D204 Budget Problems:

[macrockett]

As our District administration pointed out last night at the board meeting, our deficit will be larger. Should that surprise anyone? No.

Some of us have discussed the nature of how school district finances operate. I have pointed out the growth factor (sorry, over to any material degree), inflation (CPI) restriction due to the tax cap and the exponential factor of 80% of our budget, salaries and benefits and related costs.

Those are the three things you need to know to understand a school district budget. These three things are the material part in solving the problem.

Do I have all the answers? Of course not.

With that said, I have started my own recommendations to the Financial Advisory Committee with the following caveat:


To: Financial Advisory Committee
From: Michael Crockett

My recommendations are divided into 5 categories: Financial, Physical Assets, Employees, Contracts and School Board. With that in mind I would like to lay some groundwork.

First, both the Federal Government and the State of Illinois are mired in debt.

On the federal level our current debt is over $11 trillion dollars. www.treasurydirect.gov/NP/BPDLogin?application=np

In addition, over the next 10 years our federal government is projected to borrow an additional $3+ trillion dollars, minimum. www.cbo.gov/ftpdocs/99xx/doc9957/_selected-tables.2009.0406.pdf

Still further, at the federal level it is estimated that we have unfunded liabilities of over $50 trillion dollars related to Medicare, Medicaid, Social Security and government retirement programs. www.pgpf.org/newsroom/press/owe/

In Illinois, the situation is no better. We currently have an estimated $11 billion dollar budget deficit for the current fiscal year, budget.illinois.gov/default.htm , and an estimated $73 billion in unfunded liabilities for the 5 state pension systems. trs.illinois.gov/subsections/press/history.htm .

Further, other post employment benefit liabilities are estimated at over $24 billion. www.bondbuyer.com/issues/117_75/-286730-1.html . See also, generally, www.uhc.com/live/uhc_com/Assets/Documents/URS_StandardandPoorsReport.pdf .

At the same time, Federal and Illinois tax revenues, current and projected, continue to lag outlays. www.heritage.org/research/features/budgetChartbook/Federal-spending-growing-faster-than-federal-revenue.aspx ; www.ioc.state.il.us/ioc-pdf/dwhreportFeb2009.pdf ; blogs.wsj.com/economics/2009/09/29/tax-revenue-tumbles-change-in-receipts-by-state/ ; www.apps.ioc.state.il.us/ioc-pdf/ffweb0409.pdf (Education Spending in Illinois)

Second, consumers and taxpayers aren’t much better off.

According to the Census Bureau median household incomes have been flat for a decade. economix.blogs.nytimes.com/2009/09/10/a-decade-with-no-income-gain/?hp

In addition, consumer debt to net worth, especially taking into account the recent loss of wealth in their homes and the stock market, is near an time high. If you look at page 9, D.3 Debt Outstanding by Sector, under Households, Total column, total Household debt is over $13 trillion (2009 Q2 at bottom of the page.) www.federalreserve.gov/releases/z1/Current/z1.pdf

Correspondingly, household net worth can be seen on page 104 B.100 Balance Sheet of Households and Nonprofit Organizations, line 42, Net Worth (Fell from $63+ trillion in 2006 to 53 trillion now. Most of this wealth is concentrated in the hands of a few, as you know). www.federalreserve.gov/releases/z1/Current/z1r-5.pdf

Further, according to CareerBuilder, 60 percent of households are living from paycheck to paycheck. blogs.moneycentral.msn.com/smartspending/archive/2009/09/22/60-living-paycheck-to-paycheck.aspx .

Finally, the actual unemployment rate is much higher than the headline rate of 9.8% www.bls.gov/news.release/empsit.t12.htm (BLS shows a rate of 17%) and the Fed Reserve sees protracted, high unemployment, www.reuters.com/article/businessNews/idUSTRE57P3TC20090826 .


Conclusion:
Reliance on Federal and Illinois State Government assistance is not advised.
Reliance on the taxpayer is also not advised.

[macrockett]

Getting into D204 specifically, here is the start of that section:

Moving to the subject of District 204, it is important to note the District is a $270 (now $284) million per year business, with revenues and expenses that must be managed properly given the constraints that exist.

On the revenue side, other than the federal and state funding sources discussed above, the important considerations are growth and inflation.

It should be clear that growth in the District
is nearing an end with little available land left for development. winsome.cnchost.com/MAC/PMAProjections12-8-08.pdf (growth tax began trailing off in 05-06, collected in 07-08);

winsome.cnchost.com/MAC/NapervilleResidentialPermits1999_2009Q1.pdf (development began training off some time ago as shown by the Naperville #s).

