Bismarck-Henning’s Financial Outlook (Past and
Present)
Why are Illinois Schools facing a lack of fiscal funds?
As you may be aware from media reports, Illinois is experiencing a significant fiscal crisis. This
problem has been growing for years and unfortunately has no end in sight. From prorated State
Aid payments to payments for grants such as special education, transportation, etc. being 4-5
months behind, the cash flow issues have every indication of continuing, The money will come
eventually, but it seems to come the following fiscal year after the books are closed. At the end
of Fiscal Year 2012 (FY 12), the State owed B-H CUSD #1 $330,549.37 ($225,900.77 in the
Education Fund; $104,648.60 in the Transportation Fund). As of May 21, 2013, the State still
owes B-H CUSD #1 a total of $353,923.58 ($294,226.93 in the Education Fund; $59,696.65 in
the Transportation Fund).
How has this impacted our district?
B-H has been hit twice as hard. We have lost significant revenue at the local and at the State
level.
Local Impact
From 2005-2009, the district has been able to hold steady even in the midst of the States’
financial crisis. As the tax base increased, the district was able to increase revenue while only
increasing the tax rate from $4.75 in 2005 to $4.85 in 2009. In a couple cases, we able to
decrease the tax rate from the previous year. From 2005 to 2009 the district’s EAV increase by
almost 15% or an increase $11,317,062. This resulted in a 5 year average increase of $66,507 in
new money each year in the Education Fund more than the previous year.
As the recession and the States’ fiscal crisis blew out of the starting gates, it resulted in lower
property value across the state, and B-H was in the middle as most district were. The property
value began to decrease which resulted in lower EAV’s and this negatively impacted the tax
base. With the EAV at its’ all time high in 2009 of $75,624,737, the EAV in 2012 dropped to
$71,470,734. As of May 20, 2013, the EAV is projected to be at $71,665,773. From the 20092013, the EAV has decreased by more the 5%. As previously stated, the district was receiving
an average of $66,507 in new monies while only slightly increasing the tax rate. For the past 2
years, the change has been an average decrease of $23,678 in the Education Fund. What does
this mean for B-H? In order to keep the same funding in the tax levy on a yearly basis…the tax
rate has to be increased to cover the loss in the EAV. The Education Fund, like the O & M,
Transportation, Working Cash, Fire Prevention & Safety, Special Education, and Lease
Equipment, is capped (or has a limit to the tax rate). As our EAV decreases, so does the amount
of locally generated revenue we can expect to receive.
The Education Fund is the largest fund for the school district and is the most often discussed
fund.
Year Extended
Extension Amount
Change from
Previous Year
% Change
2013
2012
2011
2010
2009
2,042,475
2,034,078
2,111,091
2,130,134
2,155,305
$8,397
$77,013
$19,000
$25,171
$84,779
.41%
3.79%
.90%
1.00%
1.20%
State Impact
The two primary state funding sources for schools are General State aid (GSA) and mandated
Categorical Aid. GSA is the money provided by the state to “support” public education. This is
supposed to be done in an equitable manner. This done through the Foundation Level. This is the
minimum per child expenditure, as established by the Illinois State Legislature. The Foundation
Level is $6,119. The GSA/Foundation level we receive is determined by a state formula that
combines state and local property tax resources. Only once back in the mid 90’s did the state not
uphold their end of the bargain and failed to pay all of the state aid as promised. This was called
the “mysteriously lost 24th payment”. In FY12, the GSA was prorated at 95%. In FY13, it was
prorated at 89.16%.
The following table provides a picture of our GSA losses.
Fiscal Year
General State Aid
Difference
Prorated Percentage
Received
From Previous
Year
FY09
$2,286,002
$667,369
FY10
$2,391,560
$105,558
FY11
$2,814,038
$422,478
FY12
$2,620,496
$193,542
95% ($131,025)
FY13
$2,510,210
$111,286
89.16% ($305,155)
Total Loss of
Prorated Dollars
$436,180
As stated above, the second primary funding source of revenue from the state is Mandated
Categorical Aid. This aid’s purpose is to reimburse districts for expenses associated with
providing services to and for target populations.
The area hit hardest by reductions in state revenue is transportation. Since FY 09, the State of
Illinois has instituted a $133.7 million or 39.4% reduction in transportation funding. Other
programs like Reading Improvement and ADA Block Grant have cut completely. When
combined with the reduction sin GSA, this has been a major reduction in state funding for B-H.
