Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, December 19, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by a Truth in Taxation (tax levy) hearing at 6:45 in the gymnasium.  The Truth in Taxation hearing will then be followed by the regular Board Meeting at 7 p.m. All of the meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here. In addition, for those who are interested, click here for information regarding issues that will be discussed at the Committee of the Whole Meeting and the Board Meeting, and click here for the information that will be discussed at the Truth in Taxation (tax levy) hearing.

Tax Rates Set to Rise With or Without Referendum

Sometime in the next few years, the taxpayers of Minooka CCSD 201 will be asked to raise their own property tax rates.  Yes, it's coming.  If you attend the Finance Committee meetings, you can already here talk of it.  Oh sure, there will be talk of deficit reduction, but the real plan in the end will be to ask the taxpayers for more money (it seems like this is always the plan whether the government body be federal, state, or, in this case, local).

Well, regardless of the outcome of a possible future referendum, Minooka CCSD 201 tax rates are already set to rise.  Why?  Because of the current bonded indebtedness of the school district and the slow growth (and, in some recent years, decreases) in equalized assessed valuation (EAV).  You see, when the school district issued the bonds to build the two new schools (Jones and Minooka Intermediate School), add on to Minooka Elementary School and renovate what is now the Minooka Primary Center, the district and its financial advisors projected that the EAV of property within the school district would increase at a rate of 8% per year for the next twenty years.  As it turns out, this was a "pie in the sky" projection.  Perhaps this was another instance of "normalcy bias" since the EAV had been growing at such a rate during the housing bubble.  Perhaps this was done because it made the resulting bond and interest tax rate appear to remain stable throughout the payback period of the bonds.  In either case, projecting such a growth rate to continue for that time period was, at best, wishful thinking.

Unfortunately, reality intervened, the housing bubble burst and the EAV did not continue to grow at the projected rates.  In fact, in each of the last few years, the EAV has dropped.  As a result, the bond and interest tax rate (only one component of the total tax rate of the school district) must increase in order to compensate.  The school district's financial advisors recently issued a new chart of the Minooka CCSD 201 current bond and interest payments based on a revised projection of a 2% EAV growth rate.  Even this may be optimistic, since the EAV is projected to drop again next year and may remain flat for a few years after that.

What this means is that, even assuming that the tax rates for the other funds remain the same, the district's total tax rate will increase each and every year for the foreseeable future.  This increase will occur automatically since by law the district must levy sufficient funds in the bond and interest fund to pay the then current principal and interest payments on the bonds each year.  Based on the projected bond and interest tax rates, the projected implied total tax rates (assuming tax rates for the other funds remain the same) are as follows:

Fiscal Year	B&I Tax Rate	Implied Total Tax Rate
2013	0.5306%	2.9630%
2014	0.5686%	3.0010%
2015	0.5993%	3.0317%
2016	0.6366%	3.0690%
2017	0.6741%	3.1065%
2018	0.7152%	3.1476%
2019	0.7653%	3.1977%
2020	0.8094%	3.2418%
2021	0.8568%	3.2892%
2022	0.9074%	3.3398%
2023	0.9539%	3.3863%
2024	1.0061%	3.4385%
2025	1.0739%	3.5063%
2026	1.1340%	3.5664%
2027	1.2108%	3.6432%
2028	1.2927%	3.7251%
2029	1.0661%	3.4985%

Ouch! . . . Illinois Makes Forbes' List of "Death Spiral" States

Click here for a recent article which lists Illinois among eleven "death spiral" states.  I must warn you, however, that the article is pretty harsh.

Next Minooka 201 Finance Committee Meeting

The next meeting of the Minooka CCSD 201 Finance Committee will be Wednesday, December 5, 2012. The Finance Committee meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. Finance Committee meetings are open to the public, so everyone is welcome to attend. The Finance Committee will be discussing a new deficit reduction plan to further address our operating deficit.  So, if you want your voice heard during the process, you may want to attend the Finance Committee meeting.  The agenda for the meeting is available here.

As an informational reminder, here is a link to the Minooka CCSD 201 budget for fiscal year 2012-2013, as well as a link to a previous post regarding the financial projections which were presented to the Finance Committee this past January.  We now know that the EAV (the property value upon which property taxes are based) in the district fell by roughly 8% in 2011, whereas the projections had assumed that the EAV would be stable.  Therefore, updated projections would reflect a bleaker local revenue picture than previously projected.

