When a local government or Ohio school system encounters budgetary problems, it may be placed in fiscal caution, fiscal watch or fiscal emergency status.
In each setting, the designation is a legislative mechanism used to identify financial problems as soon as possible and to provide the assistance needed to keep a bad situation from growing worse.
To determine whether a local government has fallen into fiscal caution, watch or emergency, the Auditor of State will review fiscal practices or conduct a fiscal analysis to determine the severity of the financial situation. That analysis can be requested by a government entity’s leadership or – in an urgent situation – the Auditor of State can initiate the process.
If the analysis shows that a deficit in a local government’s general fund, or in any other fund, exceeds one-twelfth of the total general fund budget, then the local government is placed on fiscal watch.
If the deficit exceeds one-sixth of the total general fund budget, the local government’s situation becomes a fiscal emergency. In the case of a fiscal emergency, a seven-member public commission is created to oversee the government’s financial operations and develop a plan for recovery.
In the case of schools, designations of financial distress are rated as fiscal caution, fiscal watch or fiscal emergency.
The Ohio Department of Education and the Auditor of State’s office jointly work to make fiscal watch and emergency designations. The two agencies then work with each affected school district to provide guidance and technical assistance to help prevent the financial condition from getting worse.
Ohio schools fall into fiscal watch or emergency only after an analysis is conducted by Auditor Yost’s office. A fiscal watch is declared when the analysis shows that financial problems threaten a school’s ability to operate.
If the analysis reveals that the district is in a severe situation, then it is placed in fiscal emergency. A five-member public commission is then created to assume powers of the board of education (the commission decides what powers they want to assume) and develop a plan for recovery.