MANSFIELD — Mansfield City Schools is projected to run out of money before the end of the 2025-2026 school year, according to the district’s most recent five-year financial forecast.
District officials said MCS, struggling with revenue due to declining enrollment, may be placed under state fiscal oversight as a result.
During her overview of this month’s five-year forecast, interim treasurer Jennifer Hedrick said she expects the Ohio Department of Education and Workforce to place Mansfield City Schools under fiscal watch.
ODEW can place districts in financial straits into three levels of oversight — caution, watch and emergency.
“(ODEW) will have the authority to determine at what placement they will put you in,” Hedrick told the board.
“I believe it’ll be the fiscal watch category, which means you will have to submit a plan to the state on how you plan on rectifying your deficit,” she said.
A Tuesday night press release from Mansfield City Schools acknowledged the district could face state oversight “if deficits continue and cash reserves are depleted.”
“These designations are triggered by specific financial thresholds and could require external state intervention if corrective measures are not sufficient,” the release said.
A fiscal watch designation would not result in a state takeover of the district’s finances — something Mansfield experienced from 2013 to 2016 while in fiscal emergency.
“With the failure of the levy earlier this month, the predictions in the five-year forecast show a troubling trend,” board member Jennifer Kime said.
“It’s critically important that we thoughtfully evaluate every option moving forward to ensure the district’s fiscal stability,” she said.
As of Nov. 1, only four Ohio school districts were under financial oversight from ODEW.
Richland Source requested additional comment from all five school board members, but did not receive responses by the time of publication.
Fund balance rapidly depleting
Based on Hedrick’s forecast, Mansfield City Schools’ estimated revenues will exceed $54.5 million this school year, while estimated costs will exceed $58.5 million.
Thus, the projected deficit for this school year sits at $3.9 million. It’s projected to stay above $3 million in the years to follow.
At the current rate of revenues and expenditures, the district is projected to carry a fund balance of just $594,107 by the end of the school year.
What is a five-year forecast?
Public school districts are required to submit two five-year forecasts to the Ohio Department of Education and Workforce each year — one in May and one in November.
“(The five-year forecast) is a tool for the board of education and the administration to gauge the fiscal solvency of the district, as well as assist with their long range planning,” Hedrick said.
“It’s a snapshot based on today, based on board historical trends, what we know and future assumptions. So it is the best information that’s available at the time.”
The Government Finance Officers Association recommends government entities maintain a general fund balance of at least two months’ worth of operating expenses.
“We do not have that in any year of our forecast,” Hedrick said. “The fund balance, after encumbrances, in fiscal year 2025 is just under $600,000, so that’s very concerning.”
(School fiscal years run from July 1 to June 30. Fiscal year 2025 began on July 1 and ends in June 2025.)
Hedrick recommended continued monitoring of the five-year forecast and submitting additional forecasts to the state prior to the next required one in May.
Declining enrollment, high employee costs driving deficit
Hedrick’s five-year forecast projected larger deficits than the last five-year forecast, done by former treasurer Barb Donohue in May.
While projected costs did rise slightly for this school year, the change was largely driven by decreased revenue projections.
Hedrick’s projection of the district’s FY25 revenue was $1,375,675 lower than Donohue’s forecasted called for in May.
That drop mirrored a decrease in projected state funding.
Projected general operating funds from the state for FY25 dropped by $1,386,689 from the May forecast. Meanwhile, projected expenditures for FY25 ticked up by less than $270,000 from the May forecast. Hedrick projected lower expenditures than the May forecast for subsequent years.
Mansfield City Schools relies heavily on state funding, which constitutes 60.93 percent of total revenue, according to a district press release.
“We have declining enrollment at Mansfield schools and that affects our state funding that we receive from the state of Ohio,” Hedrick said.
Mansfield City Schools could see an increase in state funding next year if the Ohio legislature opts to fully implement the Fair School Funding Plan in the next biennium budget.
The Fair School Funding Plan has resulted in increased dollars for public schools over the last several budget cycles, as legislators “phased in” a new funding formula.
Nevertheless, school treasurers are typically conservative when projecting future funds from the state.
“The district benefits from recent state budget changes that reduced deductions for certain external programs,” a district press release stated.
“However, funding uncertainties remain beyond fiscal year 2025, as full implementation of the Fair School Funding Plan is not guaranteed.”
Local revenues, primarily from property taxes, make up 39.07 percent of district revenues.
While recent reappraisals have increased assessed property values, a district press release said a declining collection rate of 93.37 continues to present challenges.
What’s been done to reduce the deficit?
Hedrick cited high personnel costs as a pain point for the district’s budget.
According to Hedrick, the district spends a larger-than-average portion of its budget on wages and benefits — more than 80 percent of its total operating expenses.
“Our estimated benefits as a percent of the wages is 61.71 percent,” Hedrick said. “The state average is 25 to 32 percent, maybe occasionally up to 40 percent.”
Earlier this month, the school board authorized a request for proposals for the district’s health insurance in an effort to get the best price.
After the May financial forecast, ODEW required Mansfield City School to submit a written plan to eliminate its projected deficit. State officials approved that plan, which included several cost saving measures implemented ahead of the 2024-2025 school year.
The district implemented $1.2 million in budget cuts for the 2024-2025 school year in May, including 16-percent reductions across department and building budgets, former treasurer Barb Donohue told Richland Source earlier this year. Administrators went without cost-of-living increases.
In July, the school board voted to close the Tyger Digital Academy. At the time, district officials said it would save Mansfield City Schools around $2 million.
Over the past several years, the district has closed buildings. Woodland Elementary was dissolved and now houses Spanish Immersion. Prospect Elementary was closed and demolished.
In November, the school district asked voters to approve a new operating levy, which would have generated $7.8 million in additional operating funds each year. Residents voted the levy down.
Supt. Stan Jefferson said the district will continue to analyze its finances, including staffing and operating costs.
For more information on how to read a five-year forecast, check out this guide from the Ohio Department of Education and Workforce.
