by Chuck Hoven

     (Plain Press December 2024) At the November 6, 2024, Cleveland Metropolitan School District (CMSD) Board of Education Business meeting Cleveland School Board Chair Sara Elaqad praised the efforts of the Cleveland Teachers Union, CMSD staff and Board members, endorsers, businesses and supporters that helped to pass the Issue 49 levy and bond issue that Cleveland voters overwhelmingly supported in the November 5^th General Election. Elaqad, a resident of the Detroit Shoreway neighborhood, said she “deeply believes it is the responsibility of adults to make sure children have everything they need to learn and succeed.”

     Elaqad noted the school district still has, “Tough work ahead.” But she noted that the school district was in a “stronger position because of the work of voters.”

     CMSD Chief Executive Officer Warren Morgan expressed a feeling of “overwhelming gratitude for the continuation of support” from Cleveland voters.

     Later in the meeting a five-year budget forecast presented by CMSD Chief Financial Officer Kevin Stockdale revealed the “tough work ahead” that school district faces. Stockdale’s report revealed that the $52 million dollar a year levy the voters just pasted the day before, only will buy the school district another year before current levels of expenditures and income will result in a huge negative fund balance.

     Before the levy, the five-year forecast predicted CMSD would face a negative $110 million unencumbered fund balance at the end of the 2026-2027 school year. Now with the levy, the projection is a negative unencumbered fund balance of $96.2 million at the end of the 2027-2028 school year.

     Stockdale explained to the Board of Education, the Chief Executive Officer and the public step by step how this negative cash balance would occur.

Base Cost of Education

     Stockdale outlined some implications from how the State of Ohio calculates funds it sends to the CMSD that will severely impact the school district’s budget.

     Stockdale explained that when the State of Ohio figures school district’s share of the State Calculated Base Cost of education a child, it looks at the valuation of property in the school district. Based on the value of properties in Cleveland, Stockdale said, “Cleveland is looking like a wealthier city.”

     “Cleveland according to the data that they (State of Ohio) look at is looking like a wealthier District with the property valuations, which of course we know, we don’t receive additional funds for and income from. So that is a challenge for us. The takeaway from this is that there is a shift with the state funding formula with the cost of education from the state to local taxpayers, “said Stockdale.

     Stockdale explained, “The expectation is we will be spending 21% more out of local tax dollars” as CMSD’s share of the calculated base cost of education. He said in the current school year the base cost of education calculated by the State of Ohio is $8,094. The State’s share of that amount is $5,270 per child. CMSD’s share is $2,824. In the 2028-2029 school year the State of Ohio projects the base cost of education to increase to $8,763 per student. The State’s share would be $5,356, and the local share would increase to $3,407.

     What Stockdale referred to but didn’t spell out why the CMSD doesn’t receive revenue that would be expected from the wealth of property in Cleveland. A March 11, 2024 article by Nick Castele in Signal Cleveland does spell it out. The article titled “Cash strapped Cleveland schools lose out on millions from tax abatements.” The article says, “The Cleveland Metropolitan School District misses out on an average of almost $29 million in revenue each year, thanks to tax breaks meant to spur new housing and businesses in the city.” The article notes this figure does not include tax exemptions by nonprofit institutions such as the large hospitals and the property tax exemptions granted to the stadiums.

Disadvantaged Student Fund

     Another area where policy at the State level will impact the Cleveland Metropolitan School District Budget is in revenue it receives from the Disadvantaged Student Fund. “Due to change in calculation methodology, Cleveland will receive $10.5 million less this year, than was projected in 2023 and the gap will continue to widen,” said Stockdale.

     Stockdale said while the state has increased the amount of funding statewide that goes into the Disadvantaged Student Fund, due to a new way of calculating eligibility, more students statewide will be eligible for funds. The funding is calculated based on students being eligible for a free lunch.

     Recent changes in the school lunch program eligibility criterion mean more students are included. Previously a school system had to have a 60% poverty rate for all students in the school to be eligible for a free lunch. That changed to school systems needing only a 30% poverty rate among their students to have all students be eligible for a free lunch. Stockdale says this has resulted in “funding shifting from high -high poverty districts to middle income districts.”

Levy impact

     Stockdale then proceeded to explain the impact of the recently passed levy on projected deficits and fund balances.

     He said, CMSD would only be due $49 million a year from the $52 million levy. This is because per agreements in the Cleveland Plan $3 million a year would go to partner charter schools.

     Stockdale noted that in this year’s budget, CMSD would only receive a half year of revenue from the new levy. Stockdale said current general fund expenses of the district are about $733.3 million. Continuing revenue that CMSD had before the levy amounts to $710.8 million. This school year’s income from the new levy is expected to be about $24.1 this school year. This brings this year’s revenue to $734.9 million. Thus, CMSD projects a surplus of $1.6 million for this school year.

     Stockdale explained that CMSD began this fiscal year with a positive cash balance of $140.8 million. With the projected $1.6 million surplus, the district will end the year with a cash balance of $142.4 million. However, encumbrances (bills owed) will bring the unencumbered year end cash balance to $117.4 million.

     Stockdale explained that employee wages make up 53% of the CMSD annual budget and employee benefits constitute another 22%. He said the increases in wages in the current bargaining unit agreement call for a 4% increase this school year, a 2% increase in the 2025-2026 school year, and a 3% increase in the 2026-27 school year.

     Under current projections of rising costs and declining revenue from the State of Ohio, Stockdale said CMSD projects that if nothing changes it will have a deficit of $39.7 million in the 2025-26 school year and a deficit of $77.6 million in the 2026-27 school year.

     Stockdale noted that another five-year budget projection will be readied by CMSD in May of next year. He noted the next two-year State of Ohio Budget as well as actions by the Cleveland Board of Education would likely result in changes in CMSD budget projections.