-Out 120,000 125,000 175,000 22.1% 375,000 413,000 454,000 499,000 549,000 10.0%5.020 Advances-Out5.030 All Other Financing Uses5.040 Total Other Financing Uses 120,000 125,000 175,000 22.1% 375,000 413,000 454,000 499,000 549,000 10.0%5.050 Total Expenditures and Other Financing Uses 78,120,728 77,860,541 81,570,345 2.2% 87,051,913 91,946,500 93,413,000 95,138,872 97,074,872 2.8%

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HB412Forecast 10-2008 Rev10-03-08PrintSetting10/03/08

APPENDIX A.4

Actual Forecasted 5-Year Fiscal Year Fiscal Year Fiscal Year Average Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Average 2006 2007 2008 Change 2009 2010 2011 2012 2013 Change

6.010 Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses (1,197,612) 4,981,000 6,890,978 -238.8% (1,973,254) (7,233,886) (9,267,447) (11,242,954) (13,317,298) 83.6%

7.010 Cash Balance July 1 - Excluding Proposed Renewal/Replacement and New Levies 13,210,424 12,012,812 16,993,812 16.2% 23,884,790 21,911,536 14,677,650 5,410,203 (5,832,751) -78.1%

7.020 Cash Balance June 30 12,012,812 16,993,812 23,884,790 41.0% 21,911,536 14,677,650 5,410,203 (5,832,751) (19,150,049) -18.9%

8.010 Estimated Encumbrances June 30 2,733,196 2,976,233 3,387,587 11.4% 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587

Reservation of Fund Balance 9.010 Textbooks and Instructional Materials9.020 Capital Improvements9.030 Budget Reserve 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,0709.040 DPIA9.050 Debt Service9.060 Property Tax Advances9.070 Bus Purchases9.080 Subtotal 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070

10.010 Fund Balance June 30 for Certification of Appropriations 8,926,546 13,664,509 20,144,133 50.2% 18,170,879 10,936,993 1,669,546 (9,573,408) (22,890,706) -164.7%

Revenue from Replacement/Renewal Levies11.010 Income Tax - Renewal11.020 Property Tax - Renewal or Replacement

11.300 Cumulative Balance of Replacement/Renewal Levies

12.010 Fund Balance June 30 for Certification of Contracts, Salary Schedules and Other Obligations 8,926,546 13,664,509 20,144,133 50.2% 18,170,879 10,936,993 1,669,546 (9,573,408) (22,890,706) -164.7%

Revenue from New Levies13.010 Income Tax - New13.020 Property Tax - New 4,469,400 8,938,800 8,938,800 13,403,325 37.5%

13.030 Cumulative Balance of New Levies 4,469,400 13,408,200 22,347,000 35,750,325 81.7%

14.010 Revenue from Future State Advancements

15.010 Unreserved Fund Balance June 30 $8,926,546 $13,664,509 $20,144,133 50.2% $18,170,879 $15,406,393 $15,077,746 $12,773,592 $12,859,619 -8.0%

ADM Forecasts20.010 Kindergarten - October Count 385 386 371 -1.8% 355 350 355 360 365 0.7%20.015 Grades 1-12 - October Count 5,242 5,191 5,111 -1.3% 5,117 5,100 5,105 5,110 5,110 0.0%20.020 Kindergarten - February Count n/a 382 379 n/a 350 350 355 360 365 1.1%20.025 Grades 1-12 - February Count n/a 5,157 5,109 n/a 5,120 5,100 5,105 5,110 5,110 0.0%

See accompanying summary of significant forecast assumptions and accounting policiesIncludes: General fund, Emergency Levy fund, PBA fund, Textbook fund and any portion of Debt Service fund related to General fund debt

2

HB412Forecast 10-2008 Rev10-03-08PrintSetting10/03/08

Shaker Heights City School District Summary of Significant Forecast Assumptions and Accounting Policies

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Note 1 - Nature and Purpose of Presentation This financial projection presents in accordance with the mandates of House Bill No. 412 (H. B. 412), the expected revenues, expenditures, and fund balance of the General Fund of the Shaker Heights School District (the “District”) for each of the fiscal years ending June 30, 2009 through June 30, 2013, with historical unaudited information presented for the fiscal years ended June 30, 2006, 2007, and 2008. Additionally, the Textbook Subsidy Fund, USAS Fund Number 455, the school bus subsidy fund, included as part of USAS Fund Number 003, and the Poverty Based Assistance Fund, USAS Fund Number 494, are included in the forecast, as required by H. B. 412. A. Basis of Accounting This financial projection has been prepared on the cash receipts and disbursements basis, which is the required basis (non-GAAP) of accounting used for budgetary purposes. Under this system, revenues are recognized when received rather than when earned, and expenditures are recognized when paid rather than when the obligation is incurred. Under Ohio law, the District is also required to encumber legally binding expenditure commitments and to make appropriations for the expenditure and commitment of funds. B. Fund Accounting The District maintains its accounts in accordance with the principles of “fund” accounting. Fund accounting is used by governmental entities, such as school districts, to report financial position and the results of operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain District functions and activities. The transactions of each fund are reflected in a self-balancing group of accounts, which presents an accounting entity that stands separate from the activities reported in other funds. The General Fund is the operating fund of the District and is used to account for all financial resources except for those required to be accounted for in another fund. The General Fund balance is available to the District for any purpose provided it is disbursed or transferred in accordance with Ohio law. The assumptions disclosed herein are those that the District believes are significant to the projection. However, because circumstances and conditions assumed in projections frequently do not occur as expected, and are based on information existing at the time projections are prepared, there will usually be differences between projected and actual results. Note 2 - Description of the School District A. The Board of Education and Administration The Board of Education of the Shaker Heights School District (the "Board") is a political and corporate body charged with the responsibility of managing and controlling the affairs of the District, and is, together with the School District, governed by the general laws of the State of Ohio (the "Ohio Revised Code"). The Board is comprised of five members who are locally-elected to overlapping four-year terms. The Board elects its President and Vice President annually, and appoints two officials: the Superintendent, who serves as the Chief Executive Officer, and the Treasurer, who serves as the Chief Financial Officer. B. The School District and its Facilities The District is located in Shaker Heights, Ohio, Cuyahoga County. The District operates five elementary schools (K-4 and Pre-K in one school), one elementary school (5-6), one middle school (7-8), and one high school (9-12). The District covers approximately 7.5 square miles, including all of the City of


