On Aug. 16, the District 65 School Board approved a tentative budget for the fiscal year ending June 30, 2011. The tentative budget, as revised, pegs operating revenues at $100.6 million, up $5.5 million, or 5.8%, over last year. Operating expenses are pegged at $98.5 million, up $3.5 million, or 3.7%, over last year. The tentative budget projects a surplus of about $2.1 million.

At the Board’s Finance Committee meeting on Aug. 12, Superintendent Hardy Murphy said the District had hired back about one-half of the 29 non-tenured teachers who were given Reduction in Force (RIF) notices in March in anticipation of substantial cuts in state funding. Jean Luft, president of the District Educators Council, said she was working with about five of the teachers who were still seeking jobs.

While there is still uncertainty surrounding the amount of state funding the District will receive next year, the shortfall in State funding is substantially less than originally anticipated. And while there is a substantial surplus budgeted for the year, the Board was inclined to build up the District’s cash reserves in light of projected deficits in the next five years.

Operating Revenues

The District is projecting that property tax revenues for operations will be $76.5 million, up $3.5 million, or 4.8% 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 new property located in the Downtown Tax Increment Financing District, which has expired, said Kathy Zalewski, comptroller for the District.

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.

The amount of state funding that the District will receive this school year has been in flux due to the State’s budget crisis. In early June the District was budgeting it would receive about $7.5 million in state funds; on Aug. 11, the District revised that number upward to about $10.5 million.

The latest figure assumes the District will receive two and one-half of the categorical state aid payments that were due last year in this fiscal year, and that it will receive only one of the four categorical payments that are due this year in this year.

The District is also projecting less revenues from the corporate personal property replacement tax ($262,000), other local revenues ($253,000) – mainly due to the expiration of the agreement between the City and the school districts to share TIF revenues, said Ms. Zalewski.

Operating Expenses

Even after cuts of $4.1 million in expenses, the tentative budget projects that operating expenses will increase by $3.5 million in the 2010-11 school year, according to a schedule prepared by Ms. Zalewski. The District is proposing cuts of about $1.7 million in instructional programs, $1.2 million in administrative functions, and $1.2 million in other areas.

Almost $2.2 million is due to cuts in personnel or not filling vacant positions. Expenses for salaries and benefits make up 80% 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 ($1,075,000), school staff ($150,000), administrative positions that will not be filled ($414,000), program support staff ($252,000), custodial positions that will not be filled ($90,000), 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.

While the number of staff is decreasing, the projected number of students is projected to increase by 126 students.

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 finished its last fiscal year ending June 30, 2010 with an operating surplus of $77,689. Assuming the District finishes this year with an operating surplus of $2.2 million, the District will have an ending cash balance in all operating funds (including the working cash fund) in the amount of about $21 million. The cash reserves are equivalent to about 78 days of operating expenses.

Projections

Assuming that state funding is restored to past levels for 2011-12 and in subsequent years, that the $4.1 million in budget reductions are carried forward to subsequent years, and that the CPI is 2.5 percent for the next three years, the District is projected to have a surplus of $2.7 million in 2011-12 and then deficits of $2.0 million, $2.7 million and $4.3 million in the following three years. The cumulative deficit for this and the next four years is projected at about $4.1 million.