Board Briefs: Fall 2020 Financial Workshop

Board Briefs: Fall 2020 Financial Workshop

The District 58 Board of Education held a Financial Workshop (Special Meeting) on Monday, Dec. 7 at the Longfellow Center and via YouTube livestream. Assistant Superintendent for Business and Chief School Business Official Todd Drafall gave a presentation on the District’s 2020-21 budget, new financial plan, financial projections, fund balance policy, capital planning and more. Presentation highlights include:

Helpful Meeting Links

2020-21 Budget

The 2020-21 District 58 budget projects $72.8 million in expenditures and $71.0 million in revenues. District 58 expects a $1.8 million deficit this fiscal year due to revenue losses associated with the COVID-19 pandemic. These losses include OKEEP fees, transportation reimbursements, interest income and general student fees, to name a few.

New Financial Planning Process

District 58 historically has used five-year finance projections to guide its budget. Starting next fiscal year, the District will develop a more comprehensive and Board-approved three-year financial plan, along with its five-year projection. Having a formal financial plan will help the District better evaluate its long-term needs and appropriately budget for them over time. The plan will also include multi-year schedules for curriculum updates, technology replacement cycles, capital improvements and fund balance priorities.

Budget Projections

District 58 has begun to develop its financial plan and will present a completed draft to the Board in February 2021. The draft financial plan will make several assumptions, including a lower consumer price index (CPI), level state funding, no federal/state COVID-19 financial assistance, and a slow return on interest income. On a positive note, the Downtown Downers Grove Tax Increment Financing (TIF) District will expire in 2021. The result of the TIF dissolution means that new property for the 2021 tax levy will be around $95 million. This will add approximately $2 million annually to the District’s revenues. This expected increase will be included in the financial plan.

Drafall pointed out that most (87%) District 58 revenues come from local funding. It receives local funding through two property tax payments in August/September and May/June. The District’s fiscal year ends in June. In other words, District 58 receives 42-45% of its total revenue during the last month of its fiscal year. This means that District 58 must have enough cash available, at its lowest cash point, to make payroll before receiving its May/June property tax payment. By carefully budgeting money from its working cash and education funds, the District has managed to make payroll in past years, but this isn’t a sustainable funding mechanism. In fact, the District has projected its budget to incur a negative fund balance as early as fiscal year 2022. 

Earlier this year, the Financial Advisory Committee reviewed a policy that would ensure the District had adequate cash on hand to cover expenses during the low-cash period of the fiscal year without having to borrow funds to cover payroll and bills. Through this policy, the District would develop a budget with a year-end fund balance of at least 35% of its annual budgeted expenditures. To accomplish this goal, the District will need to reduce approximately $1.1 million from its current 2022-23 projection. Some of the initial options for next fiscal year are to reduce operating expenditures and review new revenue streams (i.e. increase fees). Additionally, the District would re-engage the Citizen Task Force to review other options starting in the 2022-23 school year. Some of those longer-term options could include reconfiguring the current usage of District 58’s schools. (i.e. consider boundary changes or long-term school building uses).

Capital Planning

Over the past two years, District 58 created a comprehensive draft Master Facility Plan in collaboration with its architect, staff, families, community members and other stakeholders. The plan identified approximately $249 million in updates to buildings and educational environments. A representative Citizen Task Force convened to help the District prioritize its most urgent facility needs and prepare for a bond referendum that would be required to pay for this work. The District paused its facility planning work and delayed pursuing a referendum bond due to the pandemic. Yet, the District’s facility needs still exist. 

District 58 is limited in the amount of funding it can allocate toward capital projects without going to referendum. Due to the tax cap law (officially called the Property Tax Extension Limitation Law or PTELL), District 58 may only request a funding increase equal to the consumer price index (which is currently at 1.2%), plus the taxes associated with any new construction. Further, when PTELL was passed in DuPage County in 1991, it froze each school district’s non-referendum bonding authority. This means that school districts can only issue non-referendum debt equal to its pre-PTELL levels, which grows by inflation annually. District 58 has historically been very conservative in the debt it accumulates, so its pre-PTELL debt levels were very low. Currently, District 58 can only levy $1.5 million per year in debt, which limits its ability to fund large and necessary projects. 

Drafall presented a tentative alternative capital plan that proposes restructuring its current outstanding debt and issuing an additional amount of bonds to provide $3 million in capital updates for summer of 2021. Additionally, the selling of the District’s Longfellow Center property could allow for an additional $2 million more for capital projects in the summer of 2022. Meanwhile, the District would reconvene the Citizen Task Force and seek a bond referendum as early as spring of 2022 to cover long-term facility needs. 

Next Steps

School Board members discussed different approaches to closing the District’s $1.1 million 2022-23 budget deficit and reaching its fund balance goal. Board members emphasized that the District must value community engagement and transparency throughout any budget reduction process, as it is imperative that the community understand the District’s budget limitations and needs. The Board acknowledged that District 58 already runs an incredibly lean budget and asked the District to recommend budget cuts that would have the lowest impact on families and services. In addition, the Board asked the District to openly communicate the trade-offs required for all potential budget cuts. 

The District will present a draft three-year financial plan to the Board in February 2021 for potential approval in March 2021. In the meantime, the District will also conduct a new demographic study, issue restructured and new bonds, and complete an updated budget for future curriculum and technology needs, as part of its four-year financial plan development.

District 58 Board of Education members are: Darren Hughes, president; Gregory Harris, vice president; Kirat Doshi, Emily Hanus, Steven Olczyk, Jill Samonte and Tracy Weiner, with Dr. Kevin Russell, superintendent; and Melissa Jerves, board secretary.