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Shaker Heights and a portion of the City of Cleveland in the Shaker Square area, and is located approximately ten miles southeast of downtown Cleveland. C. District Employees The District’s instruction and support facilities are staffed by 303 classified employees, 470 certificated full-time and part-time teaching and tutoring personnel, and 34 administrators who provide services to approximately 5,500 students. The District's teachers are represented by the Shaker Heights Teachers’ Association ("SHTA"). Classified employees (secretarial-clerical, custodial, maintenance, transportation and cafeteria staff) of the District are represented for collective bargaining purposes by two other unions. Non-bargaining employees include educational specialists, aides, security staff and all administrators and supervisors. Note 3 - General Assumptions Summarized below are the significant general assumptions underlying the financial forecast. A. Enrollment/Average Daily Membership (ADM) Enrollment refers to the number of students registered with the District as intending to attend school. Average Daily Membership (ADM) is the number of full time equivalent (FTE) students for which the State funds the District. ADM is a smaller number than enrollment typically due to the loss of student counts for unexcused absences by enrolled students during the first full week of October each year, and beginning in fiscal 2007 a second count in February, the State’s official ADM count weeks. State funded ADM is estimated to remain stable during the projection period at a level approximating 5,500 per year. B. Staffing The reduction in staffing levels for Fiscal 2007 reflect the budget reduction actions taken and implemented by the District, most of which became effective at the beginning of Fiscal 2007. The increase in staffing levels between Fiscal 2007 and Fiscal 2008 include an increase of 9.4 positions attributable to the reclassification as employees effective in Fiscal 2008. Staffing levels beyond Fiscal 2008 are not expected to change significantly other than to accommodate enrollment changes. Actual staffing levels through Fiscal 2008 are as follows:

STAFFING CATEGORY

FYE 2002

FYE2003

FYE2004

FYE2005

FYE2006

FYE 2007

FYE2008

Regular Instruction 353.9 351.9 349.3 353.2 347.1 327.3 339.7Special Instruction 38.0 40.6 41.2 40.6 45.6 52.2 51.1Vocational Instruction 1.0 0.9 0.9 1.0 1.0 1.0 1.0Pupil Support Services 149.5 156.0 160.5 153.2 151.6 151.8 150.1Administrators 36.0 36.0 36.0 36.0 36.0 35.0 34.0Operation of Plant 86.0 85.0 83.0 84.0 87.0 73.6 72.6Pupil Transportation 32.8 34.7 35.5 41.0 32.5 31.5 32.9Food Service Program 13.9 12.0 12.9 13.1 19.2 19.6 22.3Other 93.3 99.5 96.9 96.2 95.2 94.3 *103.2Total Employees 804.4 816.6 816.2 818.3 815.2 786.3 806.9

* Increase from prior year due to reclassification as employee status effective in Fiscal 2008.


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C. Budget Savings (Line 3.06) Under the current set of long-range forecast assumptions (which include the passage of an operating levy every three years), additional unidentified permanent budget reductions are indicated approximating $3 million in each year beginning in 2011, and are reflected on this line item and appear as a negative value. Additional budget adjustments would be required in the event other such projected future events do not occur.