The following table indicates the level of cuts to B-H.
Regular
Transportation
Special
Education
Transportation
ADA Block
Grant
Reading
Improvement
Block Grant
Early
Childhood
Total
2009
2010
2011
2012
2013
199,153
209,946
135,739
152,855
143,197
FY9 to
FY13
Difference
($55,956)
73,658
105,625
85,292
93,379
95,831
$22,173
30,385
7,405
0
0
0
($30,385)
24,651
21,140
0
0
0
($24,651)
121,883
118,894
121,174
121,254
111,652
($10,231)
$449,730
$463,010
$342,205
$367,488
$350,680
($99,050)
What can B-H do?
Like a household budget, a district budget cannot operate year after year with higher
expenditures than revenue. Two options exist when revenue shortages occur. The first is to
increase revenue, and unfortunately, very few options exist for a school district. Fees can be
raised, but they further increase the burden on parents / guardians. Another option is to sell
working Cash Bonds. Selling bonds can help to replenish the reductions in the fund balances
created by the revenue shortfall, and as an insurance against future funding shortages.
The second option is to implement further reductions in expenses by reducing budgets and
layoffs or Reductions in Force. For FY14, the district has tried to save in multiple ways, but no
limited to:
1. Elimination of 2 FTE (1 at the Elementary School / 1 at the Junior High)
2. Change Employee insurance to a different provider at a lower cost.
3. Reduce School Psychologist time from VASE.
4. Higher lower costing employees when veteran (higher costing employees) retire or resign.
5. Reduce building level budgets
6. Reduce main bus route from 9 to 8 and employ 1 less full-time route driver.
The compounding effect of those reductions is tremendous for our district; however, it has not
kept pace with the reduction in revenue and has caused a significant lowering of the fund
balances reserve. In fact, district expenses in 2008-2009 school year were more than $300,000
higher than the budget amount for the 2012-2013 school year (four years later). The following
graph (in millions) shows the expenditures have been fairly static in the Education Fund the past
5 years except for 2010.
Education Fund
$7.0
$6.8
$6.6
$6.4
$6.2
$6.0
$5.8
$5.6
$5.4
$5.2
$5.0
2006
2007
2008
Revenue
2009
2010
2011
2012
Expenditures
The following graph (in millions) shows the revenue and expenditures in the Operating Funds.
The Operating Funds include the Educational, Operations & Maintenance, Transportation, and
Working Cash Funds.
Operating Funds
$7.9
$7.7
$7.5
$7.3
$7.1
$6.9
$6.7
$6.5
2008
2009
2010
Revenue
2011
2012
Expenditures
What does the future hold?
The majority of this article focuses on state and local funding shortages. The reality is that the
district is also beginning to suffer due to federal fiscal issues and laws. Take for example the
federal dollars we get for Title I and Title II salaries. The district pays the State’s TRS system
9.4% for employees. If we use federal grant dollars to fund employee salaries, the rate the district
pays has increased to 35.41%. Additional information has come down through the federal
pipeline that Title Grants may have further cuts or may even be exacerbated by the sequestration
cuts to be implemented by the federal government.
Unfortunately, there also appears that there is no end in sight for the financial crisis for Illinois
schools. Governor Pat Quinn’s budget proposal included a cut of about $300 million to
education. Approximately 50% would be taken out of GSA and a majority of the remaining 50%
would reduce the transportation reimbursement fund.
The Governor proposed a $150 cut to GSA which would take the districts from having GSA
prorated at 89% to approximately 82% or $5,452 per child. As stated earlier, the Foundation
Level amount is and should be funded at $6,119 per child. That proration, combined with
enrollment numbers used in the formula, would likely reduce our state aid by an additional
$180,000-$200,000 reduction in GSA.
The $145 million cut in the Transportation Reimbursement line would result in a 19% proration
in the reimbursement that school districts are owed for operating student transportation as
required by Illinois School Law. This cut would result in a loss of approximately $242,000 in
transportation funding for B-H schools.
To put it simply, we really have no idea what the future will hold. If revenue continues to
decrease and expenditures continue to rise, schools will have little choice but counteract the
trend with major reductions in force and/or significantly increase tax rates. We have always tried
to manage the districts’ finances with great care and consideration for what the tax payers want
and need. We will continue to do so even in these tough times. Careful consideration will need to
be given to all aspects of education which could lead to possibly “weeding” out the lesser of the
needs.