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News
School board faces tough budget choices : News : Oswego Ledger-Sentinel : Hometown Newspaper for Oswego and Montgomery, IllinoisSchool board faces tough budget choices
| District could be faced with $9M deficit within two years
| by Lyle R. Rolfe
| 2/26/2009
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The 2009-10 school year looks bleak financially for the Oswego School District, board members learned in a recent budget work session.
"We're on a track where we're adding programs and adding staff to meet the needs of growth. but the revenues are not there to support it," Kris Monn, assistant superintendent for finance, said.
Monn, however, said there are ways to avoid a possible $4.5 million initial deficit for the year and come up with a balanced budget.
But in 2010-11, the district could be faced with a deficit of more than $9 million, according to Monn.
He said current revenue will be affected by a Consumer Price Index (CPI), of .1 percent, no increase in the General State Aid (GSA) foundation level, low interest earnings on investments, (one percent, which he said is optimistic), and no reassessments of property in the district.
Also, new construction continues to fall which means much less additional property tax income. And there is little likelihood state funding will be increased. Monn said a memo from Daniel Hynes, Illinois Comptroller on Feb. 4, indicates that funding by the state at current levels may be impossible.
Additional expenses for the district for the coming year include salary increases projected at four percent, health and dental insurance increases of 10 and eight percent, respectively, a 4.3 percent increase in student enrollment, technology needs totaling $2 million, a 10 percent hike in special education costs, and new class size mandates by the federal government.
Negotiating is underway with three union groups-teachers, transportation employees, and custodial and maintenance employees, so Monn is using four percent as a guess until an actual figure is agreed on.
Monn said the federal government has placed a mandate on class sizes for special education classes, but they won't know until later in the year how it might affect the district.
"Each of these additional expenses outpaces the revenue streams that fund them," he said.
He does not foresee any increase in funds from the Illinois State Board of Education (ISBE). The ISBE has made its budget request to the state legislature and most items in the budget have not been increased, he said.
"Fast Growth Grants from the state have been eliminated and the Pre-Kindergarten and Early Childhood students will be funded at their present levels," he said.
Fast Growth Grants are funds the state had made available to districts experiencing tremendous growth in new housing which resulted in large numbers of new students being added to the schools without additional local tax revenue to help offset the added cost.
He said they had hoped for a $130 per student increase in General State Aid (GSA), but it appears this is highly unlikely, according to most experts he has talked to.
The amount of GSA per student set by the foundation across the state is now $5,959, and with a $130 increase it would be $6,089. But the amount received is decreased by the amount of property tax funds generated locally by each school district. In the district, this is about $3,000 per student, for its 15,000 students, Monn said.
If the additional $130 per student were approved, it also would be reduced by additional local revenue the district would receive next year, he said.
In addition to the $4.5 million deficit, for 2009-10, he said $250,000 will be added to the budget for additional staff members needed to handle student growth.
"This is a contingency we can use in case we have to add a teacher or teachers for possible class size increases we did not see before," he said.
Monn believes he can recoup $1 million of the $4.5 million deficit through an adjustment in energy costs for the district which would reduce the deficit to $3,750,000.
He said a preliminary 2009-10 budget showed a 30 percent increase in energy costs because it was prepared before the new energy contract was approved, so the actual energy costs for the year will be about $1 million less.
Monn said they can reduce the $3,750,000 deficit for next year, by deferring the $2 million they were considering using for technology (replacing outdated computers). He could not say how long it might be deferred, but noted that school board members are aware that funds from the November 2006 building referendum can be used for technology costs.
"It's not that we don't need the computers, but this expense would affect programs and services. We believe we can balance the budget, but only if we defer things such as the $2 million for technology," he added.
He also said the district is expecting to receive $895,900 as its share of the federal stimulus package recently approved by the president. "When the bill left the House and went to the Senate a list was released showing what every school district in the nation would receive. When the bill was passed on Feb. 13, it showed Oswego would receive $1,703,000 in Special Education and IDEA (Individuals with Disabilities Education Act) funds, over a two-year period, but it did not show how much it would be for each year, so I am sticking with the original figure of $895,900 for 2009-10," he said.
If all of the above figures hold true, it will still leave the district with an $854,100 deficit.
"Though this is a significant amount to reduce, we feel we can balance the 2009-10 budget without impacting current programs and services provided state funding remains at its current levels," he said.
