By Jennifer Mrozowski
Enquirer staff writer

Cincinnati Public Schools' spending is projected to increase nearly 3 percent in the 2004-05 school year to $454 million, but the district also plans a hiring freeze to stem escalating costs.

Superintendent Alton Frailey announced the hiring freeze as part of his budget recommendations Monday.

Painting a dire picture of the district's finances, Frailey told the school board that this year's budget reflects the impact of declining state revenue combined with spiraling, uncontrollable costs. Such costs include payments the district must make to charter schools.

The district's financial picture is further complicated because two board members have promised to campaign against a possible levy in November unless the district changes the way it operates. Revenue from that levy - a $65 million 5-year renewal - is included in the budget. If it fails, it will affect the 2005-06 budget.

"We are confronting several financial challenges," Frailey said.

Last year, Frailey pledged to run the district "better, faster and cheaper" and submitted a $436.6 million budget that was $700,000 less than the previous year. But figures released Monday show the district overspent its budget by $5.4 million, or 1 percent.

The 2004-05 budget recommendations indicate the district's difficulty in controlling spending at a time when enrollment is decreasing.

Some costs can't be controlled, said district treasurer Michael Geoghegan.

For example, payments to charter schools are anticipated to increase from $33 million in the current budget to $43 million.

District officials say the state provides funding for charter schools, but not enough to operate them. Four new charter schools are expected to open next year that will draw students from the Cincinnati district, bringing the total to about two dozen. About 5,500 students now attend charter schools within the district.

The state will fund $16.2 million of the $43 million Cincinnati Public must dole out to charter schools, Geoghegan said. The rest will come from local property taxes, he said.

The other growing, uncontrollable cost Geoghegan cited is out-of-district tuition, which increased from $8 million last year to a projected $11.8 million for 2004-05. These are payments primarily made to other districts and institutions for special-needs students and children placed in foster care whose parents or guardians are in the Cincinnati school district.

Without such mandated increases, Frailey said, the district's 2004-05 budget would have been $2.7 million less than the current budget.

The budget does not include tens of millions of dollars that will be spent in 2004-05 for construction.

Losses in state revenue also had a big impact, Frailey said. Some losses for 2005 include:

• $4.5 million because of a change in the way the state calculates enrollment.

• $230,000 because the state is phasing out reimbursements that districts received for property tax exemptions on businesses.

• $750,000 because the state is accelerating phase-out on the personal property tax on inventory.

Carolyn Turner, executive director for the advocacy group Cincinnati Parents for Public Schools, said she and other parents who served on the district's budget commission were concerned about the budgeting process.

"CPS must develop a plan to address the reduced enrollment and budgetary crisis facing the district," she said. Turner said the district should adopt a parent-friendly recruitment and retention plan and find strategies to reduce the out-of-district tuition payments.

The school board is expected to vote on the budget in August.

Proposed spending

Superintendent Alton Frailey's special initiatives in the 2004-05 budget include:

• $4.9 million for alternative education, including a program providing academic instruction, counseling and social skills development to students in grades 4-12 who would otherwise be suspended or expelled.

• $1 million to supplement budgets of small schools that have difficulty operating because of declining enrollment. Frailey also plans community discussion on budget challenges for small schools and the possibility of early consolidation for those schools.

• $250,000 to increase student enrollment through communication, community engagement and marketing.

• $63,000 for training for school councils.

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E-mail jmrozowski@enquirer.com