Highland schools forecast positive reserves amid rising expenses, state funding uncertainty

Highland Schools is projected to maintain positive cash reserves over the coming years, but rising expenses, changes to Ohio's property-tax laws and uncertainty surrounding state funding could create financial challenges for the district. The Highland Board of Education approved the district's fiscal year 2027 financial forecast during its Aug. 24 meeting. Treasurer Neil Barnes said the forecast helps the board and community plan for the future and identify potential financial issues. State law requires school districts to submit a four-year projection of operating revenues and expenditures. Barnes said several recent changes to Ohio's property-tax laws are affecting Highland's financial outlook. House Bill 186 limits growth in tax revenue for school districts that have reached the state's 20-mill floor. Without the legislation, Highland would have seen roughly 23 percent growth in tax revenues following the most recent property reappraisal. Instead, the district saw approximately 13 percent growth, resulting in about $4 million in additional revenue. The reappraisal gives Highland more time to address longer-term financial needs, Barnes said, but the district will not receive as much revenue from increased property values as it otherwise might have. According to district forecast materials, Medina County estimates Highland will see approximately $2.47 million less in potential revenue during the current year because of the cap, with the cumulative amount projected at roughly $7.5 million over the forecast period. Barnes emphasized that the figure represents potential revenue the district will not realize under the new rules, rather than an outright loss. The district also is monitoring other property-tax changes, including House Bill 129, which changes how emergency and substitute levies are counted toward the 20-mill floor, and House Bill 309, which expanded county budget commissions' authority to determine whether tax collections are unnecessary or excessive. Barnes said HB 309 creates uncertainty because its application can vary among Ohio counties. Highland experienced what he described as an aggressive application of the law last year, although the county ultimately missed the deadline to make a reduction. State funding remains a concernUnder House Bill 96, Highland is considered a guaranteed district because of its relatively high property valuation per student. The district is projected to receive approximately $702,000 in guaranteed funding in fiscal year 2027. Without the guarantee, Barnes said Highland would receive more than $700,000 less under the current formula. Future funding remains uncertain because the state's Fair School Funding Plan is not funded beyond fiscal year 2027. Barnes said guarantees also could be concerning because future legislatures could phase them out. Highland receives approximately 75 percent of its revenue from local sources, primarily property taxes, while about 25 percent comes from the state. Some state revenue represents reimbursements related to property-tax credits rather than additional basic state funding. The district also is affected by a Medina County Commissioners decision involving the homestead credit. The commissioners approved the credit for tax years 2025 and 2026, which the district estimates will cost Highland approximately $641,255 over the two-year period without state reimbursement. On the expenditure side, Highland projects approximately $45.3 million in operating expenses for fiscal year 2027. Wages account for 58.1 percent of the operating budget, while benefits account for another 21.2 percent. Together, the two categories make up 79.3 percent of operating expenditures. Overall expenses are expected to increase by an average of approximately 4.9 percent annually, while revenue is projected to grow much more slowly. Highland projects approximately $46.6 million in revenue for fiscal year 2027, an increase of about 1.4 percent from fiscal year 2026. The district expects a surplus of approximately $1 million in fiscal 2027, followed by a relatively small deficit the following year. Despite projected deficits later in the forecast, the district is expected to maintain positive cash balances throughout the period. By the end of the forecast, Highland is projected to have approximately 46 days of cash reserves. The board previously established a goal of maintaining reserves equal to 120 days of expenditures. Barnes said the district remains in a relatively strong financial position through fiscal year 2029, but its reserve position becomes more difficult by fiscal year 2030. That could put Highland in a position to seek additional revenue. Barnes said the district could potentially consider a new property-tax levy or income-tax request around fiscal year 2029. The alternative would be reducing expenditures, though he said Highland already ranks among the top 50 Ohio districts for lowest expenditure per pupil, making significant additional cuts difficult. For now, Barnes said Highland remains in a relatively strong position, but property-tax changes, state funding and the growing gap between revenue and expenses will remain important considerations for the district in the years ahead. Contact reporter Brooke Adams at 440-822-8373 or badams@medina-gazette.com.