Revenue Assumptions

The District’s primary sources of revenue are from the levying of property taxes on real and tangible personal property located within the District boundaries, and from the State of Ohio through the State Foundation program. The following notes provide information with respect to the revenue categories. Note 4 - Property Taxes (Lines 1.01 & 1.02) A. General Property (Real Estate) and Tangible Personal Property Taxes Property taxes that are levied and assessed on a calendar year basis include amounts levied against all real public utility, and tangible personal (used in business) property located in the school district. Assessed values for real property taxes are established by state law at 35% of the appraised market value. All real property is required to be revalued every six years and updated mid-way through the six-year period. The utility property taxes are assessed on tangible personal property at 88% of true value and on public utility real property at 35% of true value. Tangible personal property taxes are assessed at 25% of true value. In 1976, during periods of high inflation, the Ohio General Assembly passed House Bill No. 920. This law provides that real property owners receive tax credits equal to any tax increase caused by an increase in value of all real property in taxing districts as a result of reappraisal, update or readjustment. This does not apply to inside non-voted millage, tangible property or new construction. In effect, House Bill 920 removes inflationary revenue growth from the applicable real property by requiring an adjustment to the voted millage rate, thereby resulting in a lower effective millage rate. The forecast assumes growth during the projection period only for the inside millage, due to the maintenance effect of H.B. 920. The General Fund millage consists of 4.1 inside or statutory mills, and 143.03 (effective January 1, 2001), and 152.63 (effective January 1, 2004) outside or voted mills, all of which are continuing. On May 2, 2006, the District’s voters approved by a 60.7% margin a new 9.9 mill current operating expense levy for a continuing period of time, which increased the voted millage total to 162.53 effective January 1, 2007. In 1999, the Ohio Legislature passed and the Governor approved legislation calling for the reduction in the assessed valuation percentage for the inventory portion of the personal property tax to be reduced from the current 25% to 0% over a 25-year period (reduction of 1 percentage point per year). As a component of the biennial budget bill for fiscal years 2004 and 2005, this phaseout was accelerated from 1 to 2 percentage points per year. Additionally, the personal property tax exemption for the first $10,000 of taxable value was to be phased out over ten years beginning in calendar 2003. In accordance with the law, the District was held harmless for the five calendar years 2002 through 2006 with respect to the changes implemented with regard to the tax valuation reductions for electric and natural gas public utilities. Accordingly, a shift of tax revenue to Restricted Grants-In-Aid occurred and is reflected in the actual results for those years through Fiscal 2008. Because the District has been on the State Foundation “guarantee” (see Unrestricted Grants-In-Aid discussion below), and is presumed to remain so throughout the forecast period, the District has qualified for continuation of the make-up payments. The forecast reflects the continuation of such payments throughout the forecast period.


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The adoption of House Bill No. 66, the state’s biennial budget for fiscal years 2006 and 2007, was enacted in June 2005. Such legislation adopted wide-sweeping changes in the state’s tax structure. The bill provides for among other things, the reduction in personal income tax rates over a five-year period, the elimination of the corporate franchise tax, the institution of a commercial activity tax, the elimination of the tangible personal property tax, and the elimination of the Cost of Doing Business Factor portion of the State Foundation formula aid calculation. The primary impacts to the District are the elimination of the personal property tax and the elimination of the Cost of Doing Business Factor. Once these changes are fully implemented and all reimbursement periods have lapsed, the impact in 2005 dollars approximates $2 million for each of the two factors, for a total of $4 million per year. With regards to the lost personal property tax revenues, the legislation incorporates a reimbursement payment to school districts during a five-year phaseout period (tax years 2006 through 2010), after which the payments will be phased down to zero over the following eight years (tax years 2011 through 2018). The forecast reflects the expected reduction and ultimate elimination of the collection of the local Tangible Personal Property Tax (line 1.02). The reimbursement payments are included in Restricted Grants-In-Aid (line 1.04). B. New Property Tax (Line 13.02) This financial line includes the forecasted tax revenue assuming that a continuing property tax levy with a projected yield equivalent of 9.9 mills is approved by the District voters in calendar 2009 and again in calendar 2012. Note 5 - Unrestricted Grants-In-Aid (Line 1.035) The components of this financial line include the following categories of the State Foundation Program (in thousands):

2006 2007 2008 2009 2010 2011 2012 2013 Preliminary Basic/ Formula Aid

$10,559 $9,666 $8,863 $9,428 $9,428 $9,428 $9,428 $9,428

Formula Aid Guarantee

764 1,511 0 0 0 0 0 0

Total Basic/ Formula Aid

11,323 11,177 8,863 9,428 9,428 9,428 9,428 9,428

Gifted Aid 113 110 107 107 107 107 107 107PovertyBasedAsst. 155 155 113 122 122 122 122 122Special Ed. & Related Units

1,506 1,532 1,250 1,329 1,329 1,329 1,329 1,329

Vocational Units 56 54 47 51 51 51 51 51Excess Cost Supplement

268 243 512 519 519 519 519 519

Transportation 771 786 794 802 802 802 802 802Special Ed. Transportation

484 447 408 408 408 408 408 408

Preschool 82 84 78 78 78 78 78 78Training & Classroom Exp.

202 174 157 157 157 157 157 157

Other, net (58) 44 9 (31) (31) (31) (31) (31)Less Community School

(387) (446) (298) (321) (321) (321) (321) (321)

Less County ESC (37) (37) (36) (36) (36) (36) (36) (36)


7

2006 2007 2008 2009 2010 2011 2012 2013 Plus Transitional Aid Guarantee

0 173 2,561 1,887 1,887 1,887 1,887 1,887

Less Cap/Budget Cut Adjustments

0 0 0 0 (725) (1,500) (1,500) (1,500)

