Lorain City Schools is fast approaching bankruptcy despite convincing voters to approve a November 6 levy, The Morning Journal reported. The levy will increase property taxes on a $75,000 home in the district by more than $100 per year.
The Lorain City School District, located 25 miles west of Cleveland, laid off 183 employees — including 93 teachers — in June 2012 in an attempt to resolve a $12 million deficit left when decreasing state and local tax revenues met the conclusion of federal “stimulus” funds from President Obama’s 2009 American Recovery and Reinvestment Act (ARRA). Ohio Department of Education records show that Lorain City Schools, the tenth-largest district in the state, received $11.1 million in stimulus funds over three years.
The financial situation predicted by district treasurer Dale Weber several months ago is now becoming a reality, as administrators must choose between “fiscal emergency status” intervention from the Ohio auditor’s office or asking the State Controlling Board for a $3 million loan.
According to The Morning Journal, the district is still paying off much of the $10 million borrowed from Ohio taxpayers since 2006. Superintendent Tom Tucker and district treasurer Dale Weber are in favor of borrowing additional funds, but school board member Jim Smith would prefer the auditor step in.
A financial recovery plan is due by November 22 if the district decides to request a loan, but Weber intends to ask for an extension to December 6. If state officials deny the request for more time for Lorain City Schools to mull over its financial future, an emergency district school board meeting will be held on Thanksgiving.
The State Fiscal Stabilization Fund (SFSF) program was a roughly $50 billion federal bailout distributed to state and local governments as part of ARRA, intended to “minimize and avoid reductions in education and other essential public services.”
In Lorain, SFSF funds enabled the district to avoid necessary spending cuts and ignore phased out state spending. From 2009 to 2011, the school district used stimulus funds to increase spending on long-term obligations such as teachers’ pension and health insurance benefits by 20.3 percent.
In spite of slight declines in overall revenue over the past few years — revenues fell 3.2 percent between the same three-year period — the district’s spending jumped by 7.8 percent in one year, due mostly to spending on pay and benefits.