Cary Grade School District 26 Board President Scott Coffey took a look at the Crystal Lake High School District 155 budget and offers the following observations under this article:
One of the district’s key problems is inflated teacher salaries which is self-inflicted.
In fact, the levy presentation indicated that one of the two main reasons for the max levy request was the contractual increases built into the teacher’s contract.
This is further exacerbated by the relentless decline in enrollment.
The impact of de-leveraging is crushing when the Board fails to adjust appropriately.
I don’t fault the Board for hiring an independent consulting firm to analyze facilities options.
Neither the administration or the board members have the capability to adequately perform that analysis.
What I do fault the Board on is the complete failure to move forward upon the recommendations generated from the study.
It is completely clear that one of the buildings needs to be closed due to declining enrollment and the significant future capital expenditures that will be required in a building like CL Central HS.
As to the study’s recommendation to outsource food service at the remaining two schools, the Board completely screwed that up as well.
They voted to outsource the service but failed to eliminate the 16+ district food service positions at those two schools.
So the savings will be ZERO.
I spent some time on the phone with their CFO on this topic and I give him credit for trying to defend the indefensible.
Which brings us to the second reason identified for the max levy request, which was the need to fund a significant stream of capital expenditures over the next 6 years totalling $48.8 million.
This is on top of the $45+ million in CapEx the district spent over just the past 4 years.
That’s $94.2 million over a 10 year stretch.
In fact D-155 issued $19 million in debt in ’14 and ’15 to provide the cash necessary for some of those projects.
These bonds won’t be paid off (or come off the tax levy) until 2033.
I seriously question the wisdom of issuing 20-year debt with interest rates maxing out at 5% when the district is sitting on more than $100 million in Cash yielding less than 1%.
This voracious pace of capital spending is a serious management problem.
D-155 spent $11.1 million last year and is prepared to spend at least $11.3 million this year.
I asked the CFO when the last time the Board approved a Request For Qualifications for architectural services.
He did not know.
This is something Boards should do periodically, and, I think, a part of the problem.
The district’s architects have been a significant beneficiary of the district’s robust capital spending the last several years.
They have been receiving approximately $1 million/year in fees over the last 4 years per the district’s Annual Statement of Affairs reports.
Thus, it should come as no surprise that the key document, the Facilities Condition Analysis report (FCA), produced by the architects, would suggest spending another $48.8 million over the next 6 years.
This FCA report provides the foundation for the justification of the levy request presentation.
Two problems exist for using it in this manner, other than the obvious conflict of interest in the firm that produced it, is that:
1) The administration adopted the numbers without evaluating, adjusting or editing any of the proposed projects which is standard practice. They incorporated them into the levy presentation as published. And,
2) The FCA report has not yet even been presented to the Board for review. So, the Board voted to increase our taxes the maximum allowed under the law predicated on projections from a report that they have not yet seen or approved.
Lastly, regarding any discussion on fund balance levels, it looks like D-155 finished FY17 with a fund balance of $55.1 million, subject to any audit adjustments.
It should be noted that D-155 employs a levy revenue recognition accounting principle of deferring 100% of their levy revenue.
In other words, the annual levy of roughly $73 million, of which half is received in June of 2017 and the remaining half is received in September of 2017, is entirely deferred into the 17-18 school year even though half of it was received in the 16-17 school year.
Many districts utilize a 50/50 recognition principle based upon constructive receipt of that first levy payment.
The effect of a 100% deferral principle is to understate year-end fund balance, in this case about $36.5 million.
The deferrals explain most of the variance between the district’s usual Cash balance of $100+ million at year-end and its Fund balance of $55-$60 million.