Total State Foundation

$14,478 $14,496 $14,565 $14,500 $13,775 $13,000 $13,000 $13,000

State Foundation payments under the Ohio Revised Code are calculated by the State Department of Education on the basis of pupil enrollment, classroom teacher ratios, plus other factors for transportation, special education units, extended service and other items of categorical funding. (1) Basic/Formula Aid: The basic aid projected for Fiscal 2009 is based on results from the final submission of the October 2007 and February 2008 student counts by the District. The projection for years 2010 to 2013 is based on the assumptions that enrollment will remain steady approximating 5,500 over the next four years. With the elimination of the Cost of Doing Business Factor under the provisions of House Bill No. 66, the District’s basic aid would drop approximately $1.9 million after the guarantee expires at the end of the current biennium. However, the forecast has been prepared predicated upon the assumption that some form of guarantee will be extended beyond the current biennium, as has been the historical case with previous overhauls and/or modifications to the State Foundation Formula calculation. In response to the State’s continuing economic slowdown, the Governor has instituted thus far, two budget reduction directives for the State’s current biennium. Such directives to date have not impacted the State Foundation payments, however, the Governor has also directed the upcoming biennial budget be prepared at a 95% of prior year basis for the first year and 95% of prior year basis for the second year of the upcoming biennium. Accordingly, the forecast assumes a 5% reduction in the State Foundation payments during the Fiscal years 2010 and 2011, with a constant level revenue stream beyond that. The forecast also assumes no increase in the State’s assumed level of local funding from the current 23 mills (the “chargeoff”). The calculations also assume a 1% decrease in the District’s assessed valuation in tax year 2009, the next reappraisal update year. Absent the guarantee, increases in assessed value would normally negatively impact the District’s Formula Aid amount due to the phantom revenue aspects of the State’s Formula. (2) PBA: Poverty Based Assistance (formerly Disadvantaged Pupil Impact Aid (DPIA)) provides additional financial support to school districts whose school-age population has a high incidence of children from families receiving what was formerly known as Aid to Dependent Children (ADC), and is now redefined as Temporary Assistance for Needy Families (TANF) and/or Ohio Works First (OWF). The funds provide support for additional costs associated with educating children in poverty. Expected declines in TANF counts due to the impact of welfare reform, are anticipated to be offset by increases in the reimbursement rate. (3) Special Education and Related Units: these amounts vary during the forecast period due to the impact of the increase in the respective years per pupil amount offset partially by the reduction in State share percentage funding. (4) Cap/Budget Cut Adjustments: this line item is used to reflect any losses due to the cap or other similar limitations implemented by the State budget or legislative changes. This line item for Fiscal years 2010 and beyond includes an estimate of the expected Governor directed budget reductions effective with the next biennial budget as discussed above.


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Note 6 - Restricted Grants-In-Aid (Line 1.04) The components of this financial line include the following categories (in thousands):

2006 2007 2008 2009 2010 2011 2012 2013 Bus Purchase Subsidy $24 $22 $16 $22 $22 $22 $22 $22Other 20 12 7 6 6 6 6 6Special Education Catastrophic Aid

491 870 647 680 714 750 788 827

Public Utility Tax Reimbursement

770 776 776 776 776 776 776 776

Tangible Personal Property Tax Reimb.

58 458 813 1,233 1,980 2,069 1,695 1,338

State Formula Adj 42 6 29 0 0 0 0 0Total Other State $1,405 $2,144 $2,288 $2,717 $3,498 $3,623 $3,287 $2,969 Note 7 - Property Tax Allocation (Line 1.05) State law grants tax relief in the form of a 10% reduction in real property tax bills. In addition, a basic 2.5% rollback is granted on owner-occupied residential property taxes and additional relief is granted to qualified elderly and disabled homeowners based on income (homestead exemption). The State reimburses the school district for the loss of real property tax collections as a result of such provisions in the law. Such 10% reduction in commercial real property tax bills was eliminated by a provision of H.B. No. 66 effective in 2006. The elimination of the 10% credit to commercial real property taxpayers resulted in lower reimbursements to the District for this line item beginning in Fiscal 2006. However, the loss of the credit resulted in higher local property tax collections that are included in General Property Tax (line 1.01). The increase in property tax allocation for fiscal years 2007 (offset partially by the decrease described above) and 2008 are attributable to two items: 1) the May 2006 voter-approved 9.9 mill current operating levy that began collections effective January 1, 2007, and 2) the 2008 implementation of an expanded homestead exemption for senior citizens. Note 8 - All Other Revenues (Line 1.06) The components of this financial line include the following categories (in thousands):

2006 2007 2008 2009 2010 2011 2012 2013 Investment Earnings $606 $1,059 $1,716 $1,000 $1,000 $1,000 $1,000 $1,000Other Local Receipts 1,410 1,290 1,913 1,616 1,647 1,678 1,710 1,742Federal Receipts – CAFS

56 0 27 150 203 257 312 318

Total All Other Revenues

$2,072 $2,349 $3,656 $2,766 $2,850 $2,935 $3,022 $3,060

A. Investment Earnings Investment earnings are assumed to yield returns on investable cash balances during the forecast period averaging in the 2.00 – 5.0% range. This also includes investment earnings on other District funds cash balances as allowable under State law.


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B. Other Local Receipts This category includes primarily tuition as well as a variety of miscellaneous receipts not categorized elsewhere. The forecasted amounts assume minor fluctuations during the projection period. C. Federal Receipts This category consists primarily of the Medicaid billing reimbursement program receipts. The termination of the CAFS program by the State of Ohio effective July 1, 2005, resulted in minimal collections in Fiscal 2006. After three years of protracted litigation and negotiation with the State and Federal authorities, the Ohio School Medicaid Program (OSMP) was approved during the summer of 2008, with a retroactive effective date of July 1, 2005. Accordingly, the forecast includes estimated receipts beginning in Fiscal 2009 and escalating during the rest of the forecast period.

