By Larry Gavin
On Aug. 13, the Finance Committee of the District 65 School Board decided unanimously to recommend a tentative budget for the District’s fiscal year ending June 30, 2013 (FY ’13). All three members of the Committee, Andy Pigozzi, Richard Rykhus and Kim Weaver voted for the recommendation.
On a big picture basis, operating revenues are projected at $102.4 million, down 4% from the prior year. Operating expenses are pegged at $101.4 million, down 5% from the prior year. The budget projects an operating surplus of $941,983, said Kathy Zalewski, comptroller for the District.
The tentative budget benefits from the prepayment of expenses in FY ’12 that are attributable to FY ’13. Ms. Zalewski said the District prepaid workers compensation and property liability insurance premiums and one month’s health insurance premium, totaling about $1.75 million. This has the effect of increasing expenses by $1.75 million in FY ’12 and reducing them by that amount in FY ’13, which skews year-to-year comparisons.
The tentative budget incorporates deficit reduction strategies discussed by the Finance Committee and School Board many times since February. District administrators say the strategies reduce operating expenses by about $4.4 million by, among other things, eliminating 36.5 staff positions (including administrators, teachers, teacher aides, instructional coaches, custodians and other staff), replacing about 51 persons who are retiring with persons at lower salary levels, and making cuts in purchased services and supplies.
According to a chart presented by the District, spending is budgeted to decrease for the reading program by $561,000, the bilingual program by $104,000, and special education by $480,000.
One major unknown is the salary expense. The teachers’ contract expires before the beginning of the 2012-13 school year, and a new contract has not yet been negotiated. The District 65 School Board and the District Educators Council (DEC, the teachers’ union) are using a federal mediator to help them reach an agreement. DEC says its leadership has been authorized to take steps necessary for a potential strike.
In the tentative budget, salaries of all District personnel are pegged at $71.7 million, up $1.3 million from the salary expense in the draft tentative budget presented two months ago. Ms. Zalewski told the RoundTable the increase is due to adding some additional teachers, firming up the cost attributable to retiring teachers and increasing the assumption on the overall rate of salary increases. For purposes of the tentative budget, Ms. Zalewski said the District is assuming the salary rate structure for teachers (e.g., base salary, step increases, and track movements) would increase approximately 3.8% per year, a slight increase from the 3.7 percent used in earlier projections.
Compared to last year, salaries are budgeted to decrease a total of $583,000, or by 0.8 percent. This takes into account the assumed increase in the rate of compensation, plus the reduction of staff and the replacement of retiring teachers with teachers at lower salary levels, Ms. Zalewski said.
Another significant uncertainty is whether the state legislature will shift a part of teacher-pension costs to school districts throughout the state. If the cost-shift is made and phased in over five years, District administrators are estimating it will add about $600,000 in expenses in FY13, and then $1.2 million, $1.8 million, $2.4 million and $3 million over the subsequent four years. (See article, guest essay and editorial in Aug. 2 issue of the RoundTable.)
The District is reporting on an unaudited basis that it will finish the year ending June 30, 2012, with an operating surplus of about $150,234. The surplus would have been larger, but administrators decided to prepay $1.7 million in expenses in FY ‘12 that are attributable to FY ‘13.
The cash balance in the District’s operating funds, on an unaudited basis, at June 30, 2012 is $20.5 million, or about 72 days of operating expenses.
In June Ms. Zalewski presented financial 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. Like the tentative budget for FY ’13, these projections are based on an assumption for salary increases and do not take into account any potential cost-shifting of pension funds.
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.