By Jennifer Mrozowski
Enquirer staff writer
Cincinnati Public School District overspent its 2003-04 budget by $21.7 million - nearly 5 percent of the district's $436.4 million general fund budget, officials said Monday.
District officials say the expenditures were mostly unforeseen costs, such as lead abatement in schools, increases in natural gas costs, payments the district must make to charter schools and retroactive pay to teachers after a new contract was approved this spring.
"These $21 million were either one-time costs or, in many ways, were out of our control," said district Treasurer Michael Geoghegan. He said, in retrospect, officials should have anticipated some of the costs and budgeted for them.
The district will use cash reserves to pay for the overruns, Geoghegan said. After paying those, the district still has $98 million in reserves. Geoghegan anticipates spending $30 million to $35 million in reserves in 2004-05 even if the district doesn't exceed its budget.
The overruns could force the district to go to voters sooner for an additional levy - on top of the $65 million levy renewal request in November - if the district doesn't cut spending, Geoghegan said.
Even if the November levy passes, the district has projected having a $48 million deficit by 2007.
The announcement of the overruns comes just a week after the district's board of education voted to place the 5-year levy renewal on the November ballot. Residents won't pay additional taxes if they approve that levy. An owner of a $100,000 home now pays $299 annually for it.
Board member Melanie Bates said she's alarmed by the overruns. She said some costs, such as teacher raises, should have been projected. Bates voted against the teacher union contract in the spring, in part because she claims the full costs weren't spelled out, she said.
She blamed the treasurer for not sounding the alarm sooner.
Geoghegan disputes that, adding that he said in February that staff should be reduced.
Some of the unanticipated costs over budget include:
$5.2 million in salaries and related expenses. Those include sick pay payments made to retirees and retroactive pay for teachers to Jan. 1 after approval of the teacher contract in the spring. This line item was 2.2 percent over budget.
$7.9 million in payments to charter schools. The district receives money from the state for charter schools, which are privately run schools in the district. But officials say they don't receive enough to cover charter school costs. District officials said two charter schools opened that weren't expected, enrolling 1,000 students. This item was 33 percent over budget.
$900,000 for transportation to charter schools, 46 percent over budget.
$5 million in out-of-district tuition to agencies that are paid to educate Cincinnati school district students, such as Hillcrest Training School run by Hamilton County Juvenile Court. This was 63 percent over budget.
$2.7 million for electric, gas and water, including higher natural gas costs, 45 percent over budget.
$5.5 million for lead abatement in 23 schools.
Using reserves to balance the budget is not unusual for school districts.
For the last two years, the district has balanced its budget with cash reserves because expenditures exceeded revenues, Geoghegan said.
That's not unique to Cincinnati Public Schools. Ohio districts must return to taxpayers for levies every few years when their expenditures exceed revenues because levies do not include inflationary growth, Geoghegan said.
Still, Geoghegan said, Cincinnati Public has to curtail spending.
"We have to get spending in line with enrollment and with current available resources," he said. "But I don't make those decisions. I don't hire people. I don't add staff."
Superintendent Alton Frailey, who makes those decisions along with the school board, could not be reached for comment.
Though the district exceeded costs in some areas, it also exceeded its expected revenues by $4.1 million, including state aid adjustments.
That helped to reduce some of the impact of the overruns.
But the spending illustrates the district's difficulty controlling costs despite declining enrollment. Frailey released the 2003-04 budget last year, saying he intended to run the district "better, faster and cheaper."
The 2003-04 budget was $700,000 less than the previous year.
During a recent press conference on test scores, Frailey said the district is doing fine with "better and faster" but still has work to do on the "cheaper" part. His 2004-05 budget is projected to be $454 million.
Geoghegan said the projected 2004-05 budget includes contingencies for charter school payments, which should help reduce the possibility of overruns, but it's still difficult to forecast the charter schools' enrollment.
Charter school costs distort the Cincinnati school district budget, he said. For example, the state paid the district $13 million in 2003-04 for charter schools, but the district distributed about $35 million to them. The difference is paid in local property taxes, Geoghegan said.
"Though they run (the money) through us, that really inflates our budget," Geoghegan said.
While the district projected the charter school payments would increase to $27 million in 2003-04, the district did not anticipate the opening of the two new charter schools.
"We didn't find out about the schools until the fall," he said. But the district budget was approved in August.
Bates acknowledged that the charter school enrollment is hard to predict; but she believes the teacher raises should have been anticipated, or they shouldn't have been approved.
"We really didn't know what we were getting into when approved it," she said. "That's one of the reasons (board member Rick Williams) and I voted against the contract."
Geoghegan said the contract approval rests with the board - not him.
"I didn't negotiate agreements with (the teachers' union)," Geoghegan said. "We included a 3 percent increase (in the budget) overall. How would I know until the contract is negotiated?"
Geoghegan added he informed the board in February that the district couldn't afford the contract without reducing staff.
He added that he said he advocated for a severance incentive plan to reduce staff, but that was not approved.
Assuming the renewal levy passes, the district still should cut about $40 million from its spending, Geoghegan said.
That can't happen in 2004-05 because most of the positions are under contract, but the cuts need to be made for 2005-06, he said.
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