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School District 65 is projecting a slight surplus for its fiscal year ending June 30, 2010, and then deficits of $1.7 million, $3.7 million, $5.4 million and $7.2 million over the next four years, or a cumulative total of about $18 million over the five-year period. The projections were prepared in collaboration with the District’s business office and PMA, the District’s financial advisers, said Kathy Zalewski, comptroller for the District.
Last September the District was projecting a cumulative deficit of $3.6 million over the same five-year period, or about $14.4 million less than its current projections. There are three key reasons for the difference:
· First, the consumer price index, CPI, for 2008 has been determined to be 0.1 percent, rather than 2.5 percent, as previously assumed. With certain exceptions, the District may increase property taxes, which account for almost 80 percent of the District’s revenues, by the lesser of the CPI or 5 percent. The low CPI for 2008 will limit the amount of property taxes the District may levy in December 2008, and it will have a carry-over impact on subsequent years. Property tax revenues are projected to be about $6 million less over the five-year period than projected in September.
· Second, the School Board entered into a four-year collective bargaining agreement with the District Educators Council, the teachers union, last November which provides for salary increases higher than assumed in the September projections. The District is projecting that the cost of salaries – for all employees, including teachers – will be about $4.2 million higher over the five-year period than the earlier projections.
· Third, the District is projecting that employee benefits will be about $6.2 million higher over the five-year period than the earlier projections.
Superintendent Hardy Murphy said the projected deficits up through fiscal year ending June 30, 2010 were manageable, but when the projected deficits hit $3.7 million and more a year, it presents a different problem. He said decisions to address the projected deficits will be made based on instructional priorities. “We want to keep adjustments as far away from the classroom as possible,” he said.
The current projections assume that the CPI will be 2.5 percent for 2009-11, which impacts property tax revenues for fiscal years ending 2012-14. Board members Mary Rita Luecke and Keith Terry said they thought that assumption may be high, which would have the effect of overestimating property tax revenues. Mr. Terry asked the administration to run projections based on different scenarios, including a lower CPI.
Dr. Murphy said the administration would present strategies to address the projected deficits during the budgeting process this spring.