Cleveland schools tax increase to help district get into the black, CEO says

CLEVELAND, Ohio - A fiscal cliff previously expected to begin this year at the Cleveland Metropolitan School District has been delayed thanks to tax increases voters approved Tuesday , said Warren Morgan, the district's CEO.

During remarks to the media Friday afternoon, Morgan showed a new five-year fiscal forecast revealing that a shortfall had been put off until next school year, when it will be $39.7 million. In the 2026-2027 school year, the shortfall is projected to be $77.6 million. It is projected to be $96.3 million in 2027-2028 and $115.2 million in 2028-2029.

Morgan said that the district is continuing to make cuts, and he expects the shortfalls to be revised downward by May. The district provides the public a five-year projection every November and May. The November projection was unveiled at the Tuesday school board meeting.

When Morgan said the first five-year forecast was discussed under his tenure as CEO, in November 2023 , it showed the deficit to begin this year . The district began implementing a plan to eliminate the central office staff by 12.6%, restrict travel, and roll back some of programs paid for with temporary coronavirus funds, among other belt-tightening measures .

On Tuesday, voters approved dual tax increases that cost $254 a year on a house with a median value of $64,400. One increase is for an 8.6-mill operating levy expected to raise $52 million annually over the next decade. The other is for a 2.65-mill bond issue to raise $295 million to renovate and construct district buildings and pay for other capital expenses. The bonds are expected to be repaid in 35 years, with the tax remaining on homeowners' tax bills until repaid. The issuance of bonds is a renewal of existing debt.

READ MORE: CMSD seeks more money through tax requests, as it says other funding sources remain flat or decline

The district will receive half of the levy revenue, or $23.1 million, in this current school year, because it won't begin receiving money until January. After that, the district projects it will receive between $48 million and $49 million a year. Although the total revenues are $52 million, the district is sharing the revenue with high-performing charter schools, Morgan said, as part of the Cleveland Plan, which aims to give parents school choice.

District officials focus on a requirement from state overseers in Columbus that districts "have a positive cash balance at the end of every fiscal year for two fiscal years, when we do a five-year forecast," he said.

The figure on the balance sheet is known as an unencumbered cash balance, and it's the amount of money the district has when all obligations are accounted for.

With the levy, there will be a positive unencumbered cash balance in the current and next school year. Deficits are forecast for 2027-2028, when there will be a $96.2 million shortfall, and 2028-2029, when there will be a $211.3 million shortfall, Morgan said.

READ MORE: Ohio voters reject half of school district tax increases on Tuesday's ballot amid rising property values

"My heart can't be more full for what the Cleveland community did for our scholars and our educators, showing up in the way that it did," Morgan said.

An analysis shows every ward voted for the levy, with East Side wards showing the highest support. The levy eked through Ward 13, Old Brooklyn and part of the Stockyard neighborhood, with 50.5% of the vote and a margin of 72 votes. Most suburbs that are part of the district also passed the bond, except Newburgh Heights, where the tax issue received 49% votes.

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