By Christopher S. Mohr, President, K-12 Business Consulting
Since the Governor proposed the executive budget on February 4, including $487 M for private school vouchers and -$103.5 M for public schools, we could see that the FY26-FY27 state budget would not be favorable for public schools. Then, when you thought it couldn’t get worse, it did when Sub. HB96 was released on April 1. It may feel like chasing your tail to explain and react to all these proposals. They may be part of a bigger strategy to damage public education, but that’s a subject for another article.
Amid a chaotic state budget cycle with a substantial number of proposed legislative changes, managing expectations and focusing on clear, contextual communication with all your stakeholders is essential. Below are some ideas on navigating this uncertainty and effectively communicating with your board and administrative team.
Right now, it is clear that you will not have any firm data to generate numbers for your May forecast. Every legislative proposal attempts to undermine school district financial wherewithal. Despite all the numbers being tossed around, that is the intent and the simple truth of these legislative proposals. Explaining your district’s current funding story and how it relates to so many legislative proposals can be as easy as, “It will mean less revenue, but exactly how much and when it will begin is not precisely known at this time”.
With the legislature’s shotgun approach to changing school funding, you cannot forecast what is unknown. By the time the May forecast has to be filed, the Ohio Senate will be working on the budget, and there will likely be three possible versions of the state funding formula and a myriad of proposals that deal with property taxation. You won’t know what will happen to state funding or property taxes by May, when you must file.
When legislative uncertainty prevents you from having the data necessary to make revenue projections, you must focus on communicating the information you do know. Acknowledge the uncertainty and the volume of proposed legislative changes. This transparency will help build trust with your stakeholders and clarify that nobody can see how many possible changes could occur in our May forecast update.
Highlighting potential impacts can help. While you cannot predict exact outcomes, you can illustrate potential impacts using scenarios. Focus on one or two of the most egregious legislative proposals for your district. Conceptually explain the risks associated with each proposed legislative change, including potential impacts on state aid, local taxation, and cash reserves. This will provide a basic understanding of the funding mechanisms and legislative processes to help stakeholders appreciate the complexity of public schools and your district's situation.
As treasurers, you are used to feeling pressure to be correct and know everything. That’s not possible right now. For your May update, ensure potential impacts and risks are well-documented in your forecast assumptions and presentations.
One proposal that will be damaging for all districts is the cash balance limitation in Sub. HB96, whether a district is heavily funded locally or not. This provision’s unintended consequences will hurt all public-school districts. Reducing carry-over cash balances for schools to 30% of the previous year’s expenditure is bad enough, but empowering the local budget commissions to set rates and disregarding the 20-mill floor could impact 458 districts immediately and shut down property tax growth. It empowers a budget commission to reduce or suspend voted millage from a district. This could quickly become far worse than HB920 has been for school districts. Among other things, this strikes at democracy by rejecting voters’ choice to fund their schools.
Among several possible unintended consequence of the cash balance limitation is how credit rating firms will view this restrictive ending cash balance law for schools. Will your district face a downgrade as a result? What if you have a laddered investment portfolio two or three years out and need the money now? Penalties for early withdrawal or selling securities at inopportune times could result in lower yields or losses. Will a transfer of funds to other funds be viewed as sidestepping the intent of the ending cash balance carryover rule? What message does it send to credit rating firms and stakeholders to reduce our planning from a five-year forecast to three?
Because ending cash carry-over balance is a centerpiece of SubHB96 it might be a good idea to explain why districts have these cash balances. The graph below shows the combined ending cash balances for public schools, which can help explain . ESSER funds, significant increases in property values where districts were on the 20-mill floor, and implementation of the Fair School Funding Plan years one through four are major contributors. ESSER funds are gone, state aid will not increase materially in FY26 or FY27, and reappraisal growth is slowing. Ending cash balances are expected to fall through FY29, with costs rising and existing property tax laws in place. The legislature is racing as fast as it can to fix a problem that is essentially nonexistent now.
The May forecast update should not include legislative budget proposals that are not final. Your forecast should address the current law as it is. Your forecast tool should allow you to see what can happen if state guarantees are cut or property tax changes lower your ending cash faster than expected. Modeling “what if” with the forecast differs from preparing your five-year forecast with what is currently known and verifiable. Hopefully, better data will be available for the November 2025 forecast to adjust and remodel district finances with what is known at that time.
The best course of action is to conceptually explain proposed state aid and property tax law changes to your board and administrative team. They should be able to see the unprecedented uncertainties confronting school districts. Present and discuss these uncertainties and risks in your forecast assumptions and the presentation that you give to your board. Make sure you tell your board of education that these proposed legislative changes exist and your best guess as to what they could mean for your district if passed. When forecasts change sharply, as this forecast could from May to next November, it is critical that stakeholders understand why.
Your role extends beyond numbers. Focus on compelling storytelling, contextualizing financial data to your district’s current situation. And remember to be a CFO… (Communicating Finance Officer!).