At the Aug. 12 meeting of the Finance Committee of the District 65 School Board, Kathy Zalewski, Business Manager, presented a tentative budget for the 2019-2020 school year (FY’20), as well as unaudited financial results showing how the District did for the year ending June 30, 2019 (FY’19).
The budget numbers need to be considered in the context of the Referendum approved by voters in April 2017. Under the Referendum Plan, the District plans to set aside surpluses generated in FY’18 through FY’21 in a Referendum Reserve, and to use the amounts set aside to balance projected operating deficits in FY’22 to FY’25. The commitment made during the months preceding the Referendum was to balance the District’s budgets for eight years, through FY’25.
Closing Out FY’19
In its budget for FY’19, the District projected it would operate at a surplus of about $4.4 million for the year. Ms. Zalewski said the District is now estimating that it will operate at a surplus of about $7.9 million in FY’19, or about $3.5 million more than budgeted.
Operating revenues were about $1 million higher than budgeted due to receiving about $1.7 million more in federal funding than anticipated and about $500,000 less in property taxes. Expenses were about $2.5 million lower than budgeted due to pushing capital expenditures into FY’20, and lower expenses for special education tuition.
Ms. Zalewski said the District will place $1 million of that surplus into the District’s cash fund balance, and set aside about $6.9 million in the Referendum Reserve to help balance projected operating deficits in FY’22 to FY’25. According to projections dated Aug. 12, 2019, the District is on track to balance its budgets up through FY’25. See story on page 26.
Tentative Budget for FY’19
The tentative budget pegs operating revenues at $140.8 million, operating expenses at $134.9 million, and projects that the District will operate at a surplus of about $5.9 million. The District plans to allocate $1 million of the surplus to increase the cash fund balance, and to set aside the balance into the Referendum Reserve to help balance future projected operating deficits.
Ms. Zalewski said the District prepared the budget using a version of a zero-based budgeting methodology, and the District’s budget priorities for 2019-2020, which will focus on:
• “improving the instructional core so that all students and especially students of color have access to common-core aligned grade level standards,
• “building the organizational culture grounded in collaboration, trust and engagement of staff and community,
• “working on instructional and organizational culture which will include continuing efforts on culturally relevant teaching, equity learning and restorative practices to disrupt the racial predictability of student performance, and
• “maintaining long-term financial stability.”
The District is projecting that student enrollment will increase by 131 students.
Operating Revenues - $140.8 Million
On the revenue side, the increase in property taxes for FY’20, which account for 78% of the District’s operating revenues, is limited by the Consumer Price Index for 2017, which is 2.1%.
The District, however, is budgeting a 6% increase in property taxes in FY’20. The increase is due to a combination of the 2.1% increase permitted under tax caps and the expiration of the Washington National TIF District, which will add about $65 million in assessed property value to the tax rolls, said Ms. Zalewski.
The District is estimating that amounts received from the State under the relatively new Evidence Based Formula will be about $7.9 million, or roughly the same as last year. The formula contains a provision that school districts will not receive less under the formula than they did in FY’18. The formula provides funding for amounts previously received for General State Aid, the poverty grant, special education personnel, and certain special education and bilingual services.
State Aid Categoricals are budgeted to be about $5.6 million, or about 5% less than last year. The categorical payments include funding for orphanages, an early childhood grant and transportation.
The District is budgeting $9.8 million in federal funds, about 8% less than last year. Ms. Zalewski said federal funding, which constitutes 7% of the District’s overall funding, is projected to continue at “stable levels.”
Expenses - $134.9 Million
Salaries which account for 68% of the District’s expenses are budgeted at $91.3 million, a 5% increase over last year. Ms. Zalewski said the increase is primarily due to two factors: 1) the increases required under the District’s new contracts with the District Educators Council (DEC, the teachers union) and the District Evanston Teacher Assistant Association; and 2) the expense of adding 15.45 full-time equivalent positions, some of which Ms. Zalewski said will be cost neutral.
Ms. Zalewski grouped the new positions into three categories:
First, positions added due to increased enrollment or student needs: 2 middle school teachers and 1 elementary school teacher due to increased enrollment; 2 special education teachers, 1 teacher assistant, and 0.5 psychologist position to meet the requirements of students’ individual education programs;
Second, positions added to support the District’s strategic priorities: 3 assistant principals for special services and restorative practices (1 is budget neutral); and 1 restorative practices coach;
Third, positions added due to efficiencies/grants: 0.5 EvanSTEM project specialist (grant funded); 1 maintenance generalist due to needs (budget neutral); 1.45 child development lead teacher (grant funded); and 1 teacher assistant (grant funded).
Ms. Zalewski said there were 14 retirements of certified staff, but the full savings will not be realized until 2019-20 and subsequent years. Generally, the District may replace a retiring teacher with a less experienced teacher at a lower salary, resulting in a cost savings.
Employee benefits are budgeted at $15.5 million, or 11% of the operating budget. Ms. Zalewski said the cost of benefits is projected to increase by 5%, with health insurance expected to increase by 4%.
Capital expenses paid out of operating funds are projected to be about $1.6 million. In FY’20, Ms. Zalewski said at an earlier meeting that the District plans to install secure entrances at Lincolnwood and Bessie Rhodes schools, and do asbestos abatement work at Lincolnwood, Rhodes, King Arts and Washington schools.
Purchased services are budgeted to increase by 11%, and supplies and materials by 10%. Together they are budgeted at about $21.3 million. One-time costs include a new student data management system, a science textbook adoption, new math materials, and new materials for school libraries.
The Ending Cash Balance
As part of the Referendum plan, the District has been increasing the balance in its cash fund. At June 30, 2020, the District projects the fund balance will be $26.3 million (not counting the amounts in the Referendum Reserve), or 20% of operating expenses. Ms. Zalewski said the minimum recommended fund balance is 25% of operating expenses.
She added that the District’s financial rating from the Illinois State Board of Education has improved from “Financial Review” to “Financial Recognition,” which is the highest rating given.