Coventry Local Schools has flirted with fiscal insolvency for nearly two years, this week, the state stepped in to help the district stop spending more money than it gets.
Ohio Auditor Dave Yost announced Friday that the state has downgraded the school district’s financial status. Coventry had held the state record at 18 years and seven months in fiscal watch and now joins four others in the less desirable category of fiscal emergency.
Sen. Tom Sawyer and Reps. Greta Johnson and Anthony DeVitas worked with Yost and Superintendent Russell Chaboudy to expedite the fiscal recovery plan, which has a bad connotation but comes with two main perks: an army of auditors to help identify cost-savings (which could mean jobs or programs) and interest-free loans from the State Solvency Fund.
Loans and debt have sacked Coventry’s general fund in recent years.
The school district ended June with a nearly $1.6 million hole in the general fund. Another $4 million in deficit spending — or roughly 18 percent of expected annual revenue — has been projected through 2020.
The largest hit, $2.4 million this year, is due to a one-time debt payment that the district can no longer make, Chaboudy said.
The bad news may come as a surprise to voters who approved a $28.3 million bond issue in 2013 to build a new high school and renovate the old one. But after voters rejected a November renewal levy, which doesn’t raise taxes and usually passes, Chaboudy’s plan to bring the district out of financial trouble began to unravel.
Crushing debt
Chaboudy said the district has been talking with the Ohio Department of Education and state auditor since May as it plotted its next move. But when the renewal failed in November, Chaboudy said First Merit bank denied a reoccurring loan used to pay off deferred debt. For the past two years, Coventry had used the loans to make payroll and repay the Stark County Council of Governments, a consortium that collectively negotiates favorable rates for employee health benefits.
Consortia members who are current on their bills have received five $250,000 bonus payments in the past two years. Coventry, however, has been behind on its bill.
Without the loan, Chaboudy could not pay off the consortium, which he said would have released $500,000 in foregone bonus payments and helped the district inch toward solvency.
“It could have worked,” Chaboudy said. “Everyone always says they’re one levy away from slipping into fiscal emergency.
Decades in the making
Lawmakers are applauding the recovery plan.
“This declaration is a positive step toward rebuilding the community and evidence of the state’s cooperation and understanding,” said Johnson. “It has taken far too long for the state to recognize the urgency of this situation, but I am confident that we can now move forward, working together, for the well-being of the students and their families.”
But the state, which now aims to help the school district achieve financial health, has been part of the problem.
Only 14 of Ohio’s 609 school districts received less state aid per pupil than Coventry in 2014. Only 23 percent ($2,170) of the district’s $9,444 per pupil expenditure is paid by the state.
And Coventry, used to marginal state support, has creatively shored up its budget for decades as local taxpayers have increasingly shouldered the cost of funding education.
When the state approved open enrollment in 1989, Coventry was among the first to take advantage of the program.
The enrollment option, the state’s oldest school choice program, has allowed parents in South Akron to send mostly white, high-performing and more affluent children to Coventry without moving there. State funding follows the students out of Akron, which loses the most students in Ohio.
Voters in Coventry, which has the most open enrolled students in Ohio, have argued that because the state funding that follows students into Coventry doesn’t cover the cost to educate them, local voters are subsidizing an education for another community’s children.
According to the Ohio Department of Education, Coventry taxpayers contribute more to support schools locally than 85 percent of Ohio’s schools.
Meanwhile the state’s funding formula penalizes Coventry, where rich lake-front property masks a median income that is $25,000 below the statewide average. Property may be high, but disposable incomes are low.
Coventry’s precarious position leaves it relying more and more on local property taxes, an issue that led the state Supreme Court to make the first of four rulings in 1998, declaring Ohio’s school funding system unconstitutional. Between 1998 and 2012, Coventry property owners’ per pupil contribution increased by $4,411.
Moving forward
Chaboudy and newly hired treasurer Matt Muccio said they’d like to avoid cutting jobs and will not ask voters for more money.
A performance audit is underway to make recommendations on whether to continue the liberal use of open enrollment. A similar review by a state task force in 2013 determined that the program created funding disparities, but lawmakers took no action on the report (though Sawyer proposed legislation calling for a more comprehensive study).
The Coventry audit will also identify ways to reduce expenses. As was the case in Cloverleaf and Springfield, two local school districts that have emerged from fiscal emergency, staff and services could be cut.
“It almost has to get worse before it gets better,” said Muccio, who spoke of taking advantage of zero-interest state loans to reset the debt and completely overhaul the district’s financial plan.
In the meantime, the fiscal oversight commission will assemble to scrutinize spending, staffing levels and other areas to trim the budget.
Doug Livingston can be reached at 330-996-3792 or dlivingston@thebeaconjournal.com. Follow on Twitter: @DougLivingstonABJ.