Urbana City Schools’ finances will remain in the black for the next several years if its current levies are renewed, though the district will be deficit spending because of state changes in tax revenue distribution.
The Urbana board approved the school district’s five-year financial forecast at its Tuesday meeting. The forecast is required by state law to be developed in May and October each year.
The forecast predicts revenue will decrease from $22,612,747 in the current school year to $20,437,438 for next school year. Revenue is predicted to drop to $18,949,190 in the 2019-20 school year.
Revenues are predicted to decline due to lost tax revenue from the state and flat school funding, according to the forecast document prepared by Treasurer Mandy Hildebrand. Hildebrand said Tuesday the state decided to phase out tangible personal property tax payments to school districts in funding, but has paused that phase out over the years. The phase-out started again in the current school year, though the state has said it will hold the district “harmless,” meaning it will pay most of the money owed. Next year, the phase-out continues. Hildebrand said that amounts to approximately $500,000 each year the district will lose in funding. The district’s deficit spending ramps up once that personal property tax payment is phased out.
The forecast predicts expenses will increase from $22,029,803 in the current school year to $22,419,617 next school year. Expenses are estimated to increase to $24,337,975 in the 2019-20 school year.
Expenses are estimated to increase over the life of the forecast because of increasing salaries and health insurance costs. Health insurance costs are predicted to increase 4 percent the current school year and 5 percent each year after that. The forecast also builds in increasing costs for textbook replacement and technology improvements.
The forecast predicts the school district will end the current fiscal year with a $582,944 surplus, and end next school year with a $1,982,179 shortfall. The shortfall grows to $5,388,785 in the 2019-20 school year, though if existing levies are renewed, the district would end the school year with $5,785,927 in the black.
Deficit spending is the result of reduced revenue from state funding changes regarding tangible personal property and increasing expenses for staff. The deficits increase in size if the district’s renewal levies are not passed by voters.