There are really only two courses of action open to the school district.  The first course of action is to make the needed cuts in order to bring our spending into line with our realistic revenues under the current property tax rates.  The sooner these cuts are made, the smaller the cuts will need to be since their effects would be compounded over time.  If the district were going to opt for this course of action, what would be needed would be a complete top to bottom review of the district budget.  Every dollar that is being spent would be questioned.  Every opportunity to save money would be explored.  The current deficit is approximately 5% of the total budget.  Which means that for every dollar that the school district spends, it would have to find a way to save 5 cents.  The second course of action is to refuse to make the needed cuts (or make largely symbolic cuts) and hope that the voters in the district will vote in favor of a referendum to raise their tax rates.  Of course, if the voters vote down the referendum, then the school board and the school district will be faced with making drastic cuts quickly.  If this is the situation that we find ourselves in a few years from now, it will not be the fault of the voters but rather the fault of the school board.

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, November 28, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by the regular Board Meeting at 7 p.m. Both meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here.  In addition, for those who are interested, click here for information regarding issues that will be discussed at the Committee of the Whole Meeting and the Board Meeting.

Head of TRS Says Cuts to COLAs Are Inevitable

In a recent interview with Crain's Chicago Business, Richard Ingram, the executive director of the Illinois Teachers' Retirement System (TRS), stated that cuts to the cost-of-living adjustments of pensioners are inevitable.  According to Ingram, in order to ensure the solvency of the TRS pension fund, the state will have to somehow reduce COLAs.  In what could only be called a moment of brutal honesty, Mr. Ingram is quoted as having said the following: “It's very likely that benefits are impaired today, that we're looking at the possibility in the future of not being able to pay them.”  Translation: the state will not be able to fulfill the promises that it has made in the past.  If you are a participant in this pension system, you might not want to be solely dependent on TRS for your retirement.

Click here to read the entire article.

Government Transparency and the Illinois Open Meetings Act

A recent law passed in Illinois requires that all school board members complete training on the Illinois Open Meetings Act.

The problem with the Illinois Open Meetings Act is that it is woefully outdated.  Given the current state of technology (internet, free PDF readers, camcorders, YouTube, etc.), if the politicians in the State of Illinois were serious about government transparency, each entity of state and local government would be required to do the following (at a minimum):

1.  Post information (including board packets or the like - minus the information that is subject to privacy protection or the subject of executive session) online at least two days prior to public meetings.  This would be in addition to the agenda that is required to be posted pursuant to the Open Meetings Act.
2.  Post video recordings of meetings to their websites or to a service like YouTube.  This would be in addition to the minutes that are required to be posted pursuant to the Open Meetings Act.
3.  Post all financial information to their website and update such information at least monthly.

Given the technology available today, there is no reason that each and every citizen shouldn't have this information available to them at their fingertips.  A person should not have to submit a Freedom of Information Act (FOIA) request for anything but the most esoteric information.  If we really want openness in government, we need to bring our Open Meetings Act into the 21st century.

It's Official, Illinois on Road to Ruin

A new report has recently been published by the State Budget Crisis Task Force (apparently you need a task force to tell you what someone who is good in math could tell you).  The State Budget Crisis Task Force is co-chaired by Richard Ravitch (former Lieutenant Governor of New York) and Paul Volcker (former Chairman of the Federal Reserve Board of Governors).  Their new report on Illinois' budget crisis does not paint a pretty picture.  Some highlights from the report summary include the following statements:

"Illinois' budget is not fiscally sustainable." (p. 7)

"Illinois has the worst unfunded pension liability of any state . . . . Illinois will not be able to fund other priorities unless it adopts serious pension reform." (p. 7)

"Illinois' debt is also crowding out the budget." (p. 7)

"It would be better for Illinois to start on a long-run path to a sustainable budget than to live beyond its means for several more years and then face a sudden, painful reckoning." (p. 8)  This could also be said for our school district (in fact, I have been saying this about our school district since I was elected to the board in 2009).  But, it is in the nature of most people to seek to delay the painful reckoning until it can no longer be delayed.  By then it is so large that drastic measures are required.

A couple of other points that are mentioned later in the report:

"Financing deficits, particularly using debt as if it were an element of revenue, is bad financial and budgetary practice." (p.32)

". . .funding pensions, Medicaid, and debt service has diminished Illinois' ability to fund education." (p.37)  In other words, we have starved our future to feed our present.  Can you say "generational theft?"

