Lexington Local Schools’ treasurer gives gloomy financial forecast

LEXINGTON — Lexington Local Schools is on track to run out of operating funds by the end of the 2026-2027 school year, according to recent financial projections.

Treasurer Jason Whitesel presented the district’s four-year financial forecast at Wednesday’s board meeting, highlighting a trend of operating deficits and dwindling state funds.

Forecast are a tool to communicate and assess the financial health of a school district. It includes an overview of a district’s operating revenues and expenditures over the previous three years and projections for the next four.

School districts are required to submit these forecasts twice annually to the Ohio Department of Education and Workforce.

Up until this year, schools had to submit five-year forecasts. The state legislature recently changed it a four-year forecast.

“Part of me believes they don’t want it to look as bad as it already looks, so they dropped off that last year,” Whitesel told board members.

The financial forecast follows a fiscal year schedule, with fiscal years beginning June 30 and ending July 1. Fiscal years are named for the calendar year in which they end.

Deficits ahead for Lexington schools

By the end of fiscal year 2029, Whitesel said the district is projected to face a $7,344,918 operating deficit.

He added the projected fund balance for June 30, 2029, places the district at a $14,532,955 deficit. However, forecasts are not allowed to assume any new or renewal levies will pass.

That impact will begin in fiscal year 2027, Whitesel said the district is expected to see a $558,703 deficit fund balance.

Whitesel also highlighted the district’s growing operating deficit.

“For the past three years, the school has been deficit spending,” Whitesel said.

He projected that by the end of the 2026 fiscal year, the district’s operating costs will exceed revenues by $2,949,022. That deficit is expected to deepen in fiscal year 2027, to $4,394,744.

Whitesel noted the previous fiscal year (FY25) ended with an operating deficit of $1,476,877.

“I’ll just say it, if there is a potential new income tax, that would have a very real impact on our overall forecast,” he said.

Whitesel noted that treasurers and superintendents are 24/7 employees and, under state law, are not allowed to advocate for school levies.

“These are facts that I am sharing with you as far as where we are at financially and what an income tax would mean for us when it comes to our overall outlook financially moving forward,” he said.

Understanding the 20-Mill Floor

Whitesel also explained the “20-mill floor,” the minimum level to which a district’s total tax collection rate can decline.

School district levies are “dollar levies,” meaning they collect a fixed amount of money each year. As property values rise, collection rates fall, so the district continues to receive the same total amount.

While collections remain steady on existing properties, the only growth in the school district’s property tax revenue comes from the district’s 3.8 mills of inside millage (an amount Ohio law allows local governments to assess without a vote from taxpayers) and from new construction.

To minimize the impact of inflation on tax revenue, the Ohio legislature passed House Bill 920 in 1976. The bill created a 20-mill floor, which prevents a district’s total voted millage rate from dropping below 20 mills.

“When those effective rates reach 20 mills, that’s when you start to see growth (in property tax revenue),” Whitesel said. “It’s been nearly 15 years since we’ve been on the ballot for an operating levy, and property values have pushed us to that 20-mill floor.”

“Now that we’ve hit the 20-mill floor, we should start to see growth — but lawmakers in Columbus are also looking to change those rules,” he added.

Whitesel said the last new operating levy was passed in 2011. Voters have since passed a levy to fund the construction of new buildings; however, funds passed for construction cannot be used for general operating expenses.

Levy history and spending

Whitesel said Lexington is a “formula district,” meaning it receives funding from both the state and local taxpayers. Some districts are guaranteed to receive a set amount of state funding, but Lexington is not one of them.

“When the state makes these decisions and changes, they calculate the formula based on what used to be called a state share percentage,” he said.

School districts that have higher property tax values and average incomes are determined by the state formula to be more capable of funding their schools at the local level.

In short, if property and income values rise, the state reduces its funding share.

Over time, Whitesel said, the state has shifted more of the burden to local communities.

“They say, Lexington, your values went up — you don’t need as much state funding. The state share percentage goes down,” he said. “That impacts us. Those are real dollars.”

“We are now down to a 30-percent state share percentage.”

(Photos of the district financial forecast. Credit: Hannah Martin)