"If state funding decreases, we would have to take a long, hard look at all the programs and services we provide, and look for cost cutting measures throughout the district. In the past we have formed committees to look at this and we expect we will have to form them again," he said. Committee members included residents from throughout the district.
"At this point, I believe through salary adjustments, seeing how the (contract) negotiations turn out, and finding out what the final property tax income will be, we'll have to see how all that plays into this," he added. "But again, if state funding is reduced, it's likely to be coupled with reduced programs or something like that," he said.
Pass a referendum?
Officials have doubts
Aside from funding reform at the state level, Monn said the only other means they have to significantly increase revenues is through a property tax referendum.
When the November 2006 building bond referendum was approved, board members said they would not ask for an Operating Fund increase until 2011. Monn said they cannot wait that long because of the present financial situation, but added that he has not suggested an amount for a referendum because school officials do not believe a referendum would be approved at this time.
"And unfortunately, even a referendum will not solve the problem because as the amount of local funds is increased, the state reduces its allotment to the district by the same amount," he said
"So by having a referendum, not only are you picking up only about 50 cents on the dollar because of what we would lose on state aid, but you're still not addressing the expenditure side. We have to bring expenses in line with revenue, but there's no guarantee we can do this," he added.
He said the CPI for the period from Dec. 31, 2007 through Dec. 31, 2008 was .1 percent.
"This is what will be applied to our 2009 tax levy. Instead of using the .1 percent CPI set by the federal government, we can ask the voters for approval to use a higher CPI. For the purposes of the workshop, we used a 5 percent figure as an example. The CPI affects only the property tax side of the budget. The additional property tax we receive each year is determined by taking the previous year's property taxes received and multiplying them by the CPI," Monn said.
"If the voters approved a CPI of five percent, the district would receive an additional $14,985,000 in property taxes over five years. But, the district would lose $7 million in general state aid over the same five years, shifting even more of the burden of funding the schools onto the local taxpayers, he said.
"The bottom line is that there is no efficient way to increase revenues," he said.
Cut expenses?
The alternative would be to cut expenses.
Increasing class sizes could have a major impact on the deficit, he said.
"When we project staffing, we're going to look at every grade level in the elementary schools and junior high (grades 6-8) and high school (grades 9-12) as individual groups because they are scheduled differently than elementary classes," he said.
Other ways to cut costs would be to reduce auxiliary services which include transportation, operating and maintenance and grounds keeping.
And another possible way would be to eliminate or reduce educational and curricular programs such as gifted and academically talented classes, or fine arts such as music, drama and art classes, he said. They also could reduce or eliminate co-curricular programs such as sports, music, clubs, teams and others that are not part of the regular curriculum, he said.
Or they could do a combination of things like the East Aurora School District did. Prior to passing their November 2008 referendum, East Aurora was facing cuts of more than $6 million.
He said East developed a plan to pass a referendum for the voters to approve Working Cash Bonds which do not have an adverse effect on the GSA. By investing the funds, they were able to generate additional interest income to support programs.
East Aurora still had to make cuts because Working Cash Bonds cannot be used for operational expenses. But the interest income helped avoid more significant program reductions, he noted.
He said the district has had to rely on Fast Growth Grants to balance the last two budgets, noting that Oswego is not the only district facing budget problems.
Kaneland is anticipating layoffs, Geneva is tapping into its reserve funds, West Aurora is considering closing schools, Plainfield is facing a $9 million deficit for 2008-09, Batavia has a deficit budget, Valley View is talking layoffs, and Wheaton has a projected $14 million deficit he said.
In summary, Monn said 2009-10 is projected to be a tight, but balanced budget that is not expected to contain any programmatic reductions. If state funding is not reduced, he does not expect to have layoffs and said they should be able to hire the seven teachers requested.
"However, pending an economic recovery, funding reform from the state or an increase in funding in general, we will need to begin the process of deciding how to eliminate expenses from future budgets. If we have to let teachers go, state law says it must be done within 60 days of when school starts. If things would change, there is no restriction on when we can rehire them or add new teachers," he said.
Monn said the new superintendent who will replace Dr. David Behlow on July 1 will be named by the board before the April 7 election so he or she will be able to have input on the 2009-10 budget.
He is hoping a tentative budget can be approved in June and a final budget approved in September.
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