In addition, inflation is not on the horizon www.federalreserve.gov/monetarypolicy/fomcminutes20090128ep.htm .

The tax cap and cpi, cnx.org/content/m18338/latest/ ,will restrict the tax revenue collected beginning in 2010, next year.

On the expense side, approximately 80% of our expenses are salaries, benefits and associated expenses. Historically, these expenses grow exponentially (increases on top of increases).

In summary, the combination of little growth, little inflation and the exponential aspect of approximately 80% of our expenses means we must address this 80% and some other issues in some fashion or we will have, in my estimation, a series of $30 million referendums every four years. The point is whether it is in our taxes as a result of CPI increases or by referendum, it will be there.

[macrockett]

October 6, 2009
By KATHY CICHON [e-mail]

The deficit facing Indian Prairie School District 204 in 2011 is bigger than originally projected.

According to the district's latest financial forecast, expenditures in 2011 will exceed revenue by $9.2 million.

"It's important to note, the numbers I'm about to show you truly are before we do our work," Dave Holm, assistant superintendent for business, told the school board Monday night. "We have every intention of addressing the deficit and it will look different when it is done."

Previous projections showed the district facing an $8 million shortfall for 2011. The deficit, Holm said, is attributed to a "perfect storm" of revenue challenges. Property taxes are capped at the overall consumer price index for the calendar year, which in 2008 was 0.1 percent; fewer state dollars for education funding; no more federal stimulus funds and slowing new property growth.

"We knew ultimately it would decline as the district reaches build-out," Holm said.

The decline, he said, was accelerated by the economic downturn.

"Is it a more difficult challenge this year than it was last year? Yes, it is," Holm said.

But, he added it is one he thinks the district can overcome.

"Nine million represents about 4 percent of our expenditures," Holm said. "I actually think we have a shot at making a big dent." How? What is that plan? What about next time? With 80% of our budget being Salaries, etc. that are projected to keep growing, how do you address that (yes I understand nothing is static, we will have things happen that allow budget expense reductions. But without action, anything that happens naturally will not solve the problem.)

Originally the district had a $6.5 million projected deficit for the 2010 budget — which was approved by the board last month — but it was able to close the gap through a variety of means. Those included an infusion of $3 million in stimulus money, redoing contracts, locking in lower rates on new energy contracts and working with bus company First Student to buy diesel fuel directly to save on taxes and labor efficiencies.

"In 2011 we may very well be doing some short-term borrowing, which we haven't done in quite some time," Holm said. And how is all this going to affect our bond credit rating...on $300 million in outstanding debt?

Despite the deficit, a balanced budget is still possible, Holm told the board. Administrators, as well as the Citizens Financial Advisory Committee, are meeting on a regular basis to work on closing the gap. In addition, the district has appealed to the community for suggestions that can lead to cost savings.

"We're interested in every idea," Holm said. "We don't care how big or small."

Community input is being sought through Oct. 15. Comments and suggestions can be made by visiting the district's Web site at ipsdweb.ipsd.org/News.aspx?id=25176 which will provide a link to feedback form.

[rew]

I really wonder what all this community input could amount to. Yes, there are some general principles we can all email to the district...the economy, the deficit. But, really, they would be better off appealing to the teachers and staff for ideas to cut spending. They are the people that have the insider knowledge to make comment.

This, to me, is no different than GM asking the public for ideas on how to avoid bankruptcy. Sure everyone can give some broad response. So what.

And yet the district keeps coming back to "community input". Note to administration, you are paid to find the money, make it work. We are all balancing budgets and looking for ways to save money in our own businesses and our households. I don't know the inner workings of your business. I can't contact suppliers. I can't decide what positions are redundant.

[doctorwho]

Oct 6, 2009 11:30:16 GMT -6 rew said:

I really wonder what all this community input could amount to. Yes, there are some general principles we can all email to the district...the economy, the deficit. But, really, they would be better off appealing to the teachers and staff for ideas to cut spending. They are the people that have the insider knowledge to make comment.

This, to me, is no different than GM asking the public for ideas on how to avoid bankruptcy. Sure everyone can give some broad response. So what.

And yet the district keeps coming back to "community input". Note to administration, you are paid to find the money, make it work. We are all balancing budgets and looking for ways to save money in our own businesses and our households. I don't know the inner workings of your business. I can't contact suppliers. I can't decide what positions are redundant.