To read the full report, click here.  To read a discussion of the math involved involved in the problem, click here.

Anothery Canary in the Coal Mine: San Bernardino, CA

Is this the ultimate outcome of the public pension crises?  One day, when the money runs out, when the bond buyers will no longer finance the deficits, and when taxpayers refuse to pay more in taxes, do the pension payments just stop?  While the article is talking about a city (which can file for bankruptcy protection under current law) and not a state (which cannot file for bankruptcy protection under current law), perhaps Illinois politicians should redouble their efforts to reform the state pension systems, for the sake of the pension participants, bond holders (which are, interestingly enough, often pension funds themselves), and taxpayers.  Every day of delay merely makes the problem that much larger (actually, this could also be said of our own school district's deficit spending).

Budget Ideas Anyone?

It should be no secret that Minooka CCSD 201 currently has a multi-million dollar operating deficit and that these deficits are projected to continue for the foreseeable future.  So, the Finance Committee held a meeting on October 18, 2012 to talk about a deficit reduction resolution (the next meeting will be December 5th at 6pm).  Click here to review the proposed deficit reduction resolution.  The proposed deficit reduction resolution purports to save $902,000.  Note, however, that over half of this number ($500,000) comes not from new savings but rather from money that has already been saved in the education fund.

If anyone has any deficit reduction ideas, please send them (either by comment or email).  While coming up with ideas, it may be instructive to go through the budget line by line to come up with savings.  Click here for the detail of the 2013 budget.

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, October 24, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by the regular Board Meeting at 7 p.m. Both meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here.

What Does Fiscal Responsibility Look Like?

At a meeting on September 19, 2012, the school board in Quincy, Illinois (Quincy Public School District #172) passed resolutions stating that they were going to end the all too common practice of end of career salary bumps for district personnel (you can read the resolutions here).  In the resolutions, the Quincy school board stated their reasoning for this move.  The resolutions state that "the [Board of Education] believes the practice of pre-retirement compensation increases to staff members is a contributing factor to the current economic crisis of the [Teachers' Retirement System]" and further that "the [Board of Education] believes it fiscally appropriate to work for the expeditious elimination of such pre-retirement compensation increases as they exist today within the Quincy Public Schools, in order to strengthen the financial condition of the Quincy Public Schools, contribute to the strengthening of the [Teachers' Retirement System] and contribute to the financial integrity of any other retirement systems affected by such increases."

So, at least one Illinois school board is considering the affect that their actions have not only on their own school district (and, therefore, local taxpayers) but on the pension systems as a whole (and, therefore, participants in the pension systems as well as local and state taxpayers).  But, we must keep this in perspective, since these glimpses of fiscal responsibility are few and far between.

For a refresher on our own school board's actions with regard to these matters, see here, here and here.

School Board Nominating Petitions Available

If anyone is interested in serving on the Minooka CCSD 201 school board, nominating petitions are now available for the April 9, 2013 election. Four full terms will be open on the Minooka CCSD 201 school board. The terms of the following board members expire on April 9, 2013: James Satorius, Jeff Budde, Dave Carlson and Doug Martin. Candidates elected on April 9, 2013 will serve a four-year term ending in April 2017. Completed nominating petitions must be returned no earlier than 8am, Monday, December 17, 2012 and no later than 5pm, Monday, December 24, 2012. Click here to be taken to the District information release regarding the nominating petitions.

On the Subject of Property Taxes

Since most of the funding for our schools comes from local property taxes, perhaps we should take a minute to think about the subject of property taxes.  Property taxes are not really "property taxes" at all.  They are, in reality, a form of income tax.  What I mean is that while the tax that you pay is certainly based upon the value of a piece of real property, you do not pay them by selling a piece of that property or deeding a piece of that property to the taxing body.  You pay the tax out of your income.  It is, therefore, a type of income tax, and a highly regressive one at that (meaning that, on average, the lower your income, the higher the percentage of that income is taken in property taxes).  Therefore, when property taxes are increased, it typically has the most impact on those least able to afford the increase. 

It is true that you get a deduction on your state and federal income tax return for the property taxes that you paid.  But a "deduction" is different from a "credit."  A "deduction" does not reduce your income taxes dollar for dollar the way that a "credit" does.  A "deduction" merely reduces your taxable income.  So, if your tax rate is 15%, for example, your income taxes are reduced by 15% of the amount of property taxes you paid.

