State Budget Update (HB 64)

Transcription

1 State Budget Update (HB 64) Ernie Strawser, Consultant Miami Valley OASBO Chapter Meeting March 26, 2015 PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 1

2 To access today s presentation electronically, please go to: PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 2

3 Agenda Winners and Losers? Formula Methodology Comparison Phased In Penalty - The Rest of the Story Micro Study Change in Guarantee(s) Proposed Vs. Law Resources Financial Forecast Discussion Disclose, Disclose, Disclose PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 3

4 Proposed Formula Winners and Losers? The new formula introduces the concept of capacity to pay local taxes as a factor to reduce the state s share of Core Aid The theory is that if your district s taxpayer median income is higher than the statewide median, then your district s taxpayers can pay more in local taxes The proposed formula does create winners and losers relative to the current formula PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 4

5 Statewide Per Pupil Proposed Funding Change Statewide, HB 64 proposes to increase state funding by about $148 per pupil in 2016, and an additional $123 in The individual district per pupil impact varies greatly. PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 5

6 W & L State Share % Change PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 6

7 W & L Additional Mills Expected PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 7

8 W & L Additional Mills Expected PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 8

9 W & L? - Current Vs. Proposed Formula Current Formula Median Income only "Helps" District (1) District (2) District (3) Statewide median Income Median Income Median Income Median Income 2012 $33,074 $26,500 $48,000 $35,200 District Income index (Local as % of Statewide) 80.1% 145.1% 106.4% District Per Pupil Valuation Index 72.0% 156.7% 104.9% Median Income Median Income Median Income Not a Factor Improves Not a Factor State Share State Share Percentage of Core Aid 63.1% 22.9% 42.5% Current formula uses median income only as a basis for increasing state share in districts with low median income relative to valuation. Proposed Formula Median Income Determines Capacity (Ability to Pay Locally) If a district's income index is below 91% (Low Threshold) or above 116% (High Threshold) it is used to adjust the district's valuation index and state share calculation. District (1) District (2) District (3) Valuation Index: 72.0% 156.7% 104.9% District Income Index 80.1% 145.1% 106.4% Adjusted by 91% and 116% Threshold (91% 80.1%) (145.1% 116%)x20% 0% Capacity Measure = 61.1% = 162.5% = 104.9% State Share Percentage of Core Aid 67.4% 21.8% 47.7% The proposed formula uses median income to penalize districts with moderate to higher taxpayer incomes. The penalty is phased-in over five years. Only reflects 20% (1/5th) of Phased In Capacity Penalty PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 9

10 Phased-in Penalty Proposed Formula Median Income Determines Capacity (Ability to Pay Locally) $48,000 Median Income District (2) Valuation Index: 156.7% District Income Index 145.1% Adjusted by 91% and 116% Threshold (145.1% 116%)x20% Capacity Measure = 162.5% State Share Percentage of Core Aid 21.8% Only reflects 20% (1/5th) of Phased In Capacity Penalty Using district 2 from the previous slide as an example, and holding all wealth and income variables constant, the district s state share would drop from 21.8% in 2016, to 11.4% in Phase in of Capacity Measure Penalty Median Income $48,000 State Capacity Share Measure Percentage % % 21.8% Proposed % 19.2% Proposed % 16.6% Phase In Continued % 14.0% Phase In Continued % 11.4% Phase In Continued PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 10

11 Phasing-in Penalty Current Vs. Proposed (Executive Budget) PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 11

12 Change in State Share Appalachian Districts For the 121 districts representing Ohio s Appalachian counties, the proposed formula will reduce funding for about 40% of those districts while increasing funding for 60% of the districts. The proposed formula redefines state share to include a measurement of capacity which was defined as the district s median taxpayer income relative to the statewide median taxpayer income. PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 12

13 CAP, Guarantee & Cap Effect (Unfunded) HB 64 allows 10% year-over-year increases Guarantee is based upon prior year level less 1.0% of Total Resources Some districts still experiencing unfunded formula Some districts are experiencing everything. PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 13

14 Foundation Guarantee CALCULATION OF THE GUARANTEE Prior Year State Aid: 5,977,000 Prior Year Total Resources: 24,461,000 Prior year funding amount+prior year fixed rate tpp reimbursement+prior year fixed sum operating reimbursement+prior calendar year property taxes +prior year casino revenue+tuition payments for non open enrollment students+prior year SDIT payments One percent of Resources: 244,610 Current Year Guarantee Base: 5,732,390 Prior year state aid less one percent of resources Current Year Calculated Funding: 4,984,000 Current year actual funding: 5,732,390 Higher than Calculated (Formula) Amount of Guarantee: 748,390 Actual funding less calculated funding Funding Change from Prior year 244,610 Current year actual funding less prior year state aid PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 14

