At its April 24 meeting, the District 65 School Board adopted a Resolution and accompanying Guidelines setting out its intention on how it will use the $135.6 million in additional funds that will be generated in the next eight years through the referendum that was approved by voters in the April 4 election, and how it will report on the use of the funds.
Before being unanimously approved, the Guidelines were amended to incorporate a commitment to equity, and two proposed provisions in the Guidelines were deleted.
The Resolution, as adopted, recites among other things:
• That the increase in the Property TAx Extension Limitation Law (PTELL) limiting rate [the property tax cap rate] is expected to generate approximately $14.5 million in additional property tax revenue for the District each year, which is estimated to compound to a total $135.6 million over the next 8 years;
• That without the additional property tax revenue, the District was facing a cumulative budget deficit that would reach $112 million by FY25; and
• That “it is the steadfast intention of the Board to use all of the additional money generated from an increase in the PTELL limiting rate for the purpose of eliminating the projected budget deficits without diminishing the District’s fund balances;
• There is a single resolution: “The Board hereby declares its commitment to use all of the additional property tax revenue generated by the increase in the PTELL limiting rate approved on April 4, 2017, for the purposes set forth in the Referendum Expenditure Guidelines set forth in Exhibit A to this Resolution.”
The Referendum Expenditure Guidelines
The introductory paragraph of the Guidelines provides: “The following guidelines articulate the Board’s intentions regarding the allocation of the 2017 $14.5 million operating referendum to address projected deficits from FY’18-25. As those projections do not account for additional potential funding threats at the State and federal level, the Board recognizes that these guidelines will need to be revisited should significant changes occur.”
As adopted, the Guidelines contain two provisions, one dealing with the uses of the Referendum Funds and another dealing with transparency and reporting on the uses of the funds.
Uses of Referendum Funds
As proposed, the first provision of the Guidelines provided:
“Referendum funds were raised with the following intended uses:
• To alleviate projected operating deficits [totaling $112 million] through at least FY’25.
• To fund at least $500,000 per year for District wide capital improvements, with up to $525,000 per year available for additional capital needs.
• To maintain the District’s fund balance with contributions of at least $1 million/year.
• Fund balance contributions are intended to support meeting the Board Policy on fund balance: https:P//v3.boardbook.org/public/publicitemdownload.aspx?ik=40364377.
• To allow the District to discontinue the practice of funding short life cycle technology equipment with long term capital debt. These technology equipment expenditures will be funded with operating funds going forward.
• To support critical District strategies in the area of 1:1 instructional technology at middle schools and literacy interventions for struggling students including 1 FTE Reading Specialist at each elementary schools.
These uses were outlined in the presentation made to the School Board on Jan. 10, 2017, when it approved putting the referendum on the ballot. In addition, during information sessions, District 65 administrators and Board members told members of the community that these were the planned uses for the referendum funds.
Dr. Goren said this provision is essentially codifying a “promissory note” to the community.
Board President Candance Chow said, “This is a commitment we made on how we’re going to spend the $14.5 million. We should have a resolution on this. I feel it’s critical for this Board to make this commitment.”
Board member Anya Tanyavutti said during conversations and information sessions, “We talked to the community about our commitment to equity,” and said for some members of the community the commitment to equity was a “tipping point.” She said she thought the Resolution was being rushed and said, “I think we need to take more time” to work equity into the Guidelines.
Board member Tracy. Quattrocki said, “We went all over the community and we handed out a sheet to community members that summarized how we were going to spend the referendum dollars and it’s reflected in this Resolution.” She said she had no problem with including a provision dealing with equity, but added, “This Board should say, ‘This is what we said, and this is what we commit to going forward.’”
Ms. Quattrocki added that she was going off the Board in a week, and she felt “very strongly” that the current Board should adopt a Resolution and Guidelines stating its commitment on how the referendum funds would be used.
Dr. Goren and several Board members crafted a proposed amendment to the lead-in language of the first provision that changed the language from “Referendum funds were raised with the following intended uses” to “Referendum funds were raised with the following intended uses and will be applied in accordance with the District’s racial and equity statement and related policies.”
With that change the provision was unanimously adopted.
Transparency and Reporting
The second provision of the Guidelines provides that the District’s annual budget documents will include a “referendum deficit management” budget line that will specify the amount of the referendum funds being held to balance future deficits through at least FY’25, together with an estimate of how long the reserved funds will keep the District deficit-free.
Kathy Zalewski, the District’s newly appointed treasurer, said the District will have a separate program that will track the expenditures of the referendum funds, and the District’s financial projections will contain a line item that “will show the fund balance earmarked for future deficit management.”
Dr. Goren said, “We’ll label it as the referendum fund.” He reiterated that in the early years, the referendum funds will create a surplus that will be used to cover deficits in the later years. Technically, it is not a surplus, he said, because its use is planned for.
Ms. Zalewski added that it was important that the Board adopt a Resolution regarding the use of the Referendum funds “so the community will know that we have an intended use for these funds in the future.”
This provision was unanimously adopted by the Board as presented.
The Deleted Provisions
Two other provisions were dropped from the proposed Guidelines, as proposed.
One provision addressed how the Board would handle a surplus or a shortfall due to District’s actual financial performance coming in better or worse in the next eight years than had been projected when the Referendum was approved by the voters.
The second provision provided that if a position became vacant, the District would evaluate the continued need for that position.
Board member Suni Kartha argued these provisions should be dealt with in the Board’s policies, rather than in a Guideline. Ms. Chow said deleting these two provisions from the Guidelines and moving forward with the remaining provisions in the Guideline might be a good compromise.