If you rent property, such as a home or an apartment, you may think that you are not affected by property taxes.  But, it doesn't matter if you own property or rent property, you still pay property taxes (out of your income).  If you are a renter, of course, you do not get a property tax bill, but your rent is based in part upon the property taxes that the property owner pays.

Next Minooka 201 Finance Committee Meeting and Our Continuing Deficit Problem

The next meeting of the Minooka CCSD 201 Finance Committee will be Thursday, October 18, 2012. The Finance Committee meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. Finance Committee meetings are open to the public, so everyone is welcome to attend. The Finance Committee will be discussing a new deficit reduction plan to further address our operating deficit.  So, if you want your voice heard during the process, you may want to attend the Finance Committee meeting.  Of course, you could wait until a future board meeting when the deficit reduction plan is voted on, but at that point it might be too late to have much of an impact.

As an informational reminder, here is a link to the Minooka CCSD 201 budget for fiscal year 2012-2013, as well as a link to a previous post regarding the financial projections which were presented to the Finance Committee this past January.  We now know that the EAV (the property value upon which property taxes are based) in the district fell by roughly 8% in 2011, whereas the projections had assumed that the EAV would be stable.  Therefore, updated projections would reflect a bleaker local revenue picture than previously projected.

Lists of Bills and Treasurer's Reports

For those who are interested, here is a link to the most recent Minooka CCSD 201 lists of bills and treasurer's reports by month.

Testing Gone Wild . . .

For those who feel that our schools devote too much time to testing, you "ain't seen nothin' yet."  Take a look at this article, which talks about potentially testing 5-year-olds to determine their ability to succeed in college and career.

Next Minooka 201 School Board Meeting and Budget Hearing

The next meeting of the Minooka CCSD 201 school board is Wednesday, September 26, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by a Budget Hearing at 6:45 p.m. in the gymnasium.  The Budget Hearing will be followed by the regular Board Meeting at 7 p.m. Each of the meetings is open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here. 

The proposed budget for fiscal year 2012-2013 can be found here.

Illinois Debt Downgraded . . . Again

So, after another failure of Illinois politicians to address the ever-growing pension problem, Standard & Poor's (one of the largest credit rating agencies) has downgraded Illinois debt from "A+" to "A."  (see here)  Now an "A" might seem like a good grade, but when it comes to ratings of state debt, it is atrocious.  Only California has a lower debt rating than Illinois (these two states seem to be competing for last place).  Standard & Poor's has also attached a "negative outlook" to the rating, which means another downgrade may come soon.  What does this mean for Illinois?  It means that Illinois is going to have to pay more to borrow money.  For better or worse, bond investors pay a great deal of attention to debt ratings.  When ratings go down, they demand a higher interest rate on the debt of the rated entity.  Which in turn means that Illinois' fiscal problems will grow worse.  Since Illinois is living on borrowed money to fund its spending and pensions, the "hole" just got bigger.  This is a small glimpse of what a "debt-spiral" looks like.  If Illinois politicians continue to ignore the problem, the ratings will continue to drop, the cost of funding will continue to rise, the problem becomes bigger, rinse and repeat.  Once a "debt-spiral" gets started, delay only increases the difficulty and pain of pulling out of the "debt-spiral."  Time works against an easy solution.  As time goes on, the reforms to the pension system will have to be increasingly more drastic in order to fill the "hole."  If one wants an example of a more advanced stage of a "debt-spiral," one merely needs to look to Greece.

Update:  Since I mentioned California, here is the latest news on pension reform out of California.   

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, August 22, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by the regular Board Meeting at 7 p.m. Both meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here.  You may notice that one of the items on the agenda is the Fiscal Year 2013 Tentative Budget.  For a copy of a power point presentation regarding the proposed budget and the proposed budget see here.

A "Date with Destiny" or Another Opportunity to Kick the Can Down the Road?

So, Governor Quinn has called a special session of the Illinois General Assembly and set a vote on pension reform for August 17th.  Governor Quinn has called this a "date with destiny" (see here).  Depending on whose figures you believe, Illinois has anywhere from an $83 billion to $203 billion unfunded pension liability (see here).  It is getting to the point where Illinois will soon be spending more on pensions than on education (see here).  Increasingly, pension payments are "crowding out" spending on other state services (see here).  This fiscal calamity that is staring the Governor and the General Assembly in the face, however, may not be enough (at least, not yet) to prod politicians to actually do anything about pension reform, however.  The politicians already seem to be lining up their excuses for kicking the can down the road one more time (see here).  Unfortunately, every time that Illinois politicians kick the can further down the road, the problem continues to grow, and the pain necessary to alleviate the problem (including the pain for those who depend on state pensions) continues to grow.  Not only does the unfunded liability continue to grow, but the cost of financing state deficits will grow as bond rating agencies downgrade Illinois debt (see here).

