School District 202 is projecting an $800,000 deficit for the 2011-12 school year and an additional $3 million deficit for the following year, according to a report presented to the School Board on Feb. 28 by Chief Financial Officer William Stafford.

“The school finance environment continues to deteriorate in spite of the State’s increase in the income tax. First, the Consumer Price Index (CPI) for 2010 was finalized at 1.5%. This determines the property tax increase . . . Second, State categorical revenues continue to be over seven months delayed which amounts to over $1.1 million in delayed revenues to the District,” stated Mr. Stafford’s report. Most of the State revenues are earmarked for special education expenses incurred by the District.

“Even with the passage of the increase of 2 percent in the state income tax there is still a $3 billion deficit in the state budget,” the report continued. “Further, unless the State borrows a significant amount of money, districts like Evanston can expect to receive only one more categorical payment this fiscal year. … This amounts to a loss of approximately $593,000 for this year and for FY 2012.”

Other financial problems for the District include deteriorating property tax collection rates due to foreclosures, total collections are being reduced by property tax appeals and elimination of certain state categorical funds.

Mr. Stafford said the District can not even make satisfactory interest on the money it does have, since rates are at the .1% – .3% level.

And finally, District expenses are increasing due to “labor costs associated with negotiated contracts. Those costs will continue to increase at a 4%+ rate for at least the next two years,” the report said. Health-care and IMRF retirment costs will also increase.

Mr. Stafford laid out some preliminary proposals about where projected budget cuts might be recommended: reducing administrative costs by merging the administration of the fine arts and career and technical education departments; increasing teacher duties to reduce the equivalent of approximately four support staff positions; reducing early retirement incentives as a result of prior changes in the teachers contract; “strongly” considering an early retirement program for IMRF non-certificated employees; reducing expenditures in supplies and consulting fees; decreasing special education personnel

Board members were quick to express their concern about a reduction in special education personnel.

Mary Wilkerson said, “Can we go a little further with this?” she asked. “I’m seeing some headlines here . . .we need to clarify this a little more.”

“I realize you don’t have specifics for us tonight,” said Mark Metz. He said the first five things on the list “don’t touch the classroom too much” but “how does [cutting special ed] fit in with our values-based budgeting?”

“What we are required by the state to provide to special education students we will provide,” said Assistant Superintendent Oscar Hawthorne. “There are minimums we need to abide by.”

“How far above what is required by law have we been providing?” asked Mr. Metz. “I want to be reassured that we’re keeping that value in mind.”

Mr. Stafford said part of the reason that special education had been put on the list was that “we are currently owed $1.1 million by the State. The vast percentage of that is for special ed.” Mr. Stafford estimated that between $1.5 and $2 million would need to be cut in order to balance the budget for the 2012-2013 school year.

Board and community budget hearings for the 2011-2012 school year will likely take place in June.