On Feb. 21, District 65 School Board members reviewed financial projections dated Feb. 10, 2012, that show a very different picture from those prepared five months ago on Sept. 14, 2011.

Five months ago the District was projecting deficits for the next four years of $3.3 million, $4.1 million, $6.4 million, and $8.7 million, respectively.

Now, the District is projecting surpluses for the next three years of $329,000, $1.1 million, and $34,000, respectively, and then deficits for the following two years of $2.7 million and $3.9 million. The chart below compares the projections.

District 65 administrators initially presented the Feb. 10 projections to the Board at a Finance Committee meeting on Feb. 13. On Feb. 21, administrators followed up their initial presentation with a written summary listing 46 positions that would be eliminated and generally describing staffing efficiencies that administrators are relying on to achieve a reduction of approximately $2.9 million in salary expenses next year.

Several Board members expressed concerns about the potential impact of the proposed cuts, which include cuts of teaching assistants and instructional coaches, reduced funding for professional development and the extended day program, and savings due to replacing teachers with less experienced teachers. The Board has not agreed on any cuts.

After the cuts in 2012-13, administrators are not proposing any cuts in teachers or teacher assistants in subsequent years.

In a Feb. 15 letter to District 65 parents, Superintendent Hardy Murphy provided information concerning the March 20 referendum in which voters will be asked to approve funding for a new school and upgrades to the middle schools totaling $48.2 million. The letter reported “good news” that the District was projecting a balanced budget for the next three years.

Because the cuts have not yet been approved by the Board, one Board member thought it was premature to make that announcement to the community.

The latest projections do not take into account the cost to operate the proposed new school that is the subject of the March 20 referendum. A middle-of-the-road estimate of the cost to operate that school, including certain educational enhancements, is about $1.5 million annually. If the new school is approved in the referendum, the earliest it could be opened is the 2013-14 school year. (See sidebar.)



Property Tax Revenues

The main change in the amount of revenues projected on Sept. 14 and on Feb. 10 is due to a higher CPI for 2011. (This information became available in January.)

Under state property tax caps, school districts may increase property taxes by the increase in the Consumer Price Index (CPI) or 5%, whichever is less. For purposes of projecting property tax revenues, the District assumes the CPI will be 2.5%.

The CPI for 2011 was 3 percent, or 0.5% higher than the amount assumed when property tax revenues were projected in September. This 0.5% increases projected property tax revenues by about $600,000 for 2013-14 and each subsequent year.

The CPI for 2012 and beyond is not known. If it is higher than 2.5%, it will increase property tax revenues and reduce the projected deficits. Conversely, if it is lower, projected deficits will increase.

Salary Expenses

The salary expenses projected on Feb. 10 for the school year 2012-13 are $3 million lower than projected on Sept. 14, 2011. They are $3.5 million lower for 2013-14, $3.9 million lower for 2013-14, and $4.3 million lower for 2014-15.

One key element of salary expense is the salary rate structure for teachers (e.g., base salary, step increases, and track movements). For future years, this is unknown because the teachers’ contract expires in August. Both sets of projections assume that the salary rate structure will increase approximately 3.7% per year. A swing either way will impact the projections. Kathy Zalewski, comptroller, said the projections will be revised when a new contract is finalized.

The $3 million reduction in salary expense for 2012-13 is due in part to a high number of teachers – 28 so far – electing to take early retirement, said Dr. Murphy. The Sept. 14 projections assumed there would be 11. The early retirements enable the District to replace senior teachers with less experienced teachers at lower salary levels. The benefit in the first year of retirement is offset in part by a required payment to the State. The full benefit of these teachers taking early retirement will be felt in the 2015-16 school year said Ms. Zalewski.

The vast majority of the reduction in salary expense for the 2012-13 school year is due to eliminating 46 positions and to “staff efficiencies,” which in 2012-13 are estimated at $2,859,901. The Board’s discussion focused mainly on a reduction of 10 one-to-one aides for special education students; a reduction of 6 aids for the Two-Way Immersion (TWI) Program; 7.5 instructional coaches; and 1 speech therapist and 1 psychologist. A concern was also expressed about the staffing level for the co-teaching model used for the Inclusion Program.

One-to-one aides: The budget proposes to cut 10 one-to-one aides who are currently assigned to 10 students who have intensive needs.

Dr. Murphy explained that the 10 students are leaving the District and the aides will thus not be needed for these students. He added, “If a child has an IEP [Individual Education Program] that requires a one-to-one aide, that child will have a one-to-one aide.”

