Omaha schools, rejected on pension bond, focus on $410M construction referendum
With a $300 million pension bond proposal voted down by legislators last week, Omaha Public Schools have focused attention on a $410 million construction bond proposal on May’s ballot.
The district has said that failure in that vote will require it to lean more on its general fund dollars to complete repairs needed to keep schools fully operational as it faces budget cuts.
“The district was already going to need to make cuts because the district is projected to receive an estimated $13 million less in state aid this year compared to last year,” OPS spokeswoman Monique Farmer said in an e-mail.
The district’s failed attempt to get its pension bond authorized means schools will have to make more budget cuts in order to meet an $18.7 million payment obligation into the Omaha Schools Employee Retirement System pension fund this fall, Farmer said.
The May bond referendum would fund the second phase of work identified in the district’s 2014 Facilities Capital Plan. It would fund school renovations, classroom additions and the construction of five new schools.
Omaha voters passed a $421 million bond issue in 2014 that authorized the district to renovate fire, life safety, security and technology in schools, replaced four existing schools, build a new school and make additions at 12 schools to address capacity issues. The bond only addressed half of the work identified in the 2014 Facilities Capital Plan.
OPS board members are hosting a series of informational meetings to explain details of the $409.9 million bond that will appear on the May 15 ballot. The referendum has received the endorsement of the Greater Omaha Chamber of Commerce. The chamber will contribute $50,000 to the pro-bonds campaign, which will include putting up yard signs in neighborhoods.
“The needs of OPS students, teachers and parents are great, and the time is now to address them,” said David G. Brown, president and CEO of the Omaha chamber in a statement. “The school board has done a commendable job to ensure that projects from the first bond were completed successfully and that taxpayer dollars were used judiciously. We have every confidence that careful stewardship will continue after the passage of the second bond.”
Failure of the construction bond proposal would put more strain on the district’s general budget, Farmer said. The district already has to cover the shortfall caused by a roughly $13 million reduction in state aid next year. The cuts equal roughly 2.1% of this year’s $608.8 million general fund budget.
Lawmakers last Wednesday voted against authorizing the district’s $300 million pension bond proposal, which would have been used to help stabilize the district’s underfunded pensions.
The district is obligated to make a larger payment into its retirement fund this year to ensure its solvency. The retirement account is currently underfunded. Farmer said that next year’s payment is expected to be even higher. The retirement system now faces a $713 million gap between its actuarial assets and its projected obligations over the next 30 years. It’s funded at only a 65% level.
Moody’s Investors Service rates the district’s general obligation unlimited tax and limited tax GOs Aa2. S&P Global Ratings rates the bonds AA-plus. The outlook for both is stable. The district currently has $532 million of GOULT and $58 million of GOLT debt outstanding.
“Over the longer term, pension contributions could pressure the district's operations,” Moody’s said in a report. “Pension contributions currently consume a modest share of annual revenue, but we expect those contributions to grow in the coming years. Given constraints on raising revenue among Nebraska school districts, growth in pension costs will likely necessitate cuts to other costs unless the state increases aid.”
The district reported an available fund balance of $153 million at fiscal year-end 2017. The 2018 general fund budget is operationally balanced. Omaha is the only school district in the state that has its own pension fund for teachers and other employees. All the others fall under a state-administered plan.