$79M deficit estimate makes CPS levy vote nearly certain

Cincinnati Enquirer

8/13/2007

BY BEN FISCHER

Members of the Cincinnati school board agree that a major tax levy is almost certainly headed for the November ballot, less than two weeks after the board’s controlling majority said they were unsure it would be necessary.

Their abrupt realization came Aug. 2, when newly hired Treasurer Jonathan Boyd forecast a potential $79 million budget deficit by 2009 without a massive tax hike.

Board members called Boyd’s figures “stunning” and “surprising,” but critics said the need for a levy has been obvious for more than a year and CPS has hurt its chances by delaying a frank discussion.

“Some of these last-minute rumblings that are occurring really hurt their image in terms of having their act together,” said Roger Effron, a Madeira-based schools consultant who coordinates pro-levy campaigns.

Precise calculations can’t be made until the school board officially acts, but Hamilton County Auditor Dusty Rhodes estimates property taxes would go up by more than 16 percent with a proposed five-year, 10-mill emergency levy. Board members could vote to seek a smaller levy.

Both sides of the deeply divided board say they’ve been vindicated by Boyd’s claims of looming crisis.

But if they saw such a major tax increase coming before now, the board said little publicly, and occasionally downplayed its likelihood.

From mid-April to Aug. 2, the board met 20 times, and its finance committee met twice. The levy came up in a committee meeting, but Boyd’s bombshell was the first time the full board had seriously broached the topic.

Retiring board member John Gilligan said the board’s majority was negligent to wait so long to confirm what he called the obvious need for a levy.

“Not only should have they anticipated it, they were told it was coming,” Gilligan said.

While few would say that CPS finances are healthy, official board actions in recent months have painted a picture of far more stable financial conditions.

In June, the board approved Superintendent Rosa Blackwell’s annual operating budget with no changes, and later credited her balanced budget as a positive accomplishment in her annual evaluation.

Meanwhile, Blackwell warned that she’d cut spending to the bone, and might not be able to balance future budgets without new money.

In May, the board signed off on a state-required financial forecast that predicted only a $4.9 million gap in 2009, a fraction of Boyd’s more recent $79 million figure.

But that forecast, which Boyd cobbled together in his first two weeks on the job based on his predecessor’s old figures, was based on the current year’s spending levels, which both Blackwell and Boyd said couldn’t be sustained.

“That tightness has moved through each of the years,” Boyd said. “The pressure has not been relieved.”

Board members Rick Williams and Melanie Bates say the majority stalled because they weren’t getting reliable information from Blackwell and former treasurer Michael Geoghegan, a concern they’ve voiced for years. They said they wanted to wait for Boyd’s own analysis.

Bates, chairwoman of the finance committee, said she voted to approve the documents because it was the best information she had at the time.

“I accept responsibility, but for 3½ years ago on, I’ve been saying we need to make some major changes,” Bates said.

Williams said the board erred by considering a “balanced” budget the primary determinant of whether CPS finances were well-managed.

“If you manipulate the public into saying a balanced budget means a quality year of financial management, then you’re not looking at the whole picture,” Williams said. “There’s no presentation that you had to rob Peter to pay Paul.”

A diverse group of district officials agrees with Williams that year-to-year budgets, to be balanced on paper, have relied on extremely optimistic spending projections that don’t hold up during the year.

For example: Cash flows within CPS are so tight that the district covers some expenses with cash advances on tax revenue not collected yet, Boyd said - an $18.1 million bill when it comes due in 2009.

Last year, a major accounting oversight led to $11.5 million in unplanned spending, when individual schools spent reserves they had built up in past years. As a result, officials ordered sharp mid-year cutbacks to keep the overall budget in check.

And just a month into the current financial year, Boyd says some line items already are likely to be exceeded.

Board member Catherine Ingram, who supported a levy before Boyd’s presentation, concedes those past projections may have been too optimistic, but Boyd’s projections may be overly conservative in not anticipating any future cost-cutting.

“I don’t want to be like the Chicken Little concept, we say the sky is falling,” Ingram said. “When it doesn’t, the public holds us accountable.”

Putting aside the question of whether CPS can justify its potential levy request, Effron said the more difficult political hurdle at the moment is the perception that board members couldn’t see such a large deficit coming.

“It’s not just the dollars and cents, people don’t know that detail,” Effron said. “They say, ‘Do I have confidence in the district and the people making these decisions, and do I want to move it forward?’”