Board member Eileen Budde asked, “How do you know there will be sufficient aides to meet the needs of the IEPs that will be written in May? How can we predict that now?” Dr. Murphy said, “We can’t. We never can. That’s why we essentially have to make adjustments as we go forward. The fact of the matter is we could be less.”

Dr. Murphy defended the reduction, saying that having 10 one-to-one aides for an eighth-grade class seemed to be “an anomaly.” He subsequently told the RoundTable that 7 of the aides were assigned to eighth-graders and 3 were assigned to other students leaving the District. 

TWI Aides: The budget proposes to eliminate 6 TWI aides. Tracy Quattrocki said, “Some of our Latino students are among those who struggle the most.” She asked, “What’s the thinking behind cutting half the TWI aides?”

Assistant Superintendent Mike Robey said the TWI aides have been used most effectively in providing reading support. “We’re going to focus their efforts on reading supports as opposed to other duties that they’ve been performing.”

Ellen Fogelberg, director of literacy, said the District is also using bilingual specialists who are concentrating their efforts in the earlier grades. “It’s re-looking at those positions and trying to determine what’s the best use of their time,” she said.

Ms. Quattrocki responded that the time TWI aides would spend in the classroom would go from a full day to one-half a day for kindergartners, and from one-half a day to one-third of a day for first- and second-graders. “We’ll be cutting our supports to those students,” she said.

Mr. Rykhus said he shared Ms. Quattrocki’s concern. He said the restructuring could make sense, but added, “This does raise a red flag for me and so I’ll be very interested to see how this evolves and if this is a cut we choose to make or not.”

Instructional Coaches: Kim Weaver asked about the 7.5 instructional coaches who observe teachers in the classroom and coach on best practices. “I think that program has been successful,” she said.

Dr. Murphy said the positions would be eliminated, and the coaching would be done by teachers at the schools in addition to their current duties. He said, “I would like to see a more distributive leadership model at the buildings,” where the schools across the District “become hotbeds of creativity in addressing the instructional challenges in creative ways.”

Assistant Superintendent Susan Schultz said the coaching could be provided after school or during periods when substitutes taught the classes of the teacher/coaches.

Other Reductions: The projections also build in plans not to replace one speech therapist, one psychologist and two teachers. They build in a reduction in funds of $50,000 for substitute teachers, $100,000 in stipends for providing extended-day services, and an additional $29,000 in stipends.

The projections also build in savings of $423,750 by hiring less expensive replacements for teachers and staff that are leaving the District. Ms. Zalewski told the RoundTable this would represent a change in the District’s hiring policy.

The projections also build in a reduction in 8.5 administrative or custodial positions.

Inclusion Co-teaching model: Ms. Budde raised a concern about the staffing levels to provide co-teaching effectively under the Inclusion Program, which seeks to include more students with a disability into the general education classroom. The program was implemented at the kindergarten level in the 2009-10 school year, and has been expanded to include one additional grade level each year. One method of meeting the needs of students in the inclusion classrooms is to use co-teaching (i.e., a general education and a special education teacher in the same classroom).

Ms. Budde said she had heard that in the first year (when the program was established at the kindergarten level), a co-teacher was assigned full time to an inclusion classroom. As the program expanded to the first and then to the second-grade levels, co-teachers were required to split their time between two and then three times as many classrooms. She asked, “Do we just keep on continuing with that pattern so it’s down to a fifth of a co-teacher in the fifth year?”

Dr. Murphy said there was a misunderstanding about the model. “The idea was never to replicate the same number of teachers as students move through the District,” he said. “The idea was to build capacity within the classrooms in the District and use staff in a very flexible and fluid way – or what you’re going to end up with is a system that’s going to crater under its weight of supports. There’s no way that a district budget can bear replicating the kindergarten, first and second grade model all the way up to eighth grade.

“The idea is that where students are able to, we want them to live as close to a normal life as possible. So at some point – where students are able – you have to have resources withdrawn from them, and they learn how to navigate their classrooms, the school at large and the broader social environment. For some of those students you have to have that close one-to-one support. But the goal is to be able to withdraw that support so they can live as close to a normal life as possible. The art of the deal is making sure you make the right decisions for an individual student. That’s what the IEP process is about.”

Mr. Rykhus said one of the top concerns expressed by teachers in the stakeholders’ survey “was making sure we have enough resources related to special education and inclusion.” He added that the strategic plan for inclusion says the District will increase co-teaching.

“The trend we have seen is not increasing [co-teaching] in terms of the intensity and it’s not maintaining,” he said. “It’s an issue that teachers have raised as a concern to make sure that not only the kids who have special needs, but the general education students in those classrooms be positively impacted by the co-teaching model that we choose to implement.”

