Elmhurst Unit District 205 ended the fiscal year June 30 on a positive note budget-wise, School Board members learned Tuesday. A little more money than expected came in, and a little less than expected went out, Assistant Superintendent for Finance Chris Whelton told the board.
One of the main reasons the budget came out ahead is that the district had only expected to receive three quarterly payments from the state of Illinois, but it actually received four. This is good news, even though the state remains two payments (about $2 million) behind. District 205 also received five quarterly payments instead of four in the special education personnel category.
Property taxes, which make up more than 80 percent of all district revenues, were "right on target," as well, Whelton said. In the operating fund, just less than $102 million in property taxes were received, which is 102.9 percent of the budgeted amount of $99 million.
"If we can get those right, that is an indication of how the year is going," Whelton said.
Taxes received for fiscal year 2011-12 were 1.4 percent more than the previous year.
There were also some positive things happening on the expense side last fiscal year, Whelton said. The mild weather helped reduce overtime payments for snow removal, natural gas use was low, and both natural gas and electric rates have been better than expected, he said.
In the operating funds, the district spent $97.6 million, which is .3 percent less than its budgeted $99 million. Nearly $70 million of that went to teacher salaries and benefits, a .9 percent reduction from the previous year.
While the district remains in the black, Whelton noted that transportation expenses have gone up while state reimbursement has been reduced. Also, the district's contribution to the Illinois Municipal Retirement Fund for employees increased nearly 5 percent over the previous year, to $3 million.
The number Whelton said the district has to pay particular attention to is the low point of the fund balance, which is in May right before property taxes are received in June. If the low point gets too low, the district must issue tax anticipation warrants to pay its bills.
"When we talk about not wanting to borrow to pay our operating expenses, we are concerned about this point in the year," he said.
In May 2011, that amount was just 3.23 percent of operating expense. This May, it was 7.68 percent, a more comfortable position because total revenues exceeded expenditures by $4.2 million. But Whelton recommended changing policy to require a minimum fund balance of 26 percent in the bank to avoid borrowing in the future.
"Our May 2012 fund balance was 7.5 million," Board President Jim Collins said. "That was our low cash point. To achieve that, we started out the year with 29 percent of the money we would need for the year in the bank. If we had started with a 25 percent fund balance, we would have had to borrow to meet our expenses by May 31."
Board members do not expect to continue to be in a favorable cash position going forward for myriad reasons. For one, to be in compliance with state mandates costs money, and the state increasingly is not funding those mandates. Vice President Maria Hirsch pointed out that the district only gets a 4 percent reimbursement from the state for the English Language Learners program and only about 16 percent reimbursement for special education personnel.
"That is worth noting," she said. "The rules are set by the state, the programs are set by the state, but they are nowhere near funded. I don't want to imply that we shouldn't be servicing kids … who clearly are in need of support. The challenge is about meeting the state mandates. Is the state defining (the needs) in a way we would agree is the most effective for our students?"
Superintendent David Pruneau said that overall, only 6.8 percent of District 205's budget comes from the state. The average state reimbursement in school district's throughout Illinois is 34.6 percent.
A Look Ahead
With state mandates, late payments and other variables facing Illinois school districts, as well as local variables, like staffing and enrollment, it can be difficult to create a tentative budget for this school year. But the district is required to file one with the state. Perhaps the biggest wildcard, state pension reform, is not expected to pass until 2014-15 school year, according to officials, so little time was spent discussing it Tuesday night.
Whelton presented an unbalanced tentative budget for 2012-13, with a negative ending balance of $1.1 million in the operating budget. This can largely be attributed to one factor: Elmhurst Memorial Hospital.
The $1.5 million in property taxes the hospital paid to the district will likely have to be returned as the hospital . That's not the issue, however, as the district planned for that last fiscal year. It was not budgeted to be spent.
What was not expected is that the hospital would be asking for a refund on taxes it paid for the Center for Health property since it opened in 1999. Hospital executives are saying 54 percent of the Center for Health is for hospital use and the hospital should be refunded 54 percent of the property taxes it paid. This amounts to an additional $950,000 District 205 would have to return.
"We didn't ever expect to have to return that money," Collins said. "It was budgeted and spent not knowing they would appeal to get it back. That's where the biggest part of the budget hit comes from."
The board is waiting for the final determination on the hospital's tax-exempt status, but officials expect it will be granted.
"We believe they will achieve the criteria for tax exempt status and will receive a refund for the taxes they paid for those parcels," Whelton said. "Without that, we would be in fairly good shape going into this year (because of a favorable 2011-12). We would have probably balanced the budget this year."
Other factors in the 2012-13 budget include an increased need for special education instruction and some full time teacher vacancies that still need to be filled, among other things.
"We are still in the mode of hiring," Pruneau said. "We approved two more positions today because of enrollment increases. We'll be closer to a final (enrollment) report when school starts."
Board member Susan DeRonne asked about the repercussions of an unbalanced budget.
"You're asking us to approve an unbalanced budget. What does the future hold for a district with an unbalanced budget?" she asked.
The short answer: More cuts, Pruneau said.
"We will have to make cuts to rebalance the budget," he said. "Long term, we will have to figure out a way to achieve 26 percent (fund balance) on an ongoing basis. My fear is, mandated programs instituted by the state but not funded by the state. There's the mindset (in Springfield) that it doesn't cost anything."
He pointed to the new, state-mandated teacher evaluation process, which has taken thousands of hours of staff time so far to implement, with thousands more hours to go.
"I'm so sensitive to the injustice of unfunded mandates this year and every other year I've been on the board," DeRonne said. "That is not new. What is new is presenting this board with an unbalanced budget. It's the hospital wildcard this time. We are going into this year with almost $2 million in cuts, and already we're in the hole for next year without any of the bad news this year's going to bring from the state or any other wildcard out there. That's not a good place to be."
Board member Chris Blum, chairman of the Finance Committee, reassured the board that the district still is in a "prudent financial position."
Collins added, "On a prolonged basis, it's bad governance. But for a one-time hit, we're prepared to take that financially."