You may not be able to depend on Illinois politicians to tackle the problem of pension reform any time soon, but you can depend on at least one thing in this mess: pension liabilities that are not sustainable (and every rational person on both sides of the aisle from the Governor's office to the General Assembly agrees that the pension liabilities are not sustainable) will not be paid in full.  Kicking the can down the road does not help anyone (except maybe the politicians, who seem to care only about their next election).  It does not help the taxpayers, who can only look forward to their taxes being raised yet again.  It certainly does not help the people that depend on the pension liabilities being paid, who may wake up one day to only to find out that the pension they relied upon is being cut drastically (one town in Alabama stopped paying pensions entirely, see here).  And it most certainly does not help the younger public sector workers (teachers, firefighters, policemen, etc.) whose positions are being cut because pension obligations are taking a larger and larger share of state and local budgets (see here). 

Next Minooka 201 School Board Meeting or Par for the Course Part II

The next meeting of the Minooka CCSD 201 school board is Wednesday, June 27, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by a Budget Hearing at 6:45 p.m. in the gymnasium. The Budget Hearing will be followed by the regular Board Meeting at 7 p.m. Each of the meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here.

You may notice that one of the items on the agenda is the retirement of Assistant Superintendent Stef Palaniuk after the 2015-2016 school year. This may seem like an innocuous agenda item, but instead it will be another instance of padding an administrator's salary for his last years of service and consequently his pension (for a discussion regarding this practice see Par for the Course). The school board is likely to vote to give the Assistant Superintendent a package that is substantially similar to the one recently given to the Superintendent (including four annual raises of six percent per year, severance bonuses for a number of years after retirement, and health care coverage until he is eligible for Medicare). This practice which pads an administrators' pension is one of the reasons that among the Illinois pension reform proposals is a plan to shift the pension costs of local teachers and administrators to the local school district (see here and here).

A reason that is commonly given to support this practice is that this is "the same deal that the teachers receive pursuant to their contract."  While this may seem like a fair point, it is not the whole story.   The provision of the teachers contract that is being referred to is an early retirement incentive (see page 29 of the teachers contract).  This provides an incentive for veteran teachers to retire.  When a veteran teacher (often being paid in excess of $70,000 per year) retires at the end of their many years of service, they are typically replaced by a recent college graduate who enters the salary schedule at a much lower rate of pay (close to $40,000 per year).  This early retirement incentive was put in place so that the district can SAVE money.  But, when an administrator is replaced, the new administrator's salary is typically based upon the previous administrator's last salary.

So, padding the administrators' salaries at the end of their careers is just throwing the taxpayers' money at them with NO SAVINGS and no real advantage for the district.  In other words, the district gets nothing of value for this give away.  In addition, the reality of the situation is that this practice harms the school district.  Many people act as if the amount of money available for public services is infinite, but I assure you that it is not.  And whether the additional money for these padded salaries and padded pensions comes out of local district money or state money, the truth is that there is less money to be spent in the classrooms.

Therefore, this practice directly harms education in order to enrich a small group of people.  If the local district had to pay the increases to the TRS pension liabilities due to this practice, it is very likely that districts would engage in the practice much less often.  So, we can talk all we want about the unsustainable spending practices that occur in Springfield or Washington, D.C., but if we want to find unsustainable spending practices, we need look no further than our own local school district.

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, May 23, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by the regular Board Meeting at 7 p.m. Both meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here.  You may notice that one of the items on the agenda is the second reading of the new Risk Management Plan (see here for a discussion of risk management plans and tort immunity levies).

Risk Management Plans: Legitimate Policy or End Run Around Tax Caps

At the last meeting of the Minooka CCSD 201 school board, the superintendent presented a new Risk Management Plan for the district (see here).  So what is a risk management plan?  Is it a legitimate policy tool to reduce the risk associated with running our schools or is it an attempt at an end around the tax caps placed on certain funds in the school district's budget (or is it a combination of the two)?  And why is this coming up now?

