DANVILLE — The Danville District 118 school board Wednesday heard a presentation on the state of the district’s finances 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.
“We have financial turbulence,” business director Heather McKiernan told board members. “It’s not just within our district; it’s all over the state.
“It scares me,” she 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. That would amount to deficit spending of $2.4 million.
District officials are starting to work on next year’s budget and any cuts would be recommended in March.
The district’s biggest concern is the steady decline in state funding. McKiernan said the state owes the district $1.9 million.
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.
The district was supposed to receive $29 million from the state this school year, but instead will receive about $26 million because the district is receiving only 89 percent of its total entitlement from the state.
District officials are concerned the level of state funding could drop farther to 80 percent in subsequent years, which would amount to a loss of $5.8 million each year.
The district 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.
Local revenue also has been on the decline, with the district’s equalized assessed property values 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 during four years.
“The county assessor has told us the local economy is not going to recover for another three years. It’s going to be a downward trend,” McKiernan said.
She also said the district has lost about $400,000 in interest earnings during the last few years due to the low interest rates being paid on the district’s money.
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.
If the pension shift is done in increments, it would cost the district an additional $266,000 for every 1 percent that is shifted away from the state.
McKiernan added the district could see a cut of 15 percent in federal funding in the 2013-2014 school year.
She said a proposed cut to Title 1 funding could cost the school district $516,000 annually and an additional $515,000 if Title 1 funding is eliminated altogether.
“The only way to raise revenue is to increase property taxes,” McKiernan said.
But Superintendent Mark Denman said, “We don’t think that’s a good idea with the economic climate of the area.”
Denman said he is hopeful the new retail construction on North Vermilion Street will pump some money into the district’s coffers.
Also on Wednesday, school board members: