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The District 202 School Board held a budget hearing on Sept. 15 and discussed the tentative budget for the school year 2015-16 (FY’16). While the numbers are currently in balance, the District is preparing for the possibility that legislation in Springfield could force mid-year adjustments.
Bill Stafford, chief financial officer of the District, and Mary Rodino, deputy CFO, reviewed the budget with the Board. The FY’16 budget, including operations and capital expenditures, totals $82.4 million in expenditures, 3.3% more than last year. The operating budget is $71.4 million, up 2.0% from last year. “This is mainly due to increased personnel costs from contract obligations,” said Mr. Stafford. Special education mandates also increased costs.
Property taxes, which account for 85% of the District’s operating revenues, are subject to property tax caps that generally limit the amount of increases to the lesser of the Consumer Price Index or 5%. For FY’16, property taxes revenues are limited by a cap of 1.5% for the 2013 tax levy year and 0.8% for the 2014 tax levy year, said Ms. Rodino. New property is an exception. Property taxes are budgeted at $60.4 million, up 1.64% over the prior year.
The modest increase in the CPI “does not provide the District sufficient funds to pay for its labor costs or even come close to covering the increased costs of providing health care,” says Dr. Witherspoon’s budget memo.
Due to uncertainties at the State level, the budget contains conservative revenue estimates. It is expected that General State Aid, which accounts for 2% of the District’s operating revenues will be prorated to 87% levels. Categorical State Aid, which accounts for 3% of the District’s operating revenues, may also be reduced.
Federal aid, which accounts for 4% of the District’s revenues, is budgeted to increase by 10.39% over last year due to higher special education reimbursements.
Additional revenue is generated locally from tuition, interest on investments, food service income, student fees, and other local revenues. These revenues are projected to be $3.1 million, a decrease of about 4.31% from last year, due to lower anticipated investment income and nutrition revenues.
Salaries account for 68% of the operating budget. They are budgeted at $48.2 million, up 3.37% due to employment contracts and special education mandates requiring added personnel.
Benefits, which account for 8% of the operating budget, are pegged at $6.1 million, a decrease of 1.04%. This category includes health insurance, pensions expenses, and other items.
Together, salaries and benefits account for 76% of the operating budget.
In order to balance the budget, the District was required to reduce expenses by more than $900,000, said Dr. Eric Witherspoon in a letter accompanying the budget. He said:
• Several staff positions of retiring employees were not replaced at a savings of approximately $80,000.
• Several staff positions were reduced from 12 month assignments to 10 month assignments with a savings of approximately $30,000.
• Contractual services for items such as consultants, staff travel and professional development were reduced by approximately 5% and produced savings of close to $450,000.
• The budget for supplies, as office supplies and copying, for all departments was reduced by approximately 5% resulting in a savings of close to $100,000.
Springfield May Still Impact Budget
“The State and its uncertain budget situation continue to be a constant financial concern to the District,” said Dr. Witherspoon.
Legislation is being considered in Springfield to freeze property taxes, which would have a major impact because they account for 85% of revenues.
Another “financial threat is Senate Bill 1” which could result in a loss of over $2 million in State revenues on an annual basis, said Dr. Witherspoon.
The pension reform bill for the Teachers Retirement System was ruled unconstitutional by the Illinois Supreme Court. If the legislature shift the “normal cost” for teacher pensions to school districts, that would amount to more than $2 million a year in new expenses, said Dr. Witherspoon.
Board member Jonathan Baum commended staff for the belt-tightening efforts and pointed out that nearly half of the reductions were taken from staff travel and professional development. He said he wanted staff to know that the Board understands that “this is not painless. These are trips to educational opportunities that could be valuable to our teachers that they will not be able to do. We understand that this is not easy and it will not get easier. It will get harder.”
Mr. Baum asked how the District would deal with changes from the State if they occur in the middle of the budget year.
“We can make some minor adjustments,” said Mr. Stafford, “but to be very frank, if we can’t, that’s why we have a fund balance policy. We may be in a situation where we have to experience a deficit budget. If we had a worst case scenario, I would not come back to the Board and say we need to start laying off teachers right now. That is not practical. We would go into reserves; that’s what they are there for. When things get bad, cash is king and we have decent reserves. But if all of that happened, it is going to be hard to be balanced.”
“If something happens mid-year, that’s when we institute freezes” added Ms. Rodino.
“We need to think about as a community how we are taxed,” said Board member Doug Holt. “There are always tough issues around that. The best way out of this conundrum is for the City to continue to find ways to diversify taxes and not rely on residential properties.”
“Where I get concerned,” replied Mr. Stafford, “is where we have downtown areas where we still fight about development. In terms of schools, that (development) helps everyone’s bottom line by spreading the tax burden.”
There were no public comments during the hearing. The final budget will be approved at the Sept. 28 Board meeting.