Expenditure Assumptions Note 9 - Personal Services - Salaries and Wages (Line 3.01) The projected salaries through the end of Fiscal 2010 are based on the terms of the existing ratified union contracts. As delineated in Note 3, the staffing levels are not expected to change significantly beyond the Fiscal 2008 levels, other than for changes in enrollment. On January 1, 2004, a new Teacher’s contract became effective which called for annual contractual increases of 3.0%, 3.0% and 3.25%, respectively for each of the three years of the contract. The District’s other two collective bargaining agreements called for annual contractual increases of 3.0%, 3.0% and 3.25%, respectively, for each of the three years ended June 30, 2007. On January 1, 2007, a new Teacher’s contract became effective which calls for annual contractual increases of 1%, 2%, and 3%, respectively on April 1st of each of the three years of the contract beginning April 1, 2007. On July 1, 2007, new contracts became effective for the District’s two classified collective bargaining groups, which call for annual contractual increases of 1%, 2%, and 2%, respectively on September 1st of each of the three contract years beginning September 1, 2007. The economic provisions of such negotiated agreements are reflected in the forecast. The salary increases utilized in determining the projected year amounts also incorporate contractual step increase percentages including the impact of new employees, retirements, job vacancies, and salary schedule advancements. Note 10 - Fringe Benefits (Line 3.02) Fringe benefit costs include the following categories of expenses: A. Retirement Contributions Projected costs are based on applying the statutory rates to the respective years’ salaries and wages. In accordance with a State legislative proposal, the projection assumes the State’s mandated contribution rate of 14% will increase by 0.5% per year for five years beginning in Fiscal 2009. B. Health Care Costs The forecasted health care costs for Fiscal 2009 are based on the terms of the existing health contracts and the current number of employees. For years beyond 2009 health care costs are projected to increase at rates greater than the general inflation rate (12.5%).


10

C. Workers Compensation The School District participates in the Ohio Bureau of Workers’ Compensation (the Bureau) Retrospective Rating Plan. Under the retrospective rating plan, the School District assumes a portion of the claims expense risk in return for a reduction in current premiums. The projection for 2009 is based upon estimated costs including the benefit of any discounts granted by the Bureau. Costs for the years subsequent to 2009 are projected to increase at rates greater than the general inflation rate. D. Medicare, Unemployment and Life Insurance The projection of these benefits for 2009 is based upon actual results of Fiscal 2007 and Fiscal 2008. Forecasted costs for the years subsequent to 2009 are projected to increase at a minor rate of inflation other than amounts attributable to the increasing number of District employees who are subject to the Medicare tax. Note 11 - Purchased Services (Line 3.03) The projection for 2009 is based upon actual results of Fiscal 2008. Costs over the five-year projection period increase at an average 5.4% per year. This category includes out-of–district tuition, special education transportation and utilities, which are the major cost drivers in this category. Note 12 - Materials, Supplies, and Textbooks (Line 3.04) The projection period includes additional allotments to accommodate the need for new textbook adoptions in fiscal years 2009 and 2010. Costs over the five-year projection period increase at an average 5.7% per year (including the extra allotments). Note 13 - Capital Outlay (Line 3.05) This financial line includes basic repair and maintenance and purchases of equipment including school buses and other service vehicles. Major building repairs and renovations are funded by the District’s capital fund and are not included in this report. Note 14 - Debt Service (Lines 4.01 through 4.06) The forecast includes only those outstanding debt issuances that are funded by the General Fund. Therefore, District general obligations that are paid by the District’s Debt Service Fund, which are funded by a separate dedicated property tax are excluded from this forecast. A brief description of the debt issuances that are to be paid by the General Fund and were outstanding during any of the forecast presented years is as follows: A. Energy Conservation Bonds (House Bill 264) In 1995, the School District issued $1.3 million of bonds in order to make building improvements specifically that would result in energy savings to the District. The bonds were issued for a ten-year period with final maturity in July 2005. Note 15 - Other A. Transfers and Advances In and Out (Lines 2.04, 2.05, 5.01 and 5.02) Projected transfers and advances in/out are based on historical amounts of transfers and advances. The


11

projection assumes that the out amounts combined will average $458,000 per year for fiscal years 2009 through 2013. B. Other Objects (Line 4.30) The main components of this category include County Auditor & Treasurer fees for the collection of tax receipts, insurance coverages, and other object categories. The projection for 2009 is based upon actual results of Fiscal 2008 and also reflects an increase due to the new tax levy effective January 1, 2007. Costs over the five-year projection period increase at an average 4.6% per year to reflect expected increases due to future levies. C. Encumbrances (Line 8.01) The District uses the encumbrances method as part of formal budgetary and management control. Under this method, purchase orders, contracts, resolutions and other commitments for the expenditure of funds are recorded to reserve that portion of the applicable appropriation for future payment. Encumbrances outstanding at year-end represent planned expenditures which were budgeted in the fiscal year but which were not paid for as of year-end. The forecast assumes a constant level of $3,387,587 of outstanding encumbrances for each year during the forecast period. D. Reservations of Fund Balance (Lines 9.01 through 9.08) The Textbooks and Instructional Materials (9.01), Capital Improvements (9.02), and Budget Reserve (9.03) are reserves mandated under the provisions of House Bill 412. These financial lines reflect the cumulative reserve balance required at the end of the respective fiscal year end. The required amounts are determined by and can only be utilized for expenditures in accordance with the rules jointly adopted by the Auditor of State and the Ohio Department of Education for each respective reserve. The Bus Purchases Reserve (9.07) financial line reflects the accumulated and unspent subsidy amount received from the State solely to be used for the purchase and/or lease of school buses. Expenditures of such reserve amounts as they occur, will be reflected in the expenditure section of the forecast.

