School District 65 is projecting it will finish fiscal year ending June 30, 2009 with an operating deficit of $2.9 million, rather than a budgeted surplus of $214,647, Kathy Zalewski, comptroller, told the Board’s Finance Committee on June 8. She explained that the District is projecting it would collect about $3.6 million less in revenues “as a direct result of a weak economy.” The District is projected to come in with expenses about $500,000 lower than budget.
The shortfall in revenues is mainly due to collecting about $1 million less in property taxes and $2.1 million less in categorical state aid, said Ms. Zalewski. She added that some of the state aid payments have been delayed due to the State’s financial condition; she expects about $1 million due this year to be paid in 2009-10.
“Every school district is in the same boat,” said Mary Brown, chief financial officer.
For 2009-10, Ms.Zalewski said the District is assuming that student enrollment will increase by 65 students and that the District will add 7.8 teaching positions. The District is tentatively projecting that operating revenues will increase from $87.8 million to $96 million, or an 8.1% increase, and that operating expenses will increase from $90.7 million to $95.7 million, or a 5.5% increase, leaving a surplus for the year of about $230,000.
Dr. Brown said the administration will present a tentative draft budget for 2009-10 to the Board in August which will include updated figures. She said they will try to pare down expenses in the interim.
In the next four years (2010-2014), the District is projecting deficits of $1.2 million, $4.7 million, $6.4 million, and $8.2 million, for a cumulative total for those years of about $20.5 million.
A substantial portion of the projected deficits is attributable to a low CPI in the amount of 0.1% for 2008, which limits the amount the District may increase property taxes in its 2009 tax levy to 0.1%. The low CPI has a carry over effect into subsequent years. Dr. Brown told the RoundTable the District is assuming the CPI will be 2.5% in 2009 and subsequent years.
Another factor is the District entered into a four year contract with the District Educators Council (the teachers union) last year, which the District estimated will increase teacher salaries at an average of about six percent a year. Employee salaries and benefits account for about 80 percent of the District’s expenses.
Board member Keith Terry said the Board needed to act prudently and should consider various scenarios to address the projected deficits. “I think we’re going to have to look at structural changes,” he said.
“We’re concerned about the magnitude of these [projected deficits] also,” said Superintendent Hardy Murphy. He added, “We’ve seen figures like these before and managed them.”
Dr. Murphy said the draft tentative budget for 2009-10 was balanced, that the projected deficit of $1.2 million for 2010-11 could be addressed, and the administration was already identifying some things that could be done to address projected deficits in the subsequent years. He said he wanted to act in a vigilant manner, but did not want to put plans out into the community on a premature basis. He suggested the Board put off discussions on how to address projected deficits until the Fall.
Finance Committee Chair Katie Bailey said the Finance Committee will begin to look at potential ways to address the projected deficits in September. The review is expected to start with a review of the District’s programs.
The District’s cash position is projected to be $17.7 million at June 30, 2009, or about 72 days of expenses.