“There are two related things,” said Ms. Budde. “Some of us are concerned about the aides. I’m also concerned that we haven’t yet sufficiently staffed inclusion as it’s grown through the years.”

Andy Pigozzi said this issue would probably have to be resolved at a subsequent meeting. “We’re not going to resolve all this tonight,” he said.

If additional teachers are added to staff the co-teaching model, it would impact the projections.

Non-Personnel Expenses

The District is also projecting to reduce non-personnel expenditures by a total of $1.5 million in 2012-13, $2.4 million in 2013-14, $3.2 million in 2014-15, $1.7 million in 2015-16, and $1.8 million in 2016-17, said Ms. Zalewski.

Most of the non-personnel expenses are in the categories of purchased services and supplies.

The administration did not provide a breakdown of the proposed cuts. Ms. Zalewski said the cuts in purchased services “include in-service, consultants, professional development, purchased services for buildings and grounds, legal services, and temporary help.

The cuts for supplies include “software, office supplies, and meeting supplies,” she said.



The Relevance to the Referendum

Board members had a wide-ranging discussion about the timing and the credibility of the projections, and their connection to the March 20 referendum.

Ms. Quattrocki said, “We’re asking the citizens of Evanston to make a decision in a month and a half, and that decision is based in part on how our operating budget looks. We just took a $4.4 million swing from $3.2 million in the hole to a $1.2 million surplus. That change in our financial outlook is based on assumptions. And those are assumptions that the Board has not agreed upon. … I think it might be premature to say ‘Hey, we’re in great financial shape, therefore we’re not going to have to go for an operating referendum.’

“I understand the desire to put good news out there but I think that was a premature signal to the community because we haven’t discussed this budget. We haven’t discussed the hard choices that are being made. … We’re losing some teachers, we’re losing some supports and we need to make sure we’re comfortable with those decisions before we declare that we’re in great financial shape.”

Dr. Murphy said, “No one declared that.” Referring to his Feb. 15 letter to the District 65 community, he said “good news” is different from good financial shape. “The good news is we’re not eviscerating the District’s instructional program.”

Dr. Murphy added, “We were charged with going back and trying to work out a solution [to the projected deficits], and we have. Now, if you don’t believe that’s the solution, what I can say to you is we can show that it is as we go through the budget building process.”

Ms. Quattrocki responded, “There are two things different this year than in prior years. The first one is there’s a lot more resting on the budget this year because we’re talking about building a new school, and we either will or will not have the funds to operate that school. It’s in large part based on how our finances look for the next five years.”

Dr. Murphy said, “That’s true.”

Second, Ms. Quattrocki continued, there was a “big shift” in the projected deficits after administrators said in September that the deficits were real and “we’ve cut as much of the purchased services as we can, there’s nothing more to cut.”

 Dr. Murphy said he felt the reaction was that the District would not be able to provide the same quality of services if staffing was reduced in the way proposed.

“At the end of the day what you guys are really after is outcomes,” he said. The Board should be happy if the administration can deliver the same outcomes in a different, less expensive way, he added. 

Ms. Quattrocki said, “I agree it’s about outcomes, but it’s also about what we’re requiring teachers to do and how much support we’re giving the teachers. And I do think that even if we get the same outcomes we would in fact be overtaxing some of our teachers by demanding too much of them in instructing kids who are needy without providing them the supports they need, and that’s my concern.”

Dr. Murphy said, “That’s fair.”

Kim Weaver said, “Our administration, year after year, delivered exceptional education and balanced a budget. I don’t want to think right now that they’re not doing that. It’s not like one person went in a room and designed a budget. Our entire administrative team got together, talked about delivering services differently and then saw where they can save money. That is what we asked them to do.”

Jerome Summers said, “Over the years I’ve been on the Board – seven years now – every single year there’s been a challenge with the budget and every year, he [Dr. Murphy] has come back with a balanced budget. The administration has a propensity to want to save money and figure ways to do that. I tend, because of the history, to want to give them the benefit of the doubt.”

  1.  Ms. Budde reminded everyone the projections do not include the cost to operate the new school. “These projections don’t include any potential new school operating expenses,” she said. “My sense is that we’re doing a good job in running very lean by making a lot of these cuts, but that’s going to present a challenge in 2014 – I think that would be the year the new school may come on line – I just want to keep that in mind.”                                                                        

Ms. Budde also said that Illinois legislators have been talking about shifting a part of the teachers’ pension cost currently borne by the State to the school districts. In a similar vein, Governor Pat Quinn proposed on Feb. 22 to cut $92 million in state funding to pay health insurance benefits for retired teachers.

