NL_091318

4 | September 13, 2018 | The New Lenox Patriot News
newlenoxpatriot.com
Understanding the ins and outs of the Lincoln-Way budget
Public presentation
scheduled for
Thursday, Sept. 20
Megan Schuller
Freelance Reporter
The Lincoln-Way Community
High School D210
Board of Education is scheduled
to vote on its fiscal year
2019 budget on Thursday,
Sept. 20. Since promoting
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its projected operating surplus
of $2.77 million for its
upcoming budget, questions
were raised as to how the
district could claim a surplus
if it still had outstanding
debt. The Patriot takes a
closer look at the numbers.
Having a surplus
but still in debt
According to the proposed
budget, D210 will have an
operating surplus of nearly
$2.8 million; however this
does not mean the district is
out of debt. The district still
owes $281 million in shortand
long-term debt. Under
current predictions by Assistant
Superintendent of Business
Brad Cauffman, the
long-term debt will not be
paid off until at least 2026.
While revenue in the 2019
budget trends down, the expenditures
are up from the
2018 budget. But this has
minimal impact on the overall
budget for now. The FY2019
budget has increased from
the FY2018 budget by $2.74
million. According to fiscal
year projection documents,
the majority of the increase
is going toward capital projects
and salaries. D210 plans
to spend $3 million from the
Capital Projects fund on necessary
capital improvements
and maintenance that it has
been put off, according to
Cauffman.
The district also continues
to rely on tax anticipation
warrants as it heads into the
next fiscal year. In 2016, the
district borrowed nearly $30
million in TAWs. By FY2019,
the district expects to borrow
$17 million. D210’s longterm
budget aims eliminate
the need for TAWs by the fiscal
year 2026, according to
Cauffman’s projections.
Paying down the debt
In early January, an enrollment
study was done to
forecast enrollment for the
next several years using the
“Cohort Survival Method,”
which tracks several possible
outcomes. It concluded that
over the next five years D210
could expect enrollment to
drop by approximately 340
students, which would bring
total enrollment to approximately
6,600 students for the
fall 2022 semester. While this
is a gradual change in enrollment,
a more drastic drop in
enrollment could become a
barrier to paying down debt.
Since more than 70 percent
of the district’s revenue comes
from property taxes, this becomes
a factor in lowering the
debt. From the 2018 budget to
the 2019 proposed budget, tax
revenue has increased by $1.6
million. While the School
Board has not set the 2018
tax levy yet, the FY2019 budget
is based on a 2.1 percent
increase in the current taxes,
plus taxes on new property
growth. Cauffman said he expected
the CPI to be around 2
percent in the future.
The district plans to increase
the operating surplus
by 3 percent each year as the
district builds the fund balance
to $31 million in operating
funds. Ideally, the district
would reach its fund balance
goal by 2026. According
to Cauffman, at the end of
FY2018 the district was at 9.2
percent for all operating funds
and at the end of FY2019 the
district is estimated to be at
12.10 percent, with an end
goal to be at 33 percent.
“The district spent more
than they took in for many
years and ran the fund balance
down to the point they
need to start borrowing to
pay expenditures,” Cauffman
said. “Now we are
spending less then we collect
and we are re-building back
the fund balances.”
Cauffman said that the surplus
from the operating fund
will go toward rebuilding the
fund balances, which will in
turn increase the cash reserve.
“As we continue to build
high cash reserves the asset
side of our financial balance
sheet will get higher, which
results in higher fund balances,”
Cauffman said. “If your
cash balance increases faster
than your debt, then your fund
balance will increase, also.”
Based on data collected and
future budget assumptions,
the financial 5Cast model is
projecting surplus budgets
over the next five fiscal years,
which will start to restore the
District’s fund balance. In
turn, this will reduce the need
for TAWs, increase the District’s
Financial Profile Score
and restore bond credit rating
down the road.
Looking ahead
According to Associate
Professor of Teacher Education
at DePaul University and
Illinois Board of Higher Education
member Marie Ann
Donovan, school districts are
limited in ways to dig out of
deficits, so the methods are
fairly standard when it comes
to paying the bills.
The most standard methods
of decreasing debt are:
Cutting what the school
board considers “extracurricular,”
or otherwise nonessential
programs; proposing
tax referenda; deferring
maintenance; consolidating
facilities; or changing school
transportation schedules.
“Chicago Public Schools,
for instance, is still dealing
with the negative effects of
closing schools,” Donovan
said.
D210 is also still dealing
with the effects of closing Lincoln-Way
North. Cauffman
said that closing North has
saved the district over $5 million
annually. North is considered
a capital asset that is being
paid off by a separate tax
levy; however, even though
the school isn’t being used,
it still has to be maintained,
which is costly. The FY2019
budget includes $59,000 for
security/maintenance staff;
$112,000 for cleaning, repairs
and maintenance; and
$246,000 for utilities.
As for the plausibility of
Lincoln-Way getting out
of debt within the next 10
years, Donovan said that it
depends on several factors,
such as how much debt the
district is in and what can be
cut to save money.
“Districts in Illinois held
hostage by the over two-year
budget stalemate drew down
Spending breakdown
A quick look at what D210
spends its budget on
Education/Salaries:
$65M
Debt Service: $9.4M
Operations and
Maintenance: $9.2M
Working Cash: $2.3M
Transportation: $2M
Tort: $732,835
Capital Projects:
$681,512
Municipal retirement/
Social Security:
$418,936
Projected Operating
Fund Balance fiscal year
2019: $10.6M
All Fund Summary Total:
$202.7M
on their reserves to such an
extent that, for some, there’s
nowhere else they can cut
or borrow from, and their
bonding options are limited,”
Donovan said.
Cauffman said at the Aug.
30 board meeting when he
presented a fiscal year worstcase
scenario that since more
than 70 percent of the budget
is salaries and benefits, a compromise
on cuts would have to
be made there first if the need
would arise for such cuts.
“If district revenue was not
enough to fund expenditures
the first reduction (shortterm)
would be to reduce
capital expenditures then reduce
staff cost for long-term
savings,” Cauffman said.
Donovan said that school
districts can overcome debt,
some with more sacrifices
than others, but it takes time
to do so. It is less of a race and
more like a crawl to get back
on track over time, she said.
“The way district administrators
and school boards
think, as they climb out of
debt, is that you’re playing a
long game — i.e., five years
Please see D210, 9