We waited until today to publish this final post so that we could opine on the BOE's discussion at Monday's meeting on the upcoming budget cuts. We have listened to meeting -- which once again was way too. Rather than crank out our own summary, below is an excerpt from the District's Board Summary. It is also now available on the district website at the Meeting Summaries tab.
"Board of Education discusses the projected 2018-19 deficit
Following considerable discussion and upon consideration of comments made through surveys of both staff and parents, the School Board tentatively supported approximately $1.7 million in budget reductions recommended by the administration for the 2018-19 school year in order to offset a projected deficit. The Board is expected to vote on the budget reductions at its March 12 meeting. In discussion, Board members expressed concerns about reserves which, at a low cash balance of approximately $5 million, were described as inadequate. Additional concerns were expressed about the significant cuts made to the Department of Learning including the elimination of positions (TOSA position, Director position) made prior to the budget cuts and therefore incremental to the other DOL cuts made. Budget reductions under consideration include:
●Achieving transportation efficiencies by changing the middle school day to 8:40-3:30 and the elementary school day to 8:05-2:40
●Reducing summer professional development hours from 15 to 10
●Changing hiring practices to improve the balance of new teachers vs. veteran teachers without compromising teaching quality without compromising teaching quality
●Eliminating the SELAS consultant
●Starting orchestra in 5th grade rather than 4th grade
●Reducing FTEs dedicated to Middle School Content Area Team Leaders
●Eliminating a receptionist at the District Office
●Changing the Communications Director position to Communications Coordinator
●Eliminating one TOSA position
●Utilizing staff to absorb duties of Special Education Team Leaders without decrease in services
●Not replacing a retiring 0.75 FTE physical education teacher (5 days of PE per week will still be provided)
●Not replacing a retiring chorus teacher (.375 FTE depending on whether increase in band FTE is warranted)
●Deferring for one year parking lot paving/playground resurfacing at Oak School.
●Cost savings of $690,000 by seeking efficiencies and reductions in expenses in materials, services, rental fees, private school transportation procedures, stipends, consultant fees, and other items
●Partnering with HCHTA leadership to:
--Identify savings that can be realized under the current teacher contract
--Negotiate a fiscally sustainable teacher contract upon completion of the current contract's end date of June 30, 2019"
The board discussion can be accessed at the 2/26/198 Podcast starting at approximately 1:45:00.We will not opine on the budget cuts the BOE has decided to make. Instead, we want to focus on our conclusion that the proposed cuts are insufficient and will leave the district in financial peril if pension reform is passed. Moreover, the delay in needed capital improvements at Oak will increase next year's list of needed capital improvements by$167,000, raising the projected capital costs from $2,079,000 to $2,246,000. In turn, the projected deficit will also increase in future years.
The Budget Cuts Are Insufficient
The Budget Cuts Are Insufficient
We begin by reminding our readers that the BOE must only budget for public school services and programs required by law. Daily PE and a 1.0 mile bus eligibility zone are not required and, in our opinion, should only be included in the budget if the district can afford to, especially when capital NEEDS are not being properly funded.
A. Needed Capital Projects Should Not Have Been Deferred
We reviewed the list of neglected, but NEEDED, capital improvements that were identified by the new Chief Financial Officer last year and turned what the BOE had been led to believe was a "balanced" budget into one with a multi-million dollar deficit -- a deficit that will grow each year unless permanent reductions are made. The list is available on Board Docs at: 9 Year Capital Projects Forecast. The facilities committee spent months discussing the prioritization of the identified capital projects, and utilized a rating system to identify which projects needed to be completed within one year. (Source: Prioritization rating system. The Oak School work was deemed necessary within one year -- predominantly for safety reasons. (Source: Summer 2018 Capital Projects.)
That safety project will now be delayed by at least one year. We certainly hope that no one is injured as a result of the continued neglect of this needed work. Further, if this project is delayed, will future capital projectes also be deferred by one or more years? We think the BOE has made a wrong decision by choosing to defer the needed safety work at Oak School and hope they will come to their senses before they vote on March 12.
B. Pension Reform Impact Should Have Been Considered
But even with this deferment and resulting $167,000 reduction in the projected 2018-2019 deficit, the proposed cuts are not enough to balance the budget if pension liability is shifted to D181. Posted on board docs is a chart that shows the negative impact to the budget if that happens. Source: Pension Cost Shift Estimate.) This chart estimates that under Governor Rauner's proposal, districts' expenses will increase over a four year phase in period as pension liability is shifted 25%/year until districts are responsible for 100% every year thereafter. For D181 this means budget expenses will increase by $908,192 in the 2018-2019, $1,852,711 in 2019-2020, $2,834,648 in 2020-2021 and $3,855,121 in 2021-2022. Thereafter, the district will be responsible for funding 100% of pension costs, to the tune of at least $3.85 million/year.
