MADISON TOWNSHIP — Rising health insurance costs are propelling Madison Local Schools towards deficit spending, district officials said Wednesday.
Treasurer Bradd Stevens unveiled the district’s new five-year forecast, which projected deficit spending and negative fund balance by the end of the 2026-2027 school year.
The forecast predicts that without intervention, the district will end the 2026-2027 school year with a negative balance of $1,067,769.
It also projected operating deficits in four of the next five fiscal years, including an operating deficit of $1,227,591 at the end of this fiscal year and a surplus of $376,369 in fiscal year 2026.
School districts are required to submit two five-year forecasts to the state each year. Stevens said those forecasts provide a “snapshot” of district finances — but don’t tell the whole story.
Over the course of the next five years, the Ohio legislature will pass two biennium budgets. Ohio will go through its triennial property valuation update.
Madison will have another teacher contract negotiation and levies expiring in 2027 and 2028. Stevens isn’t allowed to assume those levies will be renewed when crunching the numbers on a five-year forecast.
“I don’t have a crystal ball to tell you what all those things are going to be,” Stevens told the board. “If I had a crystal ball to give you the answer, I wouldn’t be sitting here. I’d be on a beach in Tahiti.”
Supt. Rob Petersons said he’s very concerned about the district’s finances.
“We were hopeful that passing the levy in 2023 would put us in pretty good financial shape. Clearly that’s not the case,” he said.
Instead, the levy ended up being more of a “band aid” than a long-term solution.
Peterson, Stevens and the board are currently working with consultant David Conley to create a strategy for how to approach local tax revenue moving forward. That could mean restructuring existing levies as earned income tax rather than property taxes or putting a replacement levy rather than a renewal on the ballot.
“We’re in a situation now where we’re headed back into deficit spending, and we’ve got to look at how we increase our revenue, and that’s what we’re doing.”
The board also approved a reduction in force Wednesday, eliminating eight teaching positions and two classified positions.
“I think (staffing levels) is something that we’re going to have to take a look at every year,” Peterson said. “We’ve tried to reduce (our staffing) as our enrollment has dropped. Every time we make a cut, there’s at least some negative impact on the education we can provide.”
“Sooner or later you get to that point where you just can’t make any more cuts,” he added. “I don’t know that we’re at that point, but we’re getting there quickly.”
Health care costs ‘crushing’ district budget
Stevens said the high cost of health care, along with uncertainty about the upcoming state budget, had a negative impact on the district’s financial outlook.
“Hospital visits and doctors visits are going up. A major part of it is drug costs,” Stevens said. “Every time you see one of these drug commercials on TV, they’re designer drugs, and those are extremely expensive.”
Even after hiking employee premiums by 16 percent in January, Sevens said the district is being “crushed” by insurance costs. A family health-insurance plan costs the district more than a first-year teacher’s salary.
Stevens said he and Supt. Rob Peterson are exploring ways to reduce insurance costs while still meeting the terms of the negotiated agreement with the union.
“We’ve gone out to bid on stop loss. We’ve gone out to bid on PPO (preferred provider organization) carrier. We’ve talked to consortiums,” Stevens said. “We’re working with a broker. We’re trying to figure it out.”
Stevens said the district is also looking at offering SmartShopper, a program that incentivizes policy holders to shop around for more cost-effective care.
Another consideration is looking at coverage-care management, which Stevens said might be tricky to implement but could save the district around half a million dollars per year.
The treasurer said coverage-care management could lead to limits on refills (requiring every 30 days rather than every 60 days, for example) or requiring policyholders to try the generic version of a medication before more expensive versions.
Stevens assumes ‘flat funding’ from state
Stevens said when he completed his last forecast in November, he’d just attended a conference by the Ohio School Boards Association.
Discussions at that conference made him optimistic Ohio would increase funding for public schools in the next budget cycle.
This time, he projected “flat funding” instead.
Stevens said if the district received just a 2.75-percent increase in state funding over the next few years, it would put the district “back in the black.”
Nevertheless, he said he believes it would not be responsible to assume an increase.
“A lot has changed legislatively since November,” Stevens said.
State funding makes up a significant portion of public school revenues in Ohio. According to the five-year forecast, 55.6 percent of Madison’s revenues during this school year have come from state funding.
The Ohio Legislature is currently working on a new biennium budget, which will take effect July 1. Public school officials have voiced concern about budget proposals from Gov. Mike DeWine and the House of Representatives.
State officials are no longer pushing to fully implement a school-funding formula developed four years ago, which was nicknamed the “Fair School Funding Plan” and was designed to be phased in over a six- year period.
Meanwhile, there are more than a dozen pieces of pending legislation related to limiting property tax growth in Ohio, according to Stevens’ forecast.
One citizen-led petition seeks to eliminate property tax altogether through an amendment to the state constitution.
“By November, this (forecast) could be completely different, depending on what the state legislature does, or it could be the same,” Stevens said.
“I want to plan for the worst and hope for the best, but I’m not putting this in here to be doom and gloom,” he added. “This is kind of trying to be as realistic as I can.”