On March 1, School District 65 hosted a forum at Chute Middle School to provide information about the District’s $14.5 million operating referendum that will appear on the April 4 ballot. Since Jan.30, District administrators have participated in 11 information sessions at the District’s schools, Fleetwood Jourdain Community Center and St. Nicholas Church. The next session is scheduled for March 11 at McGaw YMCA.
If approved by voters, the referendum would allow the District to increase property taxes to be used for education, support services, and operations by an amount higher than the increase currently permitted under State property tax caps.
At the March 1 meeting, Paul Goren, Superintendent, and Richard Rykhus, former School Board member and Chair of the Board’s Finance Committee, summarized the need for the referendum and answered questions about how the District got to this point, the recent contract negotiated with the District Educators Council (DEC, the teachers union), costs comparisons with other school districts, and other issues.
A Snapshot of the Referendum
The latest financial projections prepared by the District show that its operating deficits will grow from $5.1 million in FY’18 (the fiscal year ending June 30, 2018) to $24.4 million in FY’25. The cumulative operating deficits during the eight-year period are projected to be $112.3 million, said Dr. Goren.
The projections estimate District 65's operating deficits, taking into account technology costs of $1.9 million per year, and assuming the State will shift a portion of teacher pension costs to school districts.
If approved, the referendum would provide an additional $14.5 million in funding in year one. In subsequent years, it would provide an additional $14.5 million per year, plus increases on that amount permitted under tax caps. Over the next eight years, the referendum is projected to generate an additional $135.6 million, said Dr. Goren.
The $135.6 million would be enough to cover the projected operating deficits in the next eight years, which total $112.3 million, and enable the District to maintain its current educational program and provide a source of funding for technology. (See sidebar.) It would leave $23.3 million that could be used to enhance educational opportunities, to enable the District to move forward with some limited capital projects, and to maintain the working cash fund balance at 19% of operating expenses. Best practices aim for between 25% and 40% in working cash, he said.
The funding that would become available for capital projects would total about $15.2 million over the next eight years. This would enable the District to construct double-vestibule safe entrances for the five remaining schools that do not have them, make priority replacements of air-handler units and boilers, and make some roofing and masonry repairs.
The District has a list of capital projects totaling more than $90 million, said Dr. Goren.
A ‘Hedge’ Against State Threats
While the plan is to sustain the District for the next eight years, the funding could provide a “hedge,” or a way for the District to manage its financial position if the State legislature cuts State funding to District 65 or freezes property taxes. The projections do not build in an amount for these possibilities.
Dr. Goren said the State is continuing to consider legislation to reform the way it funds schools and to freeze property taxes. In the last several years, the State Senate passed bills that would have cut $6.5 million in State funding to District 65. The District estimates that a two-year property tax freeze would reduce the District’s projected revenues by about $2.1 million in year one, $3.4 million in year two, and about $3.4 million in each subsequent year. A permanent tax freeze would have far greater ramifications.
If the Referendum Does Not Pass
“If the referendum doesn’t pass, we’re facing $8.8 million in reductions in the next two years, $5.1 million next year and $3.7 million in the second year, said Dr. Goren. There would be steeper cuts in subsequent years.
Dr. Goren said to achieve cuts of between $4.25 million and $6 million, the District would need to cut between 50 and 60 staff positions, significantly increase class sizes, make deep cuts to central office services and operations, reduce classroom supports, and reduce curriculum and enrichment programming.
To achieve the balance of the cuts needed in just the first two years, the District would need to take some additional steps that could include closing a school or schools, combining buildings to serve fewer grade levels, creating multi-grade classrooms, and reassigning students to different schools, Dr. Goren said.
Impact on Taxpayers
Dr. Goren presented a table showing the impact of the referendum on property owners. A property owner who paid the average property tax bill of $8,076 in 2016 would see an increase of about $470 in property taxes per year, if the referendum were approved.
A property owner who paid $4,000 in property taxes would see an increase of $233 per year, and a property owner who paid $12,000 would see an increase of $698 per year. The increases are about 5.8% across the board.
How Did D65 Get to This Point?