To answer these questions, you have to know a little bit about school finance and how an Illinois school district raises revenue.  You also have to understand that our school district raises the overwhelming majority of its funds (80 to 90%) through local property taxes.  Now, if you own property in the district, you get a property tax bill every year which includes an entry that shows the tax rate for Minooka CCSD 201.  For example, that tax rate for last year (if you lived in Grundy County) was 2.95428 (this is the number you get when you add the rate for "Minooka Grade 201", which was 2.87206 with the rate for "Social Security" listed just below "Minooka Grade 201", which was 0.08222).  Well, this one number really consists of a combination of tax rates for each of the various categories of spending that the district has.  You can think of these as buckets.  The buckets are labeled: education; operations, building and maintenance; transportation; working cash; municipal retirement; social security; tort immunity; special education; fire prevention and safety; lease purchase; and bond and interest.  Now some of these buckets (or categories) have rate limits that are set by law and can only be increased by the voters of the district pursuant to a referendum.  Others do not have limits that are set by law.  The categories and their limits for Minooka CCSD 201 are as follows (the rates are per $100 of equalized assessed value):

Education: 1.62
Operations, building and maintenance: 0.25
Transportation: 0.12
Working cash: 0.05
Municipal retirement: none
Social security: none
Tort immunity: none
Special education: 0.02
Fire prevention and safety: 0.05
Lease purchase: 0.05
Bond and interest: none

You will notice that the funds that do not have tax caps are municipal retirement, social security, tort immunity and bond and interest.  The amounts levied for municipal retirement and social security are merely a function of the school district's payroll and so there is not much here to play with.  The amounts levied for bond and interest are a function of the school district's current indebtedness.  The county clerks are required to levy enough in the bond and interest category to pay the current principal and interest payments on the school district's debt.  Since the amount of this debt is limited by statute and the debt typically can only be issued pursuant to a referendum of the voters (but see my post on the Back Door Referendum), the amount levied for this fund is subject to certain controls.  You may notice if you look at one of the levies approved by the school board, that the school board does not set a levy amount for this fund.

That leaves the tort immunity fund.  Now, the purpose of the tort immunity fund is two-fold.  The first is reactive and the second is proactive.  The reactive part is to allow the school district to raise money to pay tort claims for which it becomes subject pursuant to a judgment as a result of a lawsuit.  The proactive part is to allow the school district to raise money to pay for insurance to cover such tort claims and to pay for risk management activities to decrease the chances of such tort claims in the future.

There is, however, a potential for abusing the tort immunity fund as a way to raise revenue that is more properly categorized under one of the other funds and therefore create an end run around the statutory tax caps.  This has been documented by commentators (here and here), as well as being remarked upon by the Illinois legislature itself ("Notwithstanding the extraordinary nature of the [tort immunity tax] . . . it has become apparent that some units of local government are using the tax revenue to fund expenses more properly paid from general operating funds."  745 Illinois Compiled Statutes 10/9-107).

At the end of the day, as long as a school district is raising revenue in the tort immunity fund in accordance with the letter and spirit of the law, the school district should not have any problem.  However, if the school district is using the tort immunity fund to pay for items that really should be paid for with another fund, then the school district has a problem.  A taxpayer has the right to sue the school district for return of the improperly levied funds.  Now, you might think that the likelihood of recovery on a lawsuit of this nature is slim.  But there have been some high-profile cases in which taxpayers have won and forced the school district in question to return the improperly levied funds.  (See here and here).  Notably, the Illinois State Board of Education has even cautioned school districts about their use of tort immunity levies in the wake of the Freeport and Quincy cases (see here).

So, why is this topic coming up now here at Minooka CCSD 201?  Well, probably because the school district is levying taxes at the maximum rate in each of the funds that has a rate limit.  In addition, the district is currently operating at a deficit with more deficits as far as the eye can see.  Faced with that situation, what is a district likely to do? 

Par for the Course

Dramatically increasing a superintendent's salary at the end of his career so as to pad his retirement is nothing new in Illinois.  Rather, it is par for the course.  Illinois seems to have a tradition of doing just this, among our other illustrious traditions.  It is one of the reasons (among other reasons, like the state failing to pay its required contributions in full over the last thirty or so years) that the Teachers' Retirement System (TRS) is in financial trouble.  In fact, TRS is projected to become insolvent by 2029 according to Executive Director Dick Ingram (see here).  School districts all over Illinois have engaged in this practice of increasing salaries and thereby padding retirement pay (you can read about it here).  This may be one of the reasons that Governor Quinn has proposed in his pension reform plan to shift the state's responsibility for TRS contributions to the local school districts (click here for analysis of the pension reform proposals).

