Despite revenues and expenditures being on target for this fiscal year and a somewhat more generous Consumer Price Index (CPI) for the 2010 tax levy, District 202 will need to make budget reductions for the 2011 fiscal year, according to a report presented to the School Board on Jan. 26.

Revenues

“There are several concerns related to District revenues,” reported Chief Financial Officer William Stafford. Revenues have decreased for several reasons, Mr. Stafford said, such as a drop in property tax collection rates because of foreclosures and the general economy; an increase in property tax appeals; and the elimination or reduction of categorical revenues such as textbook funds, Perkins grants and bilingual funding. In addition, interest income is low, as current rates are less than 1 percent.

One positive note is that the CPI for the 2010 levy is 2.7 percent, “which is better than this year’s 0.1 percent, but it is still a modest increase,” said Mr. Stafford.

On the other side of the equation, “expenditures continue to increase, based mainly on labor agreements that are in place,” Mr. Stafford continued.

He said that this year, nearly 20 teachers and administrators are scheduled to retire, providing the opportunity to reduce staff at least partly through attrition rather than a reduction in force.

Mr. Stafford told the RoundTable later that lower projected student enrollments would lessen some of the impact of the possible loss of teaching positions from budget cuts.

Plan A and Plan B

“We are developing a plan A and a plan B … for budget reductions” for the 2011 fiscal year, Mr. Stafford told the Board. “Plan A is out of our current revenues and expenditures. … We’re vetting that process now. … We’re working with PMA” (the District’s financial consultants).

In addition, if there are further reductions in state grants, “we want the board in a position [to have] alternatives [so that] we’re not between a rock and a hard place,” Mr. Stafford said, referring to a plan B budget.

“I think it’s very important for us to see alternative scenarios – worse and worser,” said Board member Gretchen Livingston, “because I’m not sure there’s anything bright on the horizon.”

Spending Reserves?

Board Vice-President Jane Colleton asked, “How low can we go with the working cash fund? I know that when we’re put to the test, there are a lot of people who will say ‘spend that money, the time is now.’”

“We could go as low as 33 percent [in reserves] without having to borrow,” responded Mr. Stafford. But he cautioned, “You don’t want to get yourself into a position that affects your bond rating.”

Superintendent Eric Witherspoon added another concern about spending cash reserves in a continuing poor economy.

“There might be times when you’re in a financial tough spot and you decide to spend down the reserves a little bit to make ends meet, but remember, that means we’re in a deficit budget. That can work if you have one year where something occurred, where you just had to put something together. But unless we’re optimistic that this economy is going to improve in one year and the State of Illinois situation is going to be fine in one year, to dip into those reserves would be very short-sighted.”

Next Steps

Mr. Stafford said that necessary budget cuts will be identified over the next month or so and “as the administration continues to refine its class schedules and financial outlook, we will continue to keep the Board updated.”