School District 65 is planning to reduce expenses by $2.2 million for the school year 2015-16 (FY’16) in light of projected deficits, a low Consumer Price Index (CPI), and financial uncertainty created by proposals and legislation pending in Springfield.

“This is not an easy process, and we’re doing the best we can to be financial stewards,” said Superintendent Paul Goren at an April 20 Finance Committee meeting.

He said the District has a “structural budget issue,” where salaries and benefits, which account for about 80% of the expenses, are increasing at a faster pace than property tax revenues, which account for about 80% of the revenues.

Property tax revenues are subject to property tax caps that generally limit the amount that school districts may increase property taxes to the lesser of the increase in the CPI or 5%. Due to a very low CPI, the District will be able to increase property tax revenues by only 1.5% in FY’16 and by only 0.8% in FY’17.

In contrast, salaries and benefits are projected to increase by approximately 4%.

For the next five years, Dr. Goren said the District is projecting operating deficits of $407,843 (FY’16), $5.9 million (FY’17), $6.7 million (FY’18), $8.7 million (FY’19), and $7.2 million (FY’20).

The projections for FY’18, FY’19 and FY’20 assume a 2% CPI and stable funding from the State, which amounts to $11 million this year.

The level of the CPI, however, is uncertain, and legislation pending in Springfield creates further uncertainties, said Dr. Goren. If Senate Bill 1 is enacted, he said, District 65 stands to lose $6.6 million per year in State funding after a three-year phase-in period. And last week, the Governor signed legislation that cuts funding for education by 2.3% for the balance of this school year.

Dr. Goren said the issue facing the District is, “How can we make some reductions to ease the pain and set us up for financial sustainability?”

The plan is to cut expenses by $2.2 million for FY’16 which will balance the budget and create a surplus that will allow the District to prepay about $1.8 million in expenses that would normally be attributable to FY’17. The prepayments may include premiums for workers’ compensation, property liability, and medical insurance.

By making cuts of $2.2 million in FY’16 that will carry through to FY’17 and by prepaying $1.8 million in expenses, the projected operating deficit for FY’17 will be reduced from $5.8 million to approximately $1.8 million.

“Even with our painful reductions at this stage,” said Dr. Goren, “we still are in deficit mode” for FY’17.

The Proposed Cuts for FY’16

District 65’s plan includes eliminating 29 full-time equivalent positions with estimated savings of approximately $1.4 million, and reductions in non-personnel expenses in a net amount of about $800,000.

These cuts follow steep cuts made three years ago, in which the District cut 48 full-time equivalent positions and non-personnel expenses, totaling $4.3 million.

In making these cuts, Dr. Goren said, administrators were guided by several key principles, including: “We would not reduce classroom teachers; we would not want to increase class size guidelines; and we worked hard to make cuts that are away from the classroom and classroom services.”

The staff reductions and savings are as follows:

• 1 science coordinator, plus reorganization of the Instructional Technology Department – $135,000

• 4.5 central office support staff – $193,912

• 4 custodian/maintenance staff – $171,512

• 1 central office literacy coach – $75,000

• 1 assistant principal at Kingsley – $98,591

• 4.8 building non-instructional staff, including two general teaching assistants and two library media specialists – $115,950

• 5 special education teacher assistants – $110,000

• 1 special education teacher – $75,000

• 6.75 reading specialists – $395,000

Joyce Bartz, assistant superintendent of special services, said the reductions in special education staff were made through a careful process and were determined by the needs of students specified in their Individual Education Programs (IEPs). She added that 5 out of a total 135 special education teacher assistants and 1 out of a total of 104 special education teachers were being reduced.

John Price, assistant superintendent of schools, said the reduction of 6.75 reading specialists was a “very difficult reduction because they serve students every day.” Two of the reading specialists serve the middle schools and the rest the K-5 schools. He added that the District currently has a total of 28.5 reading specialists. He said no programs would be cut as a result of these staff reductions.

Beatrice Davis, assistant superintendent of human resources, said 12 of the staff members affected were retained in different positions at the District, 8 of the staff members were planning to retire or move, and the rest were “honorably discharged” and may reapply for another position at the District.

These reductions were approved by the School Board at their March 23 meeting, said Kathy Zalewski, business manager.

