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On June 11, the Finance Committee of the District 65 School Board reviewed a draft tentative budget for its fiscal year ending June 30, 2013 (FY ’13) that pegs operating expenses at $100.7 million.
On a big-picture basis, the operating budget has a surplus of $1.1 million, said Kathy Zalewski, comptroller for the District. She said some key assumptions are that the District’s student enrollment will increase by 120 students to 6,929 students (not including Park and Rice schools or pre-K students), and that the budget-reduction strategies recommended by the administration will be approved by the Board.
One major unknown is the salary expense. The teachers’ contract expires this coming August, and no new contract has been negotiated. On May 24, the District Educators Council (DEC, the teachers union) issued a statement saying that, while it hopes it will reach an amicable collective bargaining agreement with the School Board, DEC’s leadership has been authorized to take steps necessary for a potential strike.
Another significant issue is whether the legislature will shift a part of teacher-pension costs to school districts throughout the state. District administrators said legislators are discussing a proposal that school districts pay one percent of teacher salaries toward their pension costs this year, with the percentage going up in subsequent years. One percent of teacher salaries amounts to about $500,000 said Mary Brown, chief financial officer.
The Board is scheduled to approve a tentative budget on Aug. 20, a public hearing will be held on the budget on Sept. 24, and the Board is scheduled to approve a final budget that same night.
The Operating Budget
Operating revenues are projected at $101.8 million, down $3.5 million, or 3.3 percent from the prior year. Operating expenses are projected at $100.7 million, down $4.2 million or 4 percent from the prior year. The tentative budget shows an operating surplus of $1.1 million.
Revenues: On the revenue side, the District is projecting that the property tax revenues it collects for operations in FY ’13 will be $77.7 million, down $4.4 million, or 5.4 percent, from the prior year. Property taxes make up about 76 percent of the District’s operating expenses.
The decline in property tax revenues in FY ’13 is attributable in large part to two factors: 1) the method used by the Cook County Collector to calculate the first and second installments of property taxes, which the District collects in different fiscal years, and 2) a low property tax cap of 1.5 percent applicable to the District’s December 2011 tax levy.
State and federal grants, which account for 18 percent of the District’s operating revenues, are expected to be about $18.4 million, about $310,000 more than last year. Local revenues are expected to be $525,000 more than last year , primarily due to a TIF payment from the City in the amount of $288,000 and the first installment ($100,000) of a new five-year Child and Parent Center grant.
Expenses: On the expense side, salaries are pegged at $70.4 million, down 2 percent from last year. Employee benefits are projected to increase to $15.9 million, a 5 percent increase. Because labor contracts are still being negotiated, the cost of salaries at this stage is still an estimate. Salaries and benefits, together, account for 85 percent of the District’s operating expenses.
Budget Reduction Strategies and New Policies
Last fall, District administrators were projecting that the District would operate at a deficit of $3.3 million. The tentative budget proposes to eliminate the deficit and generate a surplus of $1.1 million, by reducing operating expenses by about $4.4 million.
To achieve these savings, administrators have proposed reducing 36.5 staff positions (including administrators, teachers, teacher aides, instructional coaches, custodians and other staff). The District has also offered early retirement incentives to teachers and staff and is replacing them at lower salary levels. Fifty-one persons have taken advantage of the incentives and decided to retire, said Dr. Brown in a memo to Board.
The District is also projecting to reduce non-personnel expenditures by a total of $1.5 million in 2012-13. Some of the major reductions in this category are supplies, equipment and services for buildings and grounds ($590,000), in-service training and mentoring ($125,000), and consultants ($116,250).
Dr. Murphy said these strategies “avoided creating a sense of uncertainty and turmoil in our District.” He said, “There’s not an increase in class sizes” due to these strategies; “To date, we’ve pretty much placed everyone who had a job last year, this year;” and “We’ve figured out ways to do the programs in such a way that will enable us to provide high quality education.”
The deficit reducing strategies have been discussed at many Board and Committee meetings since February. The main areas of concern have centered on the reduction of 3.5 fine-arts teachers and six aides who support the Two-Way Immersion program. On June 18 the Board decided to add back one fine-arts teacher.
Superintendent Hardy Murphy said expenses will increase due to the Board’s decision to add back one fine-arts teacher and because three additional teachers may be needed to reduce class sizes at Lincolnwood, Willard and Walker.
The District is reporting on an unaudited basis that it will finish the year ending June 30, 2012, with an operating surplus of about $371,128. The District’s cash balance, on an unaudited basis, at June 30, 2012 is projected to be $20.8 million, or about 72 days of operating expenses.
Ms. Zalewski also presented revised projections, which show an operating surplus of $1.5 million in 2013-14, $493,305 in 2014-15, and then deficits of $2.1 million for 2015-16 and $3.2 million for 2016-17.