Elyria Schools may consider new operating levy in face of mounting deficit

The Elyria Board of Education could discuss its first new operating money levy in more than a decade as Elyria Schools' five-year forecast predicts increasing deficit spending. District Treasurer Colleen Aholt presented the district's five-year financial forecast during a board meeting on Wednesday. She told the board that with the end of COVID-relief funding and revenue expected to remain stable, the district would begin deficit spending next year and would expend most of its cash reserve by 2029. Aholt went over the district's revenue, which she said would receive a bump over the next two years as the district became a part of the federal Community Eligibility Provision program. Elyria became eligible for the CEP program this year. It will provide a total of $2.5 million phased in over the next two years to help pay for student lunches. The program will pay for Elyria's newly free school lunches. "We have implemented the school lunch program so everybody eats for free," Aholt said. "So we'll get the money in and then we give it right back to the lunch program. So it's a win-win for everybody." Otherwise though, Aholt said the district expected its revenue to mostly level off at roughly $90 million from 2026 through 2029. The forecast projects expenses to rise significantly over the next five years under the dual pressure of new costs and the loss of Elementary and Secondary School Emergency Relief funding. ESSER funding was provided to districts across the country to help them to recover from the COVID-19 pandemic and was funded by the American Rescue Plan Act. The funds expired on Sept. 30, and Aholt said that going forward many expenses that had been covered by ESSER would once again come out of the district's general fund. "All of the districts had the ESSER money, and you hear about this cliff that the districts are falling off of because they used that money to stretch," Superintendent Ann Schloss said to the Board on Wednesday. "We did a really nice job of stretching that money to five years while we had it … but I think that you're gonna see most school districts in this same boat." In addition to spending returning to the general fund, Aholt said that the district's expenses would increase due to inflation, rising medical costs and several new negotiated contracts, including Elyria Schools' new student transportation agreement. "This year we got hit with health care costs and transportation," Aholt said. "Transportation increased, we were on an agreement before but the contract ran up, so there's always negotiated agreements, but between the transportation costs, the fuel, (and difficulty) finding bus drivers, our transportation costs increased a lot." The district's budget was $78,741,564 in 2024, but it is expected to rise steadily to $102,990,843 by 2029. With all these new expenses together, Aholt's forecast projected that the district would be spending in a deficit starting in the 2025 fiscal year. The projection shows this deficit to be modest at first, hitting $1 million in 2025 and $1.4 million in 2026, but then rising dramatically over the following years. Aholt estimated that the district would be spending $12.5 million more than it brings in by 2029. The district began deficit spending in 2019, but the ESSER funds had put it back in a surplus, Aholt explained. Now that the additional funds are gone, the deficit spending will return in 2025. Through ESSER funding, the district built up its cash reserve of around $30 million, which would cover 35 percent of the district's annual expenses. Aholt said district's try to keep at least 20 percent of their annual expenses on hand. But, the projected deficit spending is expected to quickly erode that war chest. "If we don't do anything and we stay on the same route that we're staying, then in 2029 we'll have a cash balance of $2.9 million," Aholt said. Aholt said that she had two recommendations for the board to counteract this coming budget issue: cut spending and consider a new operating levy. She did not make a specific recommendation for the levy, but said that it probably would be less than 5 mills and ideally the board would pass it in December to place it on the May ballot. Elyria Schools has not requested new money since 2016, when voters approved a construction bond that built five new schools in the district. Voters have not been asked to approve a new operating levy, which goes directly into the district's general fund, since 2010. "Usually school districts are on a three- to five-year cycle, so I think it's amazing that Elryia hasn't asked for new operating money in that long," Aholt said. "And of course we're still trying to streamline and to save and to see what we can do to eliminate the cost, but at some point revenues are stable and expenses are going up." The board did not discuss a new levy on Wednesday, but board President Michael Gebhardt said that it was a need the district would have to discuss. "It looks like we are going to have to have a levy," Gebhardt said. "We're gonna have to talk about that." Elyria voters renewed two operating levies in March 2024, a 4.95-mill continuing levy and a 10-year, 12.85-mill emergency levy. Both levies passed with over 60 percent of the vote. Contact Owen MacMillan at (440) 329-7123 or omacmillan@chroniclet.com.