“We had an increase of about 1,500 students over about 10 years,” said Mr. Rykhus. “It costs $20 million to educate them, and the State gives general state aid in the amount of $3 million, leaving a gap of about $17 million. We hired 140 – 150 teachers in that time frame, and so the expenses started to get much higher at the same time that the CPI was at historic lows.”
The District’s ability to raise property taxes, which account for 75% of the District’s revenues, is limited by State tax caps, which limit the increase to the lessor of the CPI or 5%. In the last 8 years since the Great Recession, the CPI has averaged 1.5%.
Meanwhile salaries and benefits, which account for 84% of the District’s expenses, have been going up at a faster pace due to the increased number of teachers and staff needed to meet the needs of the additional 1,500 students, and to pay the negotiated raises for teachers.
Dr. Goren said, “Let me underscore that to run an operation and to run a high quality operation, it costs about a 3.5 to 4% per year increase to pay people and our revenue is coming in at about a1.5% increase. So there lies the gap.”
In the last seven years the District has been managing the budget by making cuts totaling about $10.8 million, said Dr. Goren. “In some ways we’ve been kicking the can down the road as best we can.”
“The Board has been considering a referendum for the last two or three years, said Mr. Rykhus.
But he said the Board wanted “to wait until we had more certainty about the variables that are out of our control and that the State controls,” such as reforming the way it would fund education and property tax freezes: and the State hasn’t resolved any of those, said Mr. Rykhus.
“We didn’t’ know what was the right amount of money to ask for. Now we can’t wait,” because the District will need to make $8.8 million in cuts in the next two years “if we don’t get more money.”
The referendum is structured to provide funding that will enable the District to operate for the next eight years, assuming the State does not cut its funding to the District or freeze property taxes.
But If the State cuts funding to the District or if it freezes property taxes, the referendum funding would give the District a better chance to manage its financial position.
What About the Latest DEC Contract?
The School Board reached a new three-year contract with the District Educators Council (DEC, the teachers union) in late November 2016, with the assistance of a federal mediator. That contract replaced one that had expired in August. DEC’s membership had authorized a strike, and the union gave notice of intent to strike beginning as early as Nov. 29.
In the negotiations, District 65 asked for significant concessions on compensation; DEC asked for salary increases and other concessions; and the final agreement represented a compromise.
“One of the challenges that the Board and administration had this fall was the community clearly and rightly supported that we compensate our teachers fairly and that we remain competitive in terms of salary and that we value them financially to say we want to keep you. We think you’re doing a good job,” said Mr. Rykhus.
“And one of the tradeoffs of that is once the District makes that decision, it costs more. So although the contract that was negotiated actually saved – because of some shared sacrifices – saved us about $2.6 million off our projected expenses – so that was positive – it still was more than the rate of inflation.
“This is part of what we do as a community, when we say to these teachers we value you. We’re going to pay you what we think is fair, given all the other constraints. This is part of what we end up needing to ask for” in the referendum, said Mr. Rykhus.
“We all know we had a good faith and robust and difficult negotiation this year,” said Dr. Goren. “I absolutely give props to the teachers and the teacher leadership for $2.6 million of reductions that we have over the contract.”
Are Administrative Costs Too High?
Mr. Rykhus said the District has been managing its administrative costs. “First, while the District’s student population has been growing, the percentage of the budget dedicated to administrative costs declined from 5% to 4%,” he said. “In fact, the District has been in the lowest – or best – quartile in terms of the percent of its expenses of administrative expenses, as you look at districts across the State.”
In addition, Mr. Rykhus said, “When you look at the ratio of administrative leaders, both in the schools and in the central office, compared to students, the ratio several years ago was 114 to 1, it’s now 175 students per administrative leader.”
“There’s a lot of things that the District has been able to do to control administrative costs. People like to get focused on what about this administrative position, what about that administrative position. It’s not about one administrative position. We’re talking about tens of millions of dollars. It’s not going to be solved by one position,” said Mr. Rykhus.