APPENDIX A.4a

MAJOR ASSUMPTIONS AND/OR HIGHLIGHTS OF THE

OCTOBER 2008 DISTRICT FIVE-YEAR FORECAST

Revenue Assumptions: • The approval of a continuing property tax levy

with a projected yield equivalent of at least 9.9 mills in calendar 2009 and again in 2012.

• After a 10% reduction over the next two-year state biennium (fiscal years 2010 and 2011), a continuation of the State biennial budget “guarantee” with regards to State Foundation funding for the District.

• No State reductions in District funding pertaining to the Homestead Exemption and Roll Back, the tangible personal or the public utility property reimbursement payments during the forecast period.

• The elimination of the tangible personal property tax is reflected as declining collections through Fiscal 2009. Replacement payments from the State are reflected in the Restricted Grants-In-Aid, Line 1.04. Commencing in Fiscal 2008, such direct replacement payments are subject to reduction for any increases in State Foundation payments caused by a reduced “chargeoff” resulting from the House Bill No. 66 declining assessed value percentages applied to tangible personal property. Because this forecast continues to assume either reducing or flat-lined State Foundation payments, we have accordingly also assumed that such tangible personal property tax replacement payments will be unaffected by such annual reduction adjustments. Such replacement payments (which are detailed in Note 6 of the Forecast footnotes) are scheduled to peak in Fiscal 2011 at just below $2.1 million.

• The forecast reflects only the first half of the expanded and increased homestead exemption that became effective in calendar 2008. The second half of calendar 2008 increased homestead exemption payments will be offset by a commensurate decrease in local real estate tax collections. Consequently, there

should be no net impact to the General Fund bottom line.

• Reduced funding of the State Foundation revenues from the levels received for fiscal 2007 and 2008 due to Governor directives for all State agencies to prepare fiscal 2010 and 2011 budget requests at 95% of the prior year budget (nearly a 10% reduction over the two-year biennium).

• Estimated increasing revenues from the new Ohio School Medicaid replacement program that was approved during the summer of 2008.

• Continuation of the Public Utility Reimbursement payment beyond the guaranteed five-year payment period ended fiscal 2007.

Expense Assumptions: • Budgeted cost reductions of $3.0 million per

year, compounded, beginning in fiscal year 2011.

• A shift to General Fund of fiscal 2009 costs of $400,000 for salaries and wages currently being funded by Federal Fund 516, IDEA. The reduction in federal funds is a result of the end of the four-year (fiscal 2008 was year four) payout of the excess funds accumulated by the State from prior years federal allotments.

• A shift to General Fund of fiscal 2009 and 2010 costs of $50,000 due to anticipated declining federal fund grant amounts.

• A shift to General Fund of fiscal 2009 and beyond costs of $150,000 reflecting the anticipated end of the Cleveland and Gund Foundations’ Achievement Gap grants.

• Salary increases at a 1%, 2%, 3% (2% for classified contracts in year 3) level for the current three-year contract and 2% thereafter.

• An increase in the current 14% employer contribution to the STRS retirement system by 0.5% per year for 5 years in anticipation of the

passage of a current STRS proposal (House Bill No. 315), starting in second half of fiscal 2009.

• A projected annual growth rate of 12.5% for health insurance costs coupled with an annual 1% increasing employee shared premium payment for fiscal 2009 and beyond (plus an increase to account for shifts from grant funds to the General Fund).

• Natural gas budget of $80,000 per month beginning in fiscal 2009, with 5% annual increases thereafter.

• Electricity budget increases of 4% per year for fiscal years beyond fiscal 2009, and a 30% increase in fiscal 2009 reflecting the expected end of deregulation and the advent of open electricity markets (note-although it is unknown at this point as to the full economic impact the recent State re-regulation

legislation will have on our District, it is, however, believed that our costs will increase from their current levels not to exceed the 30% factor utilized in the forecast).

• An additional $225,000 and $150,000 allocated for new textbook adoptions in fiscal years 2009 and 2010, respectively, and $150,000 every two years beyond that.

• A projected annual growth rate averaging 8% for out-of-district tuition costs.

• A 5% annual growth rate for out-of-district tuition transportation costs.

• A 5% annual growth rate for County Auditor and Treasurer’s fees due to expected increases resulting from planned levies.

• Property insurance growth rate of 7.5% per year due to expected insurance industry fallout from recent years claims experience.

APPENDIX A.5Shaker Heights City School District

Levy Scenario No. 1Levy on Ballot in 2009, 2012, 2015

LevyAlternate#1 2009-2012-2015 Rev10-22-08Corrected/Summary3/23/2009

23

A B CBright Green=ProjectedFiscal Year------------------------->

193

194195201202203204205206207208209210211212213214215216217218219220221222223224225226227228229230231232233234235236237238239240241242243244

Base Projected Revenues

Proposed Operating Levy Revenue: Levy in Calendar Year Levy Millage 1st Proposed Levy Est. Rev. 2nd Proposed Levy Est. Rev. 3rd Proposed Levy Est. Rev. 4th Proposed Levy Est. Rev.

