FINANCIAL FORECASTING

The Metrics of School Finance

West Clermont monitors several key metrics to assess their financial status and guide decision-making. Together this information resembles the dashboard of a car.

The metrics are similar for all school districts in the United States:

1. Operating budget: The operating budget includes revenues and expenditures for day-to-day operations. Monitoring the budget helps identify potential shortfalls or surpluses and allows for timely adjustments.
2. Fund balance: The fund balance represents the district's financial reserves. West Clermont aims to maintain a healthy fund balance to cover unexpected expenses, revenue shortfalls, or emergencies. Many states have guidelines for minimum fund balance levels.
3. Revenue sources: West Clermont monitors the stability and diversity of our revenue sources, including local property taxes, state funding, and federal grants. Over-reliance on a single source can make us vulnerable to economic fluctuations.
4. Enrollment trends: Student enrollment directly impacts a district's funding and resource allocation. West Clermont tracks enrollment trends to anticipate changes in revenue and adjust budgets accordingly.
5. Per-pupil spending: Monitoring per-pupil spending helps West Clermont compare our resource allocation to other districts and state averages. This metric can highlight areas of efficiency or potential overspending.
6. Debt levels: The district keeps track of our long-term debt obligations, such as bonds issued for capital projects. Monitoring debt levels ensures that the district can meet its repayment obligations without straining the operating budget.
7. Facility conditions: Maintaining safe and functional school facilities is crucial. West Clermont has assessed the condition of buildings and infrastructure in order to budget for necessary repairs and upgrades.
8. Academic performance: While not strictly a financial metric, academic performance is closely tied to a district's financial health. West Clermont tracks student achievement, graduation rates, and other academic indicators to ensure that resources are being used effectively to support student success.
9. Staffing levels: Staff salaries and benefits make up a significant portion of West Clermont's budget. Monitoring staffing levels and trends helps the district make informed decisions about hiring, class sizes, and resource allocation.
10. Long-term financial projections: West Clermont has developed long-term financial projections that account for anticipated changes in revenue, enrollment, and expenses. This project, in the form of a Five Year Forecast, helps the district plan for the future and make proactive decisions to maintain financial stability.

By regularly monitoring these metrics, West Clermont maintains a comprehensive understanding of their financial health and identifies potential challenges early, allowing us to make data-driven decisions to support the educational needs of students while maintaining fiscal responsibility.

The 5 Year Forecast and Its Implications

Based on the information provided in West Clermont's November 2023 Five Year Forecast, key budget projections include the following:

Revenues vs Expenditures:

• Revenues are projected to grow by an average of 1.4% annually from FY24 to FY28
• Expenditures are projected to grow by an average of 5.4% annually over that period
• This means expenditures are growing faster than revenues, which leads to a budget deficit

Cash Balance:

• The cash balance grew to a high of $24.75 million at the end of FY24 
• However, due to expenditures outpacing revenues, the cash balance is projcected to decline after FY25.
• The May 2024 Five Year Forecast projects spending deficits (expenditures exceed revenues) beginning in FY26.  By FY28, the ending cash balance is projected to be $4.2 million with a spending deficit of $10.77 million.  

Levy Outlook:

• The assumptions do not include any new levies during the 5 year forecast period through FY28
• However, with expenditures exceeding revenues and leading to low cash balances by FY28, indicates the district will likely need to pursue a new operating levy as early as FY26 to avoid critiacally low balances or even a deficit.

Long-Term Outlook:

• With a projected budget spending deficit and low cash balances by FY28, the long-term financial health depends on either increasing revenues (likely via a new levy), decreasing the rate of expenditure growth, or a combination of both
• Continued expenditure growth of 5.4% annually is likely unsustainable without new revenue sources long-term
• The district will need to balance educational investment needs with the financial capacity of the community in its long-term planning

West Clermont's five-year forecast points to a likely need for a new operating levy as early as FY26.  Long-term sustainability will require carefully managing the growth of expenses and aligning them with revenue growth and community funding capacity. Proactive planning and stakeholder communication will be essential.