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At the April 12 District 65 Finance Committee meeting, Mary Brown, Assistant Superintendent of Business Services, explained how the Consumer Price Index (CPI) not only limits the amount by which District 65 may increase property taxes for its operations, but it also impacts the amount that the District may borrow to pay for capital projects.

Absent a referendum, the District may issue bonds to pay for capital projects as long as the debt service payments for those bonds does not exceed the District’s “Debt Service Extension Base” (DSEB), said Dr. Brown. A school district’s DSEB equals the amount of its non-referendum bond payments in 1994, said Dr. Brown. For District 65, that amount was $4,858,295.

For many years, the law did not provide an additional amount to cover inflation. In 2009, though, the legislature passed a law that provided that the DSEB would increase by the amount of the CPI. In 2014 and 2015, the CPI was very low, 0.8% and 0.7% respectively. For the last five years, the average CPI is 1.54%, said Dr. Brown.

The low CPIs have limited the amount by which District 65 may increase property tax revenues, which account for about 80% of the District’s operating revenues. They have also limited the District’s ability to borrow to pay for classroom and cafeteria expansions, roof and masonry repairs, and other building work and technology.

In recent years, Speers Financial, the District’s bond financial advisors, calculated the amount available under the District’s DSEB using an assumption that the CPI would be 2% for the next 20 years, said Dr. Brown. Because the average CPI for the last five years is 1.54%, Dr. Brown said she decided, in consultation with Speers Financial, the District’s attorney, and Moody’s to reduce the assumption from 2% to 1.5%, for purposes of estimating the DSEB.

Once an actual CPI of 0.7% for 2015 and a future assumed rate of 1.5% are plugged into the formula, Speers calculated that the District has already maximized the amount of bonds it could issue in 2016, said Dr. Brown, adding, “We expect to have no room to issue additional bonds this year.”

This in fact was the reason the Board cancelled planned roof repairs at King Arts for this summer.

Spears also calculated that the District could issue about $2.6 million in bonds in 2017, and that about $2.5 million would become available under the DSEB in each subsequent year for the next 20 years.

If the actual CPI comes in lower than the 1.5%, then the amount available under the DSEB would be less. If the actual CPI comes in higher than 1.5%, then the amount available under the DSEB would be higher. The level of interest rates is also a factor.

Dr. Brown said, to be more conservative, she was recommending that the District assume that $2 million would be available in 2017 and in each subsequent year. She recommended, though, that the District not sell bonds in 2017, but hold off until 2018. 

Dr. Brown provided Board members with a revised eight-year plan for capital projects, which is a bare-bones plan based on what the District can afford under its DSEB. The revised plan allocates a total of about $3.8 million to technology and software in the three-year period 2017-19 (a significant amount of which is to pay equipment leases), and then $800,000 to technology and software for each year after that.

The plan does not provide for any building projects for the next three years. Starting in 2020, the plan allocates only between $1.0 million and $1.2 million each year to building projects, “which are to be determined based on priority,” said Dr. Brown.

Stacy Beardsley, Interim Executive Director of Curriculum and Instruction, said the proposed reductions in spending for technology would have “a very negative impact on technology.” She said staff are evaluating other solutions.

The proposed spending for building projects is a drop in the bucket. The District’s strategic plan adopted one year ago says there is a backlog of building work totaling in excess of $100 million.

Board member Suni Kartha asked if administrators would be presenting a plan showing how technology expenses could be paid for through the operating budget, rather than through the DSEB, which would free up more money for capital projects.

Superintendent Paul Goren said the District was facing projected operating deficits of $500,000 next year and $5.5 million in the following year. He said the District is going to have to wrestle with reducing expenses to balance the operating budget, while maintaining technology and the District’s buildings.

Board member Claudia Garrison brought out that the State had not reimbursed the District for some capital expenditures and that the State once again had not appropriated adequate funds to pay the full amount of State aid that is due.

On a much larger scale, Republican Governor Bruce Rauner and the Democrats are facing off on education funding for this coming year. The legislature is also considering bills that, if passed and when fully implemented, could cut off about $6.5 million in State aid on annual basis to District 65; shift teacher pension costs to District 65, which could range between $500,000 and $3 million per year; freeze property taxes for two years, which could result in a loss of revenues of $3.5 million per year; and cut off about $200,000 of special education funding. 

District 65 is projecting operating deficits of $0.5 million in FY’17, $5.5 million in FY’18, $7.2 million in FY’19, $7.2 million in FY’20, and $11.1 million in FY’21. These projections do not take into account the potential impact of the legislation mentioned above, except for the low-end of the range for a shift in pension costs.

Larry Gavin

Larry Gavin was a co-founder of the Evanston RoundTable in 1998 and assisted in its conversion to a non-profit in 2021. He has received many journalism awards for his articles on education, housing and...