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At its Sept. 27 meeting, the District 65 School Board unanimously approved a budget for the District’s school year 2021-2022 (FY’22). The final budget pegs operating revenues at about $151.3 million and operating expenses at about $151 million, and projects that the District will operate at a surplus of $302,523.
Overall, operating revenues are expected to increase by 8%, and operating expenses to increase by 11% from last year’s unaudited actuals. Last year the District operated at a surplus of about $3.4 million according to last year’s unaudited actuals.
Property tax revenues, which account for 76% of the District’s operating revenues, are budgeted at about $114.9 million. This is about $3.2 million more than the amount actually collected in FY’21.
Salaries and benefits, which account for 78% of the District’s revenues, are budgeted at about $118.6 million, up 7.5% from actuals last year.
The District’s revenues and expenses for both FY’21 and FY’22 are significantly impacted by the pandemic and the shift to remote learning, by programs to address learning loss and to mitigate the virus during in-school learning, and the grant of federal funds under ESSER (Elementary and Secondary School Emergency Relief).
One major new source of funding that has impacted the budgets for both FY’21 and FY’22 is a $10.4 million federal grant of ESSER funds. The District received $2 million in FY’21, and is planning to spend $7.4 million in FY’22.
Net New Positions and Student Enrollment
The District is adding, on a net basis, 29.8 new full time equivalent positions, or FTEs. The District is also adding 64 tutors. However, virtually all of the new positions (and all of the tutors) are temporary and funded through federal ESSER funds and through CREATE grants, said Kathy Zalewski, business manager.
During the last six years, in 2015-16 through 2020-21, the District increased FTEs from 1,122.7 to 1,235.75, or by about 113 FTEs. This does not include the increases budgeted for this year, which are said to be temporary. The increases are illustrated in the chart below.
During the same period, the District’s total student enrollment has declined by 505 students, according to student enrollment numbers presented in the District’s budget documents.
For this school year, FY’22, the District is projecting another decline in student enrollment. In early August the District projected that enrollment would decline by 185 students this school year. While the enrollment is still subject to change, District administrators said at the Sept. 27 meeting that the actual enrollment to date is 246 students below the number it previously projected, or a decline in enrollment of 431 students to date.
The District did not change the final budget to take into account any declines in student enrollment.
Changes From the Tentative Budget
The District presented a tentative budget on Aug. 9. On Sept. 27, Zalewski explained the changes that were made in the final budget from the tentative budget. On a net basis, the changes increase the projected surplus for FY’22 by $110,662.
Zalewski said the changes increased budgeted operating revenues by a total of $707,221. The increase was primarily due to an additional $541,941 in State aid to reflect a higher level of funding for early childhood programs ($219,985) and a flow-through of federal American Rescue Plan funds ($321,956). In addition, federal aid was increased by $148,680 to reflect an adjustment in Medicaid revenues.
Operating expenditures were increased by a net amount of $596,559, Zalewski said. Budgeted salaries were decreased by $258,775 due to various salary expense adjustments and a realignment of grant funded expenditures. In addition, some replacement costs for open positions were finalized with lower-than-anticipated costs. Benefits were adjusted up by $59,305.
Offsetting the reductions in salary expenses were increases in purchased services and supplies and capital outlays.
Projected Deficits for FY’21 to FY’26
At the School Board’s meeting on Sept. 27, Zalewski presented updated financial projections. She said the revised projections reduce the projected deficit for FY’23 from $1.9 million to $1.5 million. The projected deficits for the subsequent years are then $4.3 million in FY’24; $7.4 million in FY’ 25; and $11 million in FY’26.
The projections estimate that the District will have sufficient amounts in the Referendum Fund to cover the projected deficits through FY’26 and have about $3.5 million in the Referendum Reserve at June 30, 2026.
The Referendum plan contemplates that the District would contribute $1 million each year into the District’s Fund Balance. The projections reflect that the District did not contribute the $1 million to the Fund Balance in FY’21, and that the District is not contemplating a contribution of $1 million into the Fund Balance for FY’22 or subsequent years. Raphael Obafemi, Chief Financial Officer, previously said that the District would not be making those contributions to the Fund Balance in light of the projected deficits.
Obafemi said at the Sept. 27 meeting that the projections assume that the District will not make changes in the future to address the projected deficits. He said, however, the plan going forward is that the District will “reduce expenditures, starting with FY’23 and beyond, to make sure that revenues balance with expenditures,” and to make sure that “the projected deficits that we see long term do not come to pass. … So we’ll be coming back a little later this year with a deficit reduction plan, just like we did last year.”
Finance Committee Chair Joey Hailpern added at the Finance Committee meeting in August that the Finance Committee will be talking about Phase II of the deficit reduction plan later this year. He said the District has already started Phase II of the plan, which includes the student assignment project and the facilities review project. He said these two projects are to help ensure that the District is organized as efficiently as possible. He said, “we’ll get updates on those as we go through the year.”
Obafemi added that the District will be reviewing programs every year to see what programs are effective and which ones are not. If programs are not effective, “those programs will be replaced with programs that actually are more effective.” He said this may be done as part of the strategic planning process which is also underway. “If we look at the academic centers that are working, and we show that they’re effective in increasing student achievement, what we’ll then do is we’ll look for a way to find funding by reducing funding in other areas.”
The projections going forward are subject to many estimates and many unknowns, including the amount of the Consumer Price Index for 2021 and subsequent years, which impacts both increases in property taxes and salary increases; new contracts with the District Educators Council (DEC, the teachers union) and other employee unions after the current ones expire; student enrollment; budget reduction strategies; and potential State legislation that might freeze property tax increases or shift teacher pension costs to school districts.