Total Revenues with proposed levies Growth Rate-Revenues

Total Expenditures, net of reductions Growth Rate-Expenditures

Excess of Rev.Over/(Under) Expend.

Beginning Cash BalanceEnding Cash Balance

Less Outstanding EncumbrancesLess Budget ReserveUnencumbered Fund Balance

Fund Balance as % of Expenditures

Tax Year------------------------------->Tax Collection Year-------------->

Assessed Value:Real Estate-Res./Agr.Real Estate-OtherPublic Utility TangibleTangible Personal PropertyLoss of Public Utility Tangible A.V.Loss of Tangible PP A.V.Assessed Value-TotalAssessed Value-Growth Rate

Estimated Tax Collection %

AS AT AU AV AW AX AY AZ BA BB BC BD BE BF BG BH BI BJ BK BL BM BN BOActual Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

LEVY SCENARIO #1 LEVY SCENARIO #1

$88,461,323 $85,078,659 $84,712,614 $84,145,553 $83,895,918 $83,757,574 $83,729,267 $83,561,512 $83,501,256 $83,443,999 $83,304,083

Calendar Calendar Calendar Calendar2009 2012 2015 20189.9 9.9 9.9 9.9

$4,469,400 $8,938,800 $8,938,800 $8,938,800 $8,938,800 $8,938,800 $8,938,800 $8,938,800 $8,938,800$4,464,525 $8,929,050 $8,929,050 $8,929,050 $8,929,050 $8,929,050

$4,797,488 $9,594,975 $9,594,975

$88,461,323 $85,078,659 $89,182,014 $93,084,353 $92,834,718 $97,160,899 $101,597,117 $101,429,362 $106,166,594 $110,906,824 $110,766,9086.8% -3.8% 4.8% 4.4% -0.3% 4.7% 4.6% -0.2% 4.7% 4.5% -0.1%

81,570,345 87,051,913 91,946,500 93,413,000 95,138,872 97,074,872 99,260,308 101,713,466 104,582,343 107,596,926 114,087,2684.8% 6.7% 5.6% 1.6% 1.8% 2.0% 2.3% 2.5% 2.8% 2.9% 6.0%

6,890,978 (1,973,254) (2,764,486) (328,647) (2,304,154) 86,027 2,336,809 (284,104) 1,584,251 3,309,898 (3,320,360)

16,993,812 23,884,790 21,911,536 19,147,050 18,818,403 16,514,249 16,600,276 18,937,085 18,652,981 20,237,232 23,547,13023,884,790 21,911,536 19,147,050 18,818,403 16,514,249 16,600,276 18,937,085 18,652,981 20,237,232 23,547,130 20,226,770

3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070

20,144,133 18,170,879 15,406,393 15,077,746 12,773,592 12,859,619 15,196,428 14,912,324 16,496,575 19,806,473 16,486,113

24.70% 20.87% 16.76% 16.14% 13.43% 13.25% 15.31% 14.66% 15.77% 18.41% 14.45%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20172008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Actual 12/07UpdateYr. Reapp.Yr. UpdateYr.

839,801,250 835,000,00086,307,100 90,000,0009,871,720 5,000,0003,243,846 0

(9,871,720) (5,000,000)(3,243,846) 0

926,108,350 926,108,350 925,000,000 925,000,000 925,000,000 994,000,000 994,000,000 994,000,000 1,044,000,000 1,044,000,000 1,044,000,000-1.00% 7.50% 5.00%

97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50%




23


193

194195201202203204205206207208209210211212213214215216217218219220221222223224225226227228229230231232233234235236237238239240241242243244














$88,461,323 $85,078,659 $84,712,614 $84,145,553 $83,895,918 $83,757,574 $83,729,267 $83,561,512 $83,501,256 $83,443,999 $83,304,083


$4,464,525 $8,929,050 $8,929,050 $8,929,050 $8,929,050 $8,929,050 $8,929,050 $8,929,050$4,797,488 $9,594,975 $9,594,975 $9,594,975 $9,594,975

$4,797,488 $9,594,975 $9,594,975

$88,461,323 $85,078,659 $84,712,614 $88,610,078 $92,824,968 $92,686,624 $97,455,805 $102,085,537 $106,822,769 $111,562,999 $111,423,0836.8% -3.8% -0.4% 4.6% 4.8% -0.1% 5.1% 4.8% 4.6% 4.4% -0.1%

81,570,345 87,051,913 91,946,500 93,413,000 95,138,872 97,074,872 99,260,308 101,713,466 104,582,343 107,596,926 114,087,2684.8% 6.7% 5.6% 1.6% 1.8% 2.0% 2.3% 2.5% 2.8% 2.9% 6.0%

6,890,978 (1,973,254) (7,233,886) (4,802,922) (2,313,904) (4,388,248) (1,804,504) 372,071 2,240,426 3,966,073 (2,664,185)

16,993,812 23,884,790 21,911,536 14,677,650 9,874,728 7,560,824 3,172,576 1,368,073 1,740,144 3,980,569 7,946,64223,884,790 21,911,536 14,677,650 9,874,728 7,560,824 3,172,576 1,368,073 1,740,144 3,980,569 7,946,642 5,282,457

3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070

$20,144,133 $18,170,879 $10,936,993 $6,134,071 $3,820,167 ($568,081) ($2,372,585) ($2,000,514) $239,912 $4,205,985 $1,541,800