They are looking for 'public support' for the plans they already have -- teachers salaries in the future - need for referendums ( I guarantee they will put out well rehearsed input that says " paraphrasing" - we were growing so fast, then the economic downturn and the government of this state is screwing us - you're doing all you can -- " we'll all have to pitch in ".. " we have to maintain our standards to protect property values " etc. Our fave PR firm has already been retained for the next referendum --

kinda like how the WHOLE community was behind a 3rd HS in recent articles. BULL. In 2005 - 60% of this district said no. Then we were fed bullcrap about 10,400 kids ( 2000 more than we need to house)- and split shifts and neighborhood was pitched against neighborhood to get a majority vote. ( not to mention a centric site for the school) .

[rew]

This is my suspicion as well, DW. They will say they turned over every rock and there is NO other alternative than more $$$ through a referendum.

[blankcheck]

How is it that we have not heard about any of these "committees" until the last few weeks? Why has our district not been working on this all along. I agree - PR firm already in place. This is just a way of saying that we asked the residents what we should do. A little (lot) late in my opinion. I also agree that we are paying top dollar to these people - they should be able to come up with a plan.

We knew a long time ago what the potential increase in debt could be. Now, it is worse than projected. Get ready for the usual lines:, no PE, split shifts, etc. We have heard it all before. I think they will be looking for a new angle. What could that be??? Suggestions? Or maybe we should not brainstorm. They may actually use our thought:)

[doctorwho]

Oct 6, 2009 12:32:01 GMT -6 blankcheck said:

How is it that we have not heard about any of these "committees" until the last few weeks? Why has our district not been working on this all along. I agree - PR firm already in place. This is just a way of saying that we asked the residents what we should do. A little (lot) late in my opinion. I also agree that we are paying top dollar to these people - they should be able to come up with a plan.

We knew a long time ago what the potential increase in debt could be. Now, it is worse than projected. Get ready for the usual lines:, no PE, split shifts, etc. We have heard it all before. I think they will be looking for a new angle. What could that be??? Suggestions? Or maybe we should not brainstorm. They may actually use our thought:)

I think you are dead on - the threats will be: ( they could come in any order - of course most will be nonsense- but panic some people will)

1/ extra curriculars - clubs - cuts
2/ music / arts programs cuts
3/ Sports programs cut backs
4/ teacher aide cuts -
5/ bus routes ( number of ) cuts - get ready Watts here comes your 1 hr trips )
6/ ES school consolidation - need to lower ops expense
7/ reverse ADK
8/ End of Frontier Campus
9/ no A/C for ES's ever -
10/ Special Ed cuts


they'll be something for everyone emotionally - the PR firm will be surveying to find out where the hot buttons are - then will gear rhetoric towards them.

[macrockett]

winsome.cnchost.com/MAC/Profile_Rept_10.26.06.pdf

Read paragraph four, that begins with "The primary challenge for the District..."

As all of you know, if you didn't know about these things long ago (except for the inflation rate) .... Well lets just call what the District had to say, disingenuous. I seem to use that word a lot in describing the District, but if the shoe fits.

What our Board and our administration do is continue to kick the can down the road. I nominate them all for public office as each is highly qualified to lead us... Where? You don't want to know.

[anteater]

The primary purpose of the CFAC when it was first formed was to get them to recommend the (re)financing of the bonds over a longer period in order to lower the tax rate (but increasing total interest costs). Once they recommended that, there didn't seem to be a whole lot of interest in anything else they had to recommend. Since Dave Holm indicated they would have at least one recommendation, I'm expecting a similar type of scenario.

[macrockett]

___SALARY__BENEFITS__MUNI_RETIREMENT__TOTAL__TOTAL_%
_____________________________________________BUDGET
2010_186.9___27.8________6.3______________221____284__78

2009_178.1___24.4________5.9______________209____271__77

2008_169.8___24.7________5.4_______________200___257___78

2007_160.6___22.3________5.2_______________188___242___78


This is the budget info for the last for years for the employment related expenses which represent 78% of the budget. All number in millions save for the last column %s.

[southsidesignmaker]

By: Clyde Harrison

Tell the Children You’re Sorry September 30, 2009


Column: The Big Picture


In just one generation the United States went from the world’s largest creditor to the world’s largest debtor. Washington’s plan to cure the credit crisis is to borrow our way out of debt. This fool hardy plan as been tried in the past by other countries. It has never worked. Though our current elected officials believe they are smarter and give better speeches, it won’t work this time either. Most of the people reading this have had a loan in the past, possibly a home or auto loan. You know that when you add the interest, it takes a long time to pay off and may double the total cost.

