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Tyler Thornton and Kevin Poff, students at the Kellogg School of Management, recently made a presentation to administrators and several members of the District 65 School Board in which they delved into two of the 30 strategies identified by the Citizens Ad Hoc Budget Committee to address the District’s potential deficits. Therese McGuire, their supervising professor at Kellogg, served as a member of the Citizens Budget Committee which issued its report in December 2011.

In their follow-up report, Ms. Thornton and Mr. Poff focused on the proposed strategies to consider consolidating School Districts 65 and 202, and developing new revenue streams. Ms. Thornton said their approach was to gather information from external sources that might help District 65 in analyzing a solution.

Potential Consolidation of Districts 65 and 202

Ms. Thornton said school districts pursue consolidation for two reasons: financial efficiency and improving academic achievement. In order to make sense, she said, a consolidation would need to be “be clearly in the best interests of students and schools,” and “result in long-term financial and/or academic benefits that are worth the effort and difficult transition period required.”

On the financial side, Ms. Thornton said a consolidation may reduce duplication of staff and provide economies of scale. One drawback, however, is a consolidation may restrict future property tax revenues because the rate is 3.5 for a dual district (e.g., a consolidated K-12 district) and 4.0 for a unit district (e.g., a stand-alone K-8 district).

In addition, on the expense side, she said, there may be the cost of bringing elementary school teachers up to the high school teacher pay scale. She said the average teacher base salary at District 65 is $69,747, while the average at Evanston Township High School is $94,159, a difference of $24,412. District 65 has 677.7 teachers; to bring them up to the average base salary of ETHS teachers would cost a little over $17 million per year.

When asked if there was any legal requirement that there be a consistent pay scale between two school districts that consolidate, Ms. Thornton said, she was not aware of any, but a consistent pay scale appeared to be the “reality.”

She said the State provides some payment incentives to offset the cost of bringing the teacher pay scales to the same level, but cautioned that those incentive payments only last for four years.

Generally, the financial efficiencies that larger school districts can realize through consolidation are not enough to compensate for the higher teacher salary costs they may incur, she said. “Given the size of District 65 and 202, it will therefore likely be difficult to make a compelling financial case for reorganization,” she said.

On the academic side, Ms. Thornton listed some advantages for consolidation. They include: there is a single point of accountability for K-12 outcomes; there is shared expectations and aligned performance metrics; there is a coordination of the curriculum and student assessments across the K-12 grade levels; and there’s flexibility of course offerings, particularly across middle and high school.

“There are lots of compelling reasons to believe that reorganization would have significant academic benefits,” said Ms. Thornton. “However,” she added, “the experts we spoke with stressed that the research is not conclusive when it comes to academic outcomes in unit vs. dual districts.”

She suggested this may be an area for additional research, but added, “Any academic benefits identified would also have to be large enough to justify the likely negative financial impact of reorganization.”

An alternative to consolidation, is “virtual consolidation,” said Ms. Thornton. She said many of the recommendations made by the Classrooms First Commission, headed up by Lieutenant Governor Sheila Simon, lean towards the idea of virtual consolidation.

“The basic idea is for districts to find high leverage ways to act like they are consolidated, without going through the legal and physical process of merging,” Ms. Thornton said. “If done correctly, this means districts can realize the financial and/or academic benefits of consolidation without the big downside, such as upfront consolidation costs and salary alignment.”

Ms. Thornton said Districts 65 and 202 already coordinate and collaborate in some areas such as ETHS provides lunches to some District 65 schools, they share the legal expense in challenging property tax appeals, they have a joint legislative task force, they work with the City in working out TIF sharing agreements, and they cooperate in managing Park School.

Some other areas that may be worth exploring, she said, are sharing a superintendent or central office personnel, recruiting teachers, negotiating health insurance, developing curriculum and assessment, and providing professional development.

Ms. Thornton pointed to Lake Forest School Districts 67 and 115 as an example where two districts entered into an intergovernmental agreement to strengthen coordination of the K-12 educational programs and improving operational effectiveness. She said they save about $1.2 million per year by sharing personnel.

To make “virtual consolidation” work requires a “champion” in both districts and commitment from both school boards and administrations, she said.

New Revenue Streams

Mr. Poff discussed three potential new revenue streams for District 65: installing or leasing space for cell phone towers – with a revenue opportunity of $50,000 to $200,000, installing wind turbines and/or solar panels – with a potential to reduce energy bills or generate revenues of more than $50,000, and advertising sponsorships using website banner ads or ads or coupons in take-home magazines – a revenue opportunity of about $100,000 annually.