24.70% 20.87% 11.89% 6.57% 4.02% -0.59% -2.39% -1.97% 0.23% 3.91% 1.35%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20172008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


839,801,250 835,000,00086,307,100 90,000,0009,871,720 5,000,0003,243,846 0

(9,871,720) (5,000,000)(3,243,846) 0

926,108,350 926,108,350 925,000,000 925,000,000 925,000,000 994,000,000 994,000,000 994,000,000 1,044,000,000 1,044,000,000 1,044,000,000-1.00% 7.50% 5.00%

97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50%




23


193

194195201202203204205206207208209210211212213214215216217218219220221222223224225226227228229230231232233234235236237238239240241242243244














$88,461,323 $85,078,659 $84,712,614 $84,145,553 $83,895,918 $83,757,574 $83,729,267 $83,561,512 $83,501,256 $83,443,999 $83,304,083


$4,464,525 $8,929,050 $8,929,050 $8,929,050 $8,929,050 $8,929,050 $8,929,050 $8,929,050$4,464,525 $8,929,050 $8,929,050 $8,929,050 $8,929,050 $8,929,050

$4,797,488 $9,594,975 $9,594,975

$88,461,323 $85,078,659 $84,712,614 $88,610,078 $92,824,968 $97,151,149 $101,587,367 $101,419,612 $106,156,844 $110,897,074 $110,757,1586.8% -3.8% -0.4% 4.6% 4.8% 4.7% 4.6% -0.2% 4.7% 4.5% -0.1%

81,570,345 87,051,913 91,946,500 93,413,000 95,138,872 97,074,872 99,260,308 101,713,466 104,582,343 107,596,926 114,087,2684.8% 6.7% 5.6% 1.6% 1.8% 2.0% 2.3% 2.5% 2.8% 2.9% 6.0%

6,890,978 (1,973,254) (7,233,886) (4,802,922) (2,313,904) 76,277 2,327,059 (293,854) 1,574,501 3,300,148 (3,330,110)

16,993,812 23,884,790 21,911,536 14,677,650 9,874,728 7,560,824 7,637,101 9,964,160 9,670,306 11,244,807 14,544,95523,884,790 21,911,536 14,677,650 9,874,728 7,560,824 7,637,101 9,964,160 9,670,306 11,244,807 14,544,955 11,214,845

3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587 3,387,587353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070 353,070

$20,144,133 $18,170,879 $10,936,993 $6,134,071 $3,820,167 $3,896,444 $6,223,503 $5,929,649 $7,504,150 $10,804,298 $7,474,188

24.70% 20.87% 11.89% 6.57% 4.02% 4.01% 6.27% 5.83% 7.18% 10.04% 6.55%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20172008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


839,801,250 835,000,00086,307,100 90,000,0009,871,720 5,000,0003,243,846 0

(9,871,720) (5,000,000)(3,243,846) 0

926,108,350 926,108,350 925,000,000 925,000,000 925,000,000 994,000,000 994,000,000 994,000,000 1,044,000,000 1,044,000,000 1,044,000,000-1.00% 7.50% 5.00%

97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50% 97.50%

APPENDIX A.8Projected Unencumbered Fund Balance

-$5

$0

$5

$10

$15

$20

$25

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fiscal Yearend

mill

ions

of d

olla

rs

-5

0

5

10

15

20

25

% o

f Exp

endi

ture

s

Levy Scenario #1 Levy Scenario #2 Levy Scenario #3Levy Scenario #1 Levy Scenario #2 Levy Scenario #3

APPENDIX A.9

GLOSSARY

Capital Funds-Financial resources specifically earmarked by either internal designation or legal requirement to be accounted for in a separate fund which are allowed to be expended only for the acquisition or construction of major capital facilities and related capital type assets, generally defined as those physical assets that have an extended useful life. External Auditor-The outside entity that performs the annual audit or attest function with respect to the financial statements of the District in accordance with Generally Accepted Accounting Principles (GAAP). In Ohio, the Auditor of State’s office is the primary external auditor of all governmental entities. House Bill No. 920-was enacted in 1976 as a real property tax anti-inflationary measure. Prior to its enactment, real estate property taxes increased in tandem with the increase in assessed values that occurred every three (update) or six (reappraisal) years. Consequently, if a property value increased by 20%, the tax bill for that property also increased by 20%. The bill contains a tax reduction factor designed to prevent revenues from voted tax levies from increasing even though the assessed valuation of property may rise. In other words, when property owners vote for a levy, they are voting for a continuous frozen dollar amount rather than for a set number of mills that continually increases taxes as the value of property appreciates over time. Unlike other governmental taxing authorities that have built-in inflationary increases in tax revenues (e.g. as personal income rises, so does the level of income tax collected, or in the case where a taxing authority has inside or charter millage which is not subject to the reduction factors of House Bill No. 920), the local property tax revenue received by the Shaker Heights City School District (District) has remained relatively flat, while the costs of providing an education have risen. Therefore, as a direct result of House Bill No. 920, the District must submit a ballot issue to its residents to request additional revenue to cover the increasing cost of educating our children. Operating Funds-The primary fund of the District, also known as the General Fund, that is used to fund all day-to-day expenditures for the District. The vast majority of total District revenues and expenses are accounted for in this fund. All revenues and expenses not required to be recorded in a specialized grant or other special purpose fund are recorded and accounted for in the General Operating Fund.

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