The Congress, the Federal Reserve and the Treasury have borrowed over two trillion dollars this year for the stimulus, the bail outs and cash for clunkers. How much is a trillion? One trillion is sixty three thousand miles of one dollar bills – a tremendous, colossal amount of money! Our children will be paying the interest on this debt for the rest of their lives. Our children will send more of their hard earned dollars to the government, leaving them less to spend improving their lives and the lives of their children. We’re stealing their futures.

How can we halt this corrupt mismanagement of our country so our children have the better life we all hope for them? My suggestion to stop the madness is two new laws.

First New Law: Lawyers can’t hold any political office.

Lawyers are taught in law school, when there is a solution to a problem they stop getting paid. Instead of solution based careers, like all the rest of us, lawyers are driven by a never ending supply of paper and endless proposals, but no solutions. Lawyers are the ones that gave us the few million word tax code that no one understands. Lawyers have given us big city schools that are dysfunctional day care centers. Graduating students who do not possess the knowledge to compete in today’s world labor market. Lawyers gave us mountains of regulations that cost a fortune to comply with and protect no one. All enforced by the FED, FDIC and the SEC who make inspector Clueso look like a genius. With their results to date, letting lawyers run the country would be Einstein’s definition of insanity.

Second New Law: Political Donations Must Be Anonymous.

If political donations were anonymous McCane Finegold would be declared a colossal failure and that would be an understatement. This law would be designed to reduce the cost of pay to play or the price of buying a politician.





Politicians who appear on the news always say their donors do not give them money for special access, favors or laws to benefit the donor. They donate because they like the recipient’s policies. They don’t want special treatment. If they are both telling the truth, which only a fool believes, this wouldn’t change if the donations were anonymous. If you didn’t know the source of the money there wouldn’t be any special favors. Pay to play would disappear

I believe if we adopted these two laws, in a very short period of time we would get off the road to bankruptcy and diminished futures for our children and get back on the road to America’s greatness.

****************************************************************************


I can think of one lawyer that proves this theory wrong!

[casey]

Since we know almost 80% of the operating budget goes to salaries, benefits and associated expenses, and we know administrators are a HUGE portion of that 80%....shouldn't our SD be looking at eliminating some of the top down expenses. I know it's highly unlikely but our district is extremely top-heavy with upper administrators and keep in mind they pay NOTHING of their healthcare premiums.

Before our district starts cutting programs and following Dr.Who's list (which I have no doubt that they will do) shouldn't they be considering eliminating upper management positions, asking administrators to kick in for insurance premiums, ask administrators to take furlough days, etc. Since our adminstrators are not union (or are they a part of another union) can our SB just decide that admin should be paying insurance premiums? How would that work? Let's face it, they're all in this together you know, scratch my back, I'll scratch yours....

[slp]

Oct 6, 2009 12:42:43 GMT -6 doctorwho said:

Oct 6, 2009 12:32:01 GMT -6 blankcheck said:

How is it that we have not heard about any of these "committees" until the last few weeks? Why has our district not been working on this all along. I agree - PR firm already in place. This is just a way of saying that we asked the residents what we should do. A little (lot) late in my opinion. I also agree that we are paying top dollar to these people - they should be able to come up with a plan.

We knew a long time ago what the potential increase in debt could be. Now, it is worse than projected. Get ready for the usual lines:, no PE, split shifts, etc. We have heard it all before. I think they will be looking for a new angle. What could that be??? Suggestions? Or maybe we should not brainstorm. They may actually use our thought:)

I think you are dead on - the threats will be: ( they could come in any order - of course most will be nonsense- but panic some people will)

1/ extra curriculars - clubs - cuts
2/ music / arts programs cuts
3/ Sports programs cut backs
4/ teacher aide cuts -
5/ bus routes ( number of ) cuts - get ready Watts here comes your 1 hr trips )
6/ ES school consolidation - need to lower ops expense
7/ reverse ADK
8/ End of Frontier Campus
9/ no A/C for ES's ever -
10/ Special Ed cuts


they'll be something for everyone emotionally - the PR firm will be surveying to find out where the hot buttons are - then will gear rhetoric towards them.

doc,
You are absolutely right. The threats will come and those of us who won't support the referendum will be painted as "children haters" .

Just like every household I know, they district needs to cut costs.

Most importantly , they need to look at salaries.

Why should administrators be immune to the same cuts that most working Americans outside of education have had to deal with??

The teachers should not receive any pay raises until our economy is more stable and more revenues are coming in.

It's simple...you cannot come to the taxpayers right now!!!

[blankcheck]

That is a great place to start - at the administration level. A few years ago, they made a very lame
attempt to cut administrators jobs. However, since then, they have slowly started to add them back.

There are 15 administrative positions in place now.