Cost Comparisons with Other Districts
Dr. Goren said the District did a benchmarking study in which it compared its cost per student to similar school districts that have similar communities and similar demographics for the school year 2014-2015. He said District 65 is right in the middle of similar peer districts.
According to the analysis, spending for similar districts is as follows: Wheeling District 21 - $16,571; Skokie District 68 - $15,358; Wilmette District 39 - $14,804; School District 65 - $14,150; Oak Park District 97 - $13,924; Arlington Heights CCSD 59 - $13,898; and Palatine CCSD 15 - $12,536.
Closer to home, Dr. Goren said, Evanston Township High School’s cost per student is $22,500.
Mr. Rykhus said, “We have expenses that Wilmette doesn’t have because of the size of our District and the demographics that we serve. Our transportation costs are higher than theirs. [Dr. Goren] referenced the number of buildings that we have, the number of low-income students that we have here, and the services. You do have to break it apart and look at some of those differences.”
Would Consolidation Help?
Mr. Rykhus said consolidation of Districts 65 and 202 is “a popular idea,” but the School Board looked at it in the last few years and concluded it was not feasible for financial reasons. “Essentially if you have two bargaining units, teachers in the lower bargaining unit can opt into the contract of the higher bargaining unit,” said Mr. Rykhus. “That’s usually what happens. It’s about $20 million more a year, taking District 65 to the District 202 pay scale.”
“People think there are great efficiencies in consolidating. In reality it’s more expensive,” said Mr. Rykhus.
He added that Districts 65 and 202 have been working together to reduce costs in purchasing products and services. “There’s been some progress,” he said.
Timing of Plan B – the Contingency Plan
Dr. Goren said if the referendum does not pass, the District needs to be prepared with a contingency plan that makes $5.1 million in cuts for the 2017-18 school year. He said the proposed cuts would be presented to the Board for discussion on March 13, and then for approval on March 20.
He said it was necessary for the Board to make a decision within that timeframe so that the District could issue reduction-in-force notices to teachers and staff within the time limits specified in the union contracts. He emphasized, though, that the cuts would be contingent on the referendum not passing.
Andy Ross, a spokesperson for Committee to Save our Schools, said the referendum “is not only an investment in our kids and in our community, but also in our homes.”
He said that after a neighboring community failed to pass a referendum, some residents were having difficulty selling their homes because the schools were not as attractive to families with young children.
“This is something we can control,” said Mr. Ross. “Nobody else can bail us out. Our fate is in our hands and we’ve got to do this because it’s for our kids. It’s for everybody.”
Maintaining the Educational Plan
If the referendum is approved, the District would be able to maintain relatively low class sizes, and continue with the implementation of its strategic plan and its equity work. The Board has set high expectations that students will meet the college readiness benchmarks identified for the Measures of Academic Progress (MAP) test, and that each student will meet annual growth targets, which are set higher than the national average.
The District is in the process of implementing its strategic plan adopted in February 2015 and its equity statement adopted last year. Dr. Goren says the District is strengthening the rigor and quality of instruction for all students; providing intensive supports for striving students, with a particular focus on improving reading skills at the K-3 grade levels; providing social and emotional learning, including through peace circles and restorative justice work; improving the school climate so all children feel welcome and have a sense of ownership in their school; providing equity training for all employees and members of the Board; and focusing on hiring a high quality diverse workforce that reflects the diversity of the students.
The strategies are beginning to show some promising results, says Dr. Goren.
In the last two years, the percentage of black students meeting expected growth targets increased by 11 percentage points in both math and reading. The increase for Hispanic students has been 4 points in math and 8 in reading. For white students the increase was 9 points in math and 11 in reading.
The District is also showing progress using other measures: 39% of the new teachers hired last year were persons of color, compared to 20% in the previous year; three of the four principals hired in the last two years are African American; School Climate Teams have been formed in 12 of the District’s 18 schools; and all School Board members and many teachers have participated in equity training.
If the referendum passes, the District would also have funding to hire additional reading specialists to assist striving students and to expand the digital promise program that was piloted at Chute Middle School and the middle school grade levels at King Arts Magnet School to other middle schools. The program would enable every middle school student to have a computer tablet and internet access at home.