Administrators are also planning to cut non-personnel expenses for the next school year by a net amount of $800,000. “The details of non-personnel cost reductions are currently being worked on and are not yet available,” said Ms. Zalewski. It appears, though, that most of the cuts will come out of purchased services and supplies.

One increase in supplies will be the purchase of new literacy textbooks for the K-2 grade levels, said Mr. Price. “This is our investment in early literacy,” said Dr. Goren.

Comments on the Staff Reductions

Finance Committee Chair Richard Rykhus said one thing the Board has been able to do is avoid making increases in class sizes, something that both teachers and parents desired.

Board President Tracy Quattrocki said, though, that the Board should obtain input from teachers on whether they would prefer increasing class sizes by a few students to losing a teacher assistant or a reading specialist.

“This is painful for all of us,” Ms. Quattrocki added. “Where do we get the most for our money and help the most students.”

Board member Katie Bailey noted that the Board added 7 assistant principal positions several years ago, and asked what went into the decision to reduce 6.75 reading specialists rather than assistant principals.

Mr. Price responded that each assistant principal should be supporting reading achievement and also helping to provide a positive school climate that helps all students.

Paula Zelinski, president of the District Educators Council (DEC, the teachers union), referred to the addition of assistant principals several years ago and to the current reductions in special education staff and reading specialists.

“To the teachers, it feels like some of these cuts are very personal,” said Ms. Zelinski. These staff are serving “the neediest kids. I think that’s what we are all struggling with.”

“I get that. I think we all get that,” said Mr. Rykhus. “I think when you add the assistant principals, they’re also able to support the neediest kids in different ways.”

Ms. Quattrocki said when the Board decided to bring on the additional assistant principals there had been a big jump in enrollment at the schools and “we thought it would improve the learning environment for all students. We’re not trying to choose administration over teachers, it’s really about trying to create the best environment for students to learn.

“Again, we need to engage the school community and gather input on what makes the best environment for the students to learn,” said Ms. Quattrocki.

Mr. Rykhus said, “One take away for us as we think about future budgets – not this next school year but the one after – is we’re really going to have to engage a different dialogue to figure out where we make the tough choices, because there are going to be tough choices.”

Dr. Goren said, “I’ll echo that. … We want to be ahead of the game and work collaboratively to make the best decisions for our children and our professionals.”

Legislation either pending or proposed in Springfield creates uncertainties and could have a substantial adverse impact on District 65’s operations:

• The State raised the income tax to 5% several years ago, and the tax was automatically reduced to 3.75% on Jan. 1, which left a hole in the current fiscal year’s budget. Last week the State Legislature passed legislation that reduces the State’s current education budget by 2.25% for the current fiscal year. If the legislature does not raise the income tax rate or create a service tax, it will likely reduce funding for education next year.

• Senate Bill 1 revamps the way the State allocates its funding to school districts. If enacted, District 65 would lose $6.6 million per year. The full loss would be phased in over three years.

• The State is considering the degree to which the cost of funding teacher pensions may be shifted from the State to local districts, such as District 65. Kathy Zalewski, business manager, said the District’s financial projections assume that District 65 will be required to pay an amount equal to 0.5% of teachers’ compensation into the pension fund, or about $400,000, starting in 2016-17, and that the payment will increase to 2% over the next three years. There is no assurance, though, that the pension shift will be limited to that amount, and the amount may increase significantly if pension reform legislation enacted last year is held unconstitutional by the Illinois Supreme Court.

• As part of his “Turnaround Agenda,” Governor Bruce Rauner is proposing a two-year freeze on property taxes. If that were done, it would reduce District 65’s property tax revenues by millions of dollars each year going forward.

Gov. Rauner has proposed reducing by 50% the Corporate Personal Property Replacement Tax (CCPRT) that is currently paid by the State to local governments. District 65 currently receives approximately $2.2 million in CPPRT funding, said Ms. Zalewski.

Revised Financial Projections

On April 20, Kathy Zalewski, business manager, presented updated financial projections that take into account the budget cuts and the prepayments contemplated for the next school year. The projections show a surplus of $23,000 for the year ending June 30, 2016 (FY’16), and then deficits of $2.1 million for FY’ 17, $4.3 million for FY’ 18, $6.2 million for FY’19, and $4.7 million for FY’20.