District 118 school board members will hear a presentation Wednesday on the state of the district’s finances.
Superintendent Mark Denman said at a media briefing Wednesday morning the school board will learn where the district stands with its fund balances and what the future holds five years out if revenue doesn’t increase or expenditures aren’t cut.
The presentation paints a bleak financial picture for the district by the year 2017 if changes aren’t made.
“If revenues stay as they look now and if expenditures aren’t cut — if we left things as is — there would be a deficit every year in the millions,” he said.
The district started out this fiscal year’s budget on July 1, 2012, with a total fund balance of $20.3 million but projects an ending fund balance of $17.8 million by June 30.
“We’re projecting a $2.4 million deficit this year,” he said.
Denman said district officials are starting to do “pre-work” for next year’s budget.
“Yes, we’re looking at reductions, but we haven’t completed our study,” he said, adding he expects any recommendations for cuts to come in March.
The district’s biggest concern, according to Denman, is the steady decline in state funding.
“Half of our revenue comes from the state, and the state is increasingly unstable,” he said. “It doesn’t look like the state’s problem is going to be resolved for years.
“The governor says $400 million will have to be cut from state education,” he added.
Forty-nine percent of the district’s revenue comes from general state aid and reimbursement payments, another 35 percent comes from local property tax and the remaining 16 percent comes from the federal government.
“Our district is supposed to get $29 million from the state, but we’re going to get $26 million this year,” Denman said. “That $3 million would take care of the deficit the district is in.”
That’s because the district is receiving only 89 percent of its total entitlement from the state, and district officials are concerned the level of state funding could drop further to 80 percent in subsequent years.
“We’re very dependent on state revenue,” he said. “If it goes down to 80 percent, it would be a loss of $5.8 million.”
According to the district, it has not received 100 percent of what it should receive in general state aid since 2008-2009, amounting to a total loss of $4.7 million in state funding. If the general state aid is funded at the 80 percent level — which would be a loss of another $5.8 million — the cumulative loss to the district during the last five years would be $10.5 million.
Categorical payments from the state, such as transportation and special education, have been prorated as well since 2010-2011, amounting to a loss of $300,000 per year in regular transportation alone.
“When we do get categorical payments, they’re usually for the prior year,” Denman said.
As far as local revenue goes, the district’s equalized assessed valuation has been decreasing since 2009, amounting to a compounded loss of $3 million since the 2009-2010 school year. The district is expecting to lose an additional $712,577 in the 2013-2014 school year, making the cumulative total loss $5.6 million over four years.
Also since 2008-2009, interest rates on the district’s money in the bank have plummeted, Denman said.
In the meantime, expenses have been steadily increasing. Insurance costs have increased by 15.09 percent from 2011 to 2012, with an estimated increase of 18.85 percent in 2013. And while nothing has been decided on pensions, the district is aware of the possibility of a shift in pension responsibility from the state to the local school districts.
Denman said the pension shift might be done in increments, amounting to an additional expense of $266,000 for every 1 percent that is shifted to the district.
“One year would be difficult, but you could do it, but if it’s compounded over the years, then I don’t know,” he said, referring to assuming pension responsibility in increments.
Also on Wednesday, school board members will: