School District 65 administrators presented a draft tentative budget for the fiscal year ending June 30, 2011 at the Board’s Finance Committee on June 7. The tentative budget pegs operating revenues at $96.8 million, up $2.5 million, or 2.7% over the projected actual operating revenues for the current fiscal year ending June 30. Operating expenses are pegged at $95.4 million, up $1.1 million, or 1% over the current year. The tentative budget projects a surplus of about $1.4 million. 

There is still uncertainty surrounding the amount of state funding the District will receive next year, and revenue projections will be revised when the final state numbers are available and other numbers firmed up, said Ms. Zalewski. She said the draft tentative budget builds in spending cuts of $5.6 million.

Operating Revenues

The District is projecting that property tax revenues will be $76.6 million, up $3.8 million, or 5% over last year. The lion’s share of the increase is due to $3.3 million in property tax revenues from new property, most of which is attributable to property located in the Downtown Tax Increment Financing District, which has expired, said Ms. Zalewski.

The District is also projecting that revenues from federal funds will increase next year by about $1.6 million due to the District’s allocation of funds under the American Recovery Reinvestment Act.

On the negative side, the budget assumes the District will receive about $2.3 million less in state funds than last year, but there is still uncertainty over the amounts that will be paid. The budget assumes that general state aid, with the exception of the poverty grant, will be eliminated next year. If the state makes full general state aid payments next year, Ms. Zalewski estimates the District will receive an additional $1.5 million, which will increase the projected surplus for next year to $3.9 million.

The District is budgeting to receive four “categorical” payments from the state next year in the total amount of $6.1 million, a reduction of about 15% from last year. The state is behind in making two “categorical” payments that were due in the current fiscal year ending on June 30, and the District is not budgeting to receive them next year because “the State is not sure if the late payments from FY10 will ever be paid,” said Ms. Zalewski. The State has historically been behind in making categorical payments, and in healthier economic times the District has simply budgeted to receive them in its next fiscal year.

The District is also projecting less revenues from the corporate personal property replacement tax ($225,000), the expiration of the agreement between the City and the school districts to share TIF revenues (about $500,000), as well as other reductions.

Operating Expenses

The budget builds in cuts of $5.6 million in expenses, said Ms. Zalewski. The District is proposing cuts of about $2.45 million in instructional programs, $1.45 million in administrative functions, and $1.7 million in other areas.

Almost $3 million is due to cuts in personnel or not filling vacant positions. Expenses for salaries and benefits make up 81% of the District’s operating expenses.

The total number of staff reductions has not been announced, but a summary list of proposed budget reductions reflects savings as a result of reducing instructional staff ($1,420,000), school staff ($550,000), administrative positions that will not be filled ($414,000), program support staff ($252,000), custodial positions that will not be filled ($120,000), and substitutes for professional development ($175,000).

The District also anticipates savings of $488,630 as a result of 12 teachers retiring and being replaced by new teachers at lower salaries.

Additional cuts are being made in expenses for consultants, transportation, summer curriculum, utilities, special education supplies, and other items.

Cash Position

Ms. Zalewski said the District is projected to finish this fiscal year ending June 30 with an operating surplus of $54,000, and an ending cash balance in all operating funds (including the working cash fund) in the amount of about $19 million. The cash reserves are equivalent to about 72 days of operating expenses.

 Projections

Ms. Zalewski said under the draft tentative budget, the District would have a surplus of $1.4 million for the 2010-11 school year. And, assuming that state funding is restored to past levels for 2011-12 and in subsequent years and also assuming that the $5.6 million in budget reductions are carried forward to subsequent years, the District is projected to have a surplus of $3.6 million in 2011-12 and then deficits of $2.6 million, $3 million and $4.7 million in the following three years. Over the five-year span, the District is projected to have a cumulative net deficit of about $5.3 million.

If State funding is not restored to past levels, the financial projections “will look drastically worse,” said Ms. Zalewski in a May 5 memo to the Finance Committee.