Within 4 years, the deficit will have grown by at least $3.85 million/year unless other expenses are permanently cut or revenue is increased.
Passing an Operational Referendum is Unlikely
What will the District do if faced with an annual deficit of close to $4 million? There are many cuts left on the proposed list that the BOE considered, but concluded it will not approve this year since they will negatively impact student instruction. (See Proposed Cut List) These same cuts will negatively impact the classroom whether implemented this year or in the future. If they were deemed unpalatable now, we cannot imagine that future BOE's will simply slash them out of the budget. And with only $5 million in reserves that could in theory be used to reduce the deficit, the only other option is increasing the revenue stream.
The first step to increasing revenue will be to continue to levy the maximum rate allowed under the tax cap law, as the BOE just did last December for the first time in years. However, this will not raise enough revenues to wipe out the deficit caused by pension liability shifting to the district. The BOE may need to ask the community to approve an Operational Referendum to increase the levy rate beyond that currently allowed under the Tax Cap law. (Source: Illinois Dept. of Revenue Overview of Tax Cap Law.)
In our opinion, we predict that D181 voters will vote NO on an operational referendum unless two things happen first.
1. The BOE must first eliminate any expenditures NOT required by a public school district. Daily PE would have to go, saving the district $450,000/year. Bus services would need to be increased from 1 miles to 1.5 miles saving the district $250,000/year. (We must note that students who live less than 1.5 miles but must cross a designated and recognized hazardous crossing would continue -- by law -- to receive bus transporation.) Parents and teachers have complained that these cuts should not even be considered, but it was not that far in the past that PE was only offered 3 days per week and our kids still thrived in school. Similarly, to shift the transportation burden to families that do not want their children to walk one mile to school, is a small price to pay if the savings achieved allows the district to not cut programs or teachers impacting a far greater number of students than those who might have to walk to school. In fact, in our opinion, if PE is reduced while students are required to walk to school, then they will more than make up for any missed excercise.
2. Before cutting expenditures that impact our students however, the administrators and teachers will first need to share in the painful cuts by agreeing to at least a one year salary freeze. Since the teachers' contract does not expire until June 30, 2019, the salaries that must first be frozen are the administrators'. Freezing administrators salaries by one year will permanently reduce the budget by $58,000. We do not believe the teachers will consider agreeing to a one year freeze in their next contract if the administrators haven't already done so. Freezing the teachers' salaries for one year will save $992,000 per year.
Cutting the budget by the total of these expenditures will save the district an additional $1,750,000/year. But if pension reform actually passes, even this amount will be insufficient to wipe out the deficit. Short of increasing class sizes, lowering the number of teachers, and possibly cutting other programs, the district will need to seek taxpayer approval of an operational referendum. With recent changes to the federal tax laws capping property tax deductions at $10,000/year, we are concerned that the majority of taxpayers will not vote to increase their taxes.
The District is at A Tipping Point
In our opinion, the district is at a tipping point. Ignoring needed expenditures while funding those that are no longer legally required in a public school district, in combination with continuing to raise salaries beyond what the district can afford, will only push the district off the proverbial cliff.
If the BOE is not prepared at this time to balance the budget by eliminating services and programs the district can no longerafford, we hope that it will make it clear to everhone in the community -- parents, non-parent taxpayers and D181 employees -- that if pension reform passes, continuing on the current course will bankrupt the district. Community members and teachers who believe that the district is flush with savings in the reserve account need to wake up to the reality that there is only $5 million in reserves that can fund the current or future deficits, and as the Chief Financial Officer has already explained, this is not a step the BOE can afford to take.
We are not looking forward to the next teachers' contract negotiations. Although the district summary indicates that the board wants to partner with the HCHTA to possibly identify cost savings that can be achieved under their current contract and "Negotiate a fiscally sustainable teacher contract upon completion of the current contract's end date of June 30, 2019", we have heard anything from the teachers in public comments made at the last 2 board meetings to suggest that they will consider changing their current contract or agree to lower or freeze their salary increases in their next contract. For the sake of our children's educations, we hope that both the BOE and HCHTA will begin early negotiation discussions, and that both sides will keep an open mind to the reality that D181 is no longer financially able to give the teachers the raises they have grown accustomed to.
We do not envy the tough decisions the BOE must make on March 12. We believe, however, that it is in the district's best interest that the board approve more cuts than those listed in their meeting summary. Yes, the cuts will be painful, but to simply put a bandaid on a growing wound will not heal the district's financial woes.
So, we will wait and watch and hope that the BOE finds a responsible road for the distrct to follow -- a road that will lead the district out of the financial mess. We urge our readers to STAY INFORMED and while you will no longer be able to SOUND OFF on this blog, you can still do so at Board Meetings during public comment or by sending letters to the board and administration.