At this time it is unclear if these proposals will be approved by the legislature or how they might impact school district operations.

In December 2011 the District 65 School Board considered whether to place an “operating referendum” on the March 20 ballot – a referendum that would ask the community to approve an increase in property taxes above the amount permitted under state tax caps. At that time the Board was working with the projections prepared on Sept. 14, 2011. The Board decided to defer an operating referendum.

The projections issued by District 65 administrators on Feb. 10, 2012, provide a much rosier picture than those prepared five months ago. The District is projecting surpluses for the next three years of $329,000, $1.1 million and $34,000, respectively, and then deficits for the following two years of $2.7 million and $3.9 million. The accompanying article summarizes the key assumptions made in preparing the projections.

At this point, it is unclear how the budgetary issues will play out. There are many unknowns, including what the salary increases will be under the new teachers’ contract, what the Consumer Price Index (which limits the increase in property tax revenues) will be in this and subsequent years, whether the Board will approve the staffing reductions proposed in the Feb. 10, 2012, projections, whether the Board will ask for additional teachers to provide co-teaching in inclusion classrooms, and whether the community will approve the new school in the March 20 referendum. The projections do not include the cost to operate the new school, which may be about $1.5 million per year.

Dr. Murphy told the RoundTable he was optimistic the District will be able to balance the operating budget for the next two to three years without a net reduction in the number of teachers. He said he was cautiously optimistic that the District can manage the projected deficits after that without a noticeable change in the District’s education model.

When asked if there was a possibility that the District would need to place an operating referendum on the ballot in the next three, four or five years, Dr. Murphy said, “I can’t say that we will need to have an operational referendum. A lot of that depends upon what happens in your economic environment and also what happens with your pay scale, what happens with your negotiations. If we come out with reasonable negotiated agreements this time, and we get a contract for two or three years, that gives us a chance of managing all of this as we go out.

“It’s always a possibility the District may come back with an operating referendum. It’s always a possibility … that’s not planned.”

We think the District may avoid an operating referendum if a number of things come together: first, if the teachers agree to a contract that provides for a salary rate increase below the 3.7% increase assumed in making the Feb. 10 projections; and second, if the CPI is higher for 2012 and subsequent years than the 2.5% assumed in the projections. If these occur, then the District’s financial position would turn out to be better than projected. Depending on how much of a favorable variance there is between the assumptions and the actual, and depending on how other budgetary issues play out, an operating referendum might be unnecessary.

If, however, the salary rate increase and the CPIs come in close to the amounts assumed in the Feb. 10 projections, then, we think, an operating referendum will be necessary at some point down the road to maintain the quality of the current educational program and to operate the new school.

We assume that administrators have proposed cutting non-personnel expenses as much as possible in making the Feb. 10 projections. In addition, the projections propose cuts that reduce the number of teacher assistants by 16, the number of coaches by 7.5, and the number of teachers by 2; they propose reducing funds available for professional development; they propose a new policy of replacing not only retiring teachers, but all exiting teachers, with less experienced teachers to reduce the cost of salaries. Even with these and other cuts, the District is projecting deficits of $2.7 million in the 2015-16 school year and $3.9 million in the 2016-17 school year.

These projected deficits do not take into account any additional teachers to staff the co-teaching model as it expands to upper grade levels or to staff the proposed new school.

Thus, we think if the salary rate increase and the CPI come in as assumed in the projections, the District will be required either to make substantial reductions that impact the classroom or to ask the voters to approve an operating referendum to maintain the level of instruction and support that we currently have. We think this will be required with or without the new school.

Given these choices, we would opt for and support an operating referendum. Other school districts in the State are taking this approach.

In a Feb. 14 editorial, the RoundTable supported the District’s “capital referendum” on the March 20 ballot. We continue to do so.

The Incremental Cost to Operate the Proposed New School

District 65 administrators have estimated the “”incremental cost”” to operate the proposed new school using three different models. The “”incremental cost”” is the additional amount it will cost the District to educate students at the new school, rather than to educate them at existing schools. A key issue is how many teachers can be shifted from existing schools to the new school.

Under a “”best case”” scenario, the District projects the net incremental operating cost would be $684,000 per year. Using more conservative assumptions the incremental cost would be $1 million. Under a “”fail safe”” model, the incremental cost would be $2 million.

These estimates do not include any program enhancements discussed by the New School Academic Committee, such as the cost to provide an extended day, an extended year, and a “”community school”” model. The estimated cost of these programmatic enhancements is $460,000 annually, which might be reduced if the cost is shared by community partners.

A middle-of-the-road estimate of the cost to operate the new school, with program enhancements, is approximately $1.5 million.