15 Current Guarantee Vs. Proposed PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 15

16 Declining State Share = Revenue Results? (Not necessarily a direct correlation) PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 16

17 Guarantee, Cap & Unfunded Oh My! PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 17

18 Tangible Personal Property Losses Changes current hold harmless provision at current level of funding Reduces funding over two years by $235,978,064 to 260 districts in addition to per pupil formula reductions (or gains) -$135,581,733 in $100,396,331 in 2017 PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 18

19 Total Funding Change Statewide, HB 64 proposes to increase state funding by about $148 per pupil in 2016 and an additional $123 in The individual district per pupil impact varies greatly PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 19

20 Per Pupil Funding Change 301 Districts Increase 309 Districts Decrease PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 20

21 Proposed Vs. Law HB 64 will be modified through the legislative process Formula may or may-not change Could be weeks PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 21

22 Forecasting Challenges Not law Expenditures may chew into gains Sense of direction on Cap?? Sense of direction on Guarantee???? In all things - disclose, disclose, disclose PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 22

23 Disclose, Disclose, Disclose Example 1 PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 23

24 Disclose, Disclose, Disclose Example 2 PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 24

25 Thank YOU We appreciate the opportunity to work with you! PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 25

26 Other Resources PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 26

27 Other Resources PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 27

28 PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 28

29 The Public Finance Resources Team Matt Bunting, Consultant, has over 25 years of experience in the public finance sector. This includes 15 plus years as a school district treasurer, and 11 years with the Auditor of State where he led financial, legal compliance, and Federal single audits of government entities. Matt has served as interim school treasurer several times, as well as worked with Ernie and Stacy to test their forecasting software and instruct at their yearly seminars. He holds an Associates Degree in Accounting from Hocking College, and is a Certified Government Financial Manager. Ryan Ghizzoni, Consultant, began his career with the Auditor of State s Office and has served as a school district treasurer for the past 10 years. During his career, he has been the recipient of six Association of School Business Officials International Meritorious Budget Awards and was the recipient of the Ohio Association of School Business Officials 2011 Outstanding Treasurer of the Year Award. Ryan holds a Bachelors of Business Administration from the Youngstown State University, and is a Certified Administrator of School Finance and Operations. Debra Hoelzle, Chief Operations Officer, provides direct services to clients, and oversees the day-to-day operations of PFR. She brings with her operational experience from both the public and private sectors, including a school district and multiple corporations in the financial services industry. Debra holds her Masters of Business Administration from Ohio University, and her Bachelors of Science in Business Administration from The Ohio State University. Stacy Overly, Consultant, provides direct financial services to clients. He has over 20 years of experience serving as school district treasurer, including 15 plus years of developing financial forecasting tools, and providing instruction and training opportunities attended and used by over two hundred of Ohio s public school treasurers. Stacy works with clients to analyze trends and review local economic data to help determine a long-term operating strategy for the organization. He holds his Masters of Business Administration and his Bachelors of Business Administration in Finance from Ohio University. Mike Sobul, Consultant, brings 30 years of experience in public finance and tax analysis. Currently a school district treasurer, Mike spent nearly 25 years with the Ohio Department of Taxation where he led revenue forecasting efforts and provided analysis, training, and fiscal services to schools and local governments. Mike holds a Masters Degree in Public Policy from the University of Michigan and a Bachelors Degree in Economics and Political Science from Wittenberg University. Ernie Strawser, Consultant, provides direct services to our public finance clients. He has over 30 years of public finance experience as a CFO, consultant, and developer and instructor of financial forecasting techniques and tools which have been used by over two hundred Ohio school district CFOs. Ernie works with clients to facilitate their understanding of local financial results, trends, and strategies. He holds both a Masters of Science in Administration from Central Michigan University and a Bachelor of Science in Finance from Ohio University. PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 29

30 Services Five Year Forecast Software More than a compliance document Cash flow monitoring Modeling scenarios Graphics and dashboards Planning tool Consulting Maximize your effectiveness Financial consulting and cash flow monitoring Forecast review and analysis, what if planning Presentations to key stakeholders Special Projects Data Interpretation Data driven decision making Multi-year data sets to identify trends Benchmark analysis reports to see how you compare Graphics that are easy to read, understand and explain Data driven decision making PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 30

31 PFR Contact Information Ernie Strawser Consultant Public Finance Resources, Inc. PO Box 1822 Columbus, OH Phone: Debra Hoelzle Chief Operating Officer Public Finance Resources, Inc. PO Box 1822 Columbus, OH Phone: PUBLIC FINANCE RESOURCES: EMPOWERING THE PUBLIC'S FINANCIAL LEADERS 31