On Aug. 15, the Finance Committee of the District 65 School Board decided to recommend a tentative budget for its fiscal year ending June 30, 2012 (FY ’12) that pegs operating expenses at $104 million and total expenses (including capital expenditures) at $133.6 million.
On a big-picture basis, the operating budget has “a healthy surplus of about $900,000,” said Kathy Zalewski, comptroller for the District. She said some key assumptions are that the District’s student enrollment will increase by 101 students to 6,674 students (not including Park, Rice and pre-k students), and that the District will add 13 new teaching positions because of higher enrollment, and also add academic support staff and coaches.
Approving a tentative budget is the first step toward approving a final budget, which must be approved by the end of September. The Board is scheduled to consider the tentative budget on Aug. 22; a public hearing will be held on the budget on Sept. 26; and the Board is scheduled to approve a final budget that same night.
The Operating Budget
Operating revenues are projected at $104.9 million, up $2.8 million, or 2.7 percent over the prior year. Operating expenses are projected at $104 million, up $3.4 million or 3.4 percent over the prior year. The tentative budget shows a surplus of $903,049.
Revenues: On the revenue side, the District is projecting that the property tax revenues it collects for operations in FY ’12 will be $81.6 million, up $6.5 million, or 8.7 percent, over the prior year. Property taxes make up about 78 percent of the District’s operating expenses.
The District’s December 2010 levy for property taxes for operations was subject to a tax cap of 2.7 percent. Ms. Zalewski said the District anticipates it will collect more than that primarily because Cook County calculates the first and second property tax installments differently and the District collects the installments in different fiscal years. In addition, the District allocated to debt service a higher amount of the revenues collected in the Spring installment of 2011 taxes (which falls in FY ’11). This allowed a higher proportion of the fall installment (which falls in FY ’12) to be allocated to operations.
State and federal grants, which account for 16 percent of the District’s operating revenues, are expected to be about $17.9 million, about $3.8 million less than last year. About $2.2 million of the decrease is due to the expiration of federal funding under the American Reinvestment and Recovery Act and to a decrease in federal Title I funding, said Mr. Zalewski. She gave a more positive assessment on the District’s likelihood of collecting all “categorical” payments owed by the State, but the District is still budgeting in an anticipated delay in the receipt of those payments.
Expenses: On the expense side, salaries are pegged at $71.7 million, up 5.3 percent over last year. Employee benefits are projected to increase to $14.7 million, an 8.2 percent increase. The salaries reflect the increases provided for in the labor contracts that expire on June 30, 2012, and the cost of additional personnel, said Ms. Zalewski. Salaries and benefits, together, account for 82 percent of the District’s operating expenses.
Finance Committee Comments
In prior meetings, Finance Committee members had considered a draft of the tentative budget and planned how to approach projected deficits for FY’13 and ensuing years. They did not raise any macro questions on Aug. 15.
Board and Finance Committee member Richard Rykhus asked for a breakdown on the District’s technology expenses, adding that technology has changed dramatically in the last few years and the District should ensure that it is spending money wisely in this area. Superintendent Hardy Murphy said staff would provide that information.
Jerome Summers asked if the implementation of the inclusion initiative, which is designed to include more students with disabilities into the general classroom, has had an impact on expenses. Dr. Murphy said staff were beginning to analyze that issue and would provide an analysis to the Board.
A breakdown of expenses by program prepared by Ms. Zalewski showed that expenses budgeted for special education in FY’12 are $19.2 million, versus $19.5 million in FY’11. She added, though, that this may not be an “apples to apples” comparison.
Mr. Rykhus asked if the budget still included an amount for the salary for Paul Brinson, who retired late last month. Dr. Murphy said an amount equal to Mr. Brinson’s salary was not pulled out of the budget, and added that a consulting arrangement with Mr. Brinson may be in the offing.
FY’11 Surplus/Cash Balances
The District is reporting on an unaudited basis that it will finish last year, FY’11 ending June 30, 2011, with an operating surplus of about $1.5 million. Ms. Zalewski said the surplus is less than it might otherwise have been because the District, among other things, prepaid certain expenses in FY’11. While these steps had the effect of reducing the amount of the operating surplus for FY’11, they made it easier to balance the budget for FY’12.
The District’s cash balance, on an unaudited basis, at June 30, 2011 was $20.4 million, or about 72 days of operating expenses.
Projected Deficits/Citizens Budget Committee
Ms. Zalewski also presented revised projections, which show a deficit of $3.4 million for FY’13 (the year ending June 30, 2013), compared to a deficit of $5.2 million projected two months ago. The decrease is primarily due to reductions in projected expenses, which overall are projected to increase 0.9 percent over those budgeted for FY’12.
The main driver of the deficit projected for FY’13 is a projected drop in the amount of property tax revenues allocated to operations which are projected to decline by $4.2 million. This is due to in large part to the way in which the first and second installments of property tax installments are calculated, and which fall in separate fiscal years of the District.
The District is also projecting deficits of $3.9 million, $6.5 million and $8.8 million for FY’14 through FY’16, or a cumulative total of $19.2 million for those three years. This is about $4.9 million less than the cumulative total projected two months ago.
Citizens Task Force
The Finance Committee decided last month to form a Citizens’ Task Force to make recommendations about ways to address the projected deficits, and has set a timeline to address the projected deficits. If cuts are made for FY’13, the cuts will also reduce the deficits for ensuing years if they eliminate ongoing expenses.
The Citizens Task Force is scheduled to begin meeting on Sept. 6 and to present recommendations toward the end of this year.