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Finance, performance questions shaping District 161 levy talks

Upcoming decisions about the Flossmoor School District 161 tax levy may come down to how three “guiding questions” are answered before a levy is enacted on Dec. 26.

The Board of Education’s discussion continued at its Oct. 10 meeting. The dialogue is not just about deciding a new tax levy. The ongoing conversation also includes what is fair for homeowners, whether budget cuts should be considered and determining how to hold the new administration accountable for improved results.

The administration’s recommendation is to increase the levy by 2.1 percent, reflecting the cost of living increase over the past year which is derived from the Consumer Price Index (CPI). Under state imposed tax caps, schools can only raise taxes 5 percent or CPI — whichever is less. This levy was built into the fiscal year (FY) 2018 budget approved in September. The 2018 fiscal year started July 1.

The approved budget projects revenues and expenditures that closely reflect the FY 2017 budget.

The FY 2018 plan calls for revenues of $33.66 million, which are fractionally higher — by 0.71 percent — than the previous year’s budget. Budgeted expenditures of $33.14 million are virtually unchanged, just $48,000, or 0.15 percent, more than in FY2017.

Two other elements of the budget are being debated by board members. One is a projected deficit of $1.52 million due to construction projects scheduled for next summer. Total construction costs would be $2.04 million. Without the construction expenditures, the budget would have a surplus of $516,737. The other budget item that is part of the levy discussion is an anticipated fund balance of just under $30 million on June 30, 2018.

Board members are sorting out whether to assess the budgeted levy or freeze the levy without an increase. The conversation includes whether the fund balance should be tapped to pay for construction, which would have a positive budget impact but negatively impact tax revenues over the next three years.

Frances LaBella, assistant superintendent of business operations, shared data which shows the long-term effect of freezing the levy for one year. She said a levy freeze would cost the district more than $2 million in lost revenues over the next three years including $497,371 in 2018, $507,320 in 2019 and $517,466 in 2020.

She added that a two-year freeze would cost $3,431,573 in the same period of time.

LaBella said the administration needs guidance from the board and suggested three questions should be addressed.

First, she said, is it the board’s intention to have a balanced operating budget? 

Next, excluding the construction projects, the FY 2018 budget will have an operating surplus of $500,000. Other projects will need to be funded in FY 2019, including replacement of salary increases, replacement of iPads and English/Language Arts curriculum. The question becomes whether it is the board’s intention to eliminate other expenses to pay for the above items and still maintain a balanced budget.

Finally, does the board want to use fund balances to pay for construction projects like those planned for next year?

“What is it you want to do?” LaBella asked.

Board member Cameron Nelson said the district should consider “taking less of a levy” this year.

“We have many administrators,” Nelson stated. “We can do less of a levy now. You guys figure it out.”

Nelson added if the budgeted levy is assessed the staff should be asked to prepare a cost reduction plan.

“See how many homes are in foreclosure.  All of the taxes are troublesome to me,” said board member Merle Huckabee. The board’s action will affect “not just us in here but everybody else. We are not a financially strapped district but we need to make decisions based on the whole picture.”

President Michelle Hoereth asked LaBella how much is required to be in the fund balance, should the board decide to pay for construction projects. LaBella recommended three months of operating expenses but that she would prefer the funds have a five-month cushion.

If the board freezes the levy for one year, LaBella said a typical homeowner would get a $60 savings.

“There is a disconnect between the levy and the tax bill,” board member John Simmons said.  “If we freeze the levy there is not a guarantee” that homeowners would all see a reduced tax bill.”

Several board members discussed the district’s performance in the context of the financial discussion. Vice President Stephen Paredes said, “We need to see what is working and what isn’t working.”

Paredes added, “The administration should plan for the short- and long-term” by next fall. “The long-term plan should include capital projects.”

Paredes also said, “In one to three years we will see what this administration will do to bring value” to the district.

Nelson suggested a cost reduction plan that focuses on performance this school year. 

“The three questions will give us a lot to think about,” Hoereth said.

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