You see, this problem of school districts dramatically increasing salaries just prior to retirement in order to pad pensions has been going on for a long time.  Because the burden of those increased pensions is borne by the state, the state has tried to rein in the practice.  In 2005, they passed a law saying that the local districts could continue to do this but that a district would have to pay a penalty (meant to help the state bear the burden of the increased pension) for any raise greater than 6% per year.  Since the passage of that law, it is interesting to note just how many of these end of career raises were exactly 6% per year (the recent proposed contract for the Minooka CCSD 201 superintendent contains annual raises of exactly 6% per year).

Now 6% per year is still a large number (and remember this is just the increase in salary--it does not include the three years of retirement payments or post-retirement health insurance costs) when your economy and, therefore, tax revenues are growing at a much slower rate.  It is a very large number when, as is the case in Minooka CCSD 201, the equalized assessed valuation upon which property tax revenue based is dropping (the EAV of the district dropped almost 6% from 2009 to 2010 and nearly 10% from 2010 to 2011).  All the talk about our district's budget over the past three years has been about how we are projecting sustained and growing deficits as far as the eye can see (remember deficits, debt and insolvency are not the same thing, but deficits over a sustained period of time certainly create debt and insolvency once your cash balances are depleted).  In addition, as we will see in the near future, even these projections do not present an accurate picture since the assumptions of stable or growing EAV upon which they are based are already proving to be seriously flawed.  As many of you are aware, over the course of the past few years, our school district has instituted many deficit reduction measures from saving money on our health insurance costs, increasing our student registration fees, and, unfortunately, reducing teaching and support staff positions.  And, based on the budget realities going forward, there will be many more such hard decisions to come.  But, the taxpayers and parents of Minooka CCSD 201 can rest assured that the district has taken care of its superintendent both now and in retirement (see previous post).

Superintendent Offered New Contract

At yesterday's meeting of the Minooka CCSD 201 school board, the school board voted (by a 5-2 vote) to offer the current superintendent, Mr. Al Gegenheimer, a new four-year contract (click here for a copy of the proposed contract; see subsequent post for more information).  Those voting "yes" were Skwarczynski, Hannon, Budde, Carlson and Satorius.  Those voting "no" were Brozman and Martin.  The new contract, which purports to take Mr. Gegenheimer up to his retirement, includes a 6% raise for each of the four years of the contract.  This is after the school board voted at the January 2012 meeting to increase the superintendent's salary by 3% for the 2011-2012 school year, retroactive to July 1, 2011 (another 5-2 vote, with the same members voting "yes" and the same members voting "no").  The salaries over the four years of the new contract would be as follows (the superintendent's current salary for the 2011-2012 school year is approximately $136,269):

2012-2013:  $144,445
2013-2014:  $153,112 (approximate based on 6% raise)
2014-2015:  $162,298 (approximate based on 6% raise)
2015-2016:  $172,036 (approximate based on 6% raise)

A little quick math tells you that the final projected salary of $172,036 represents an increase of approximately 26% over the superintendent's current salary.  If you include the 3% retroactive raise from January of this year, the $172,036 represents an increase of approximately 30% over the superintendent's salary at the end of the last school year. 

In addition, the new contract provides for three annual post-retirement payments equal to 20% of the superintendent's final annual salary.  So, assuming a final salary of $172,036 as projected above, the three annual payments would be $34,407 each.  That is, the taxpayers of Minooka CCSD 201 will be paying the then former superintendent $34,407 each year for three years at the same time he is collecting a pension of up to 75% of the average of his highest four years of salary from the Teachers' Retirement System (approximately $118,480 based on these assumptions).  Keep in mind also that in addition to paying the then former superintendent, the taxpayers of Minooka CCSD 201 will be paying the salary of a new superintendent as well.

The contract also provides for the school district to provide the superintendent with health insurance (hospitalization/major medical) during his retirement until such time as he qualifies for Medicare (typically at 65) or becomes employed by another employer offering health insurance coverage.  This means that if the current superintendent retires at the end of this agreement, the school district would be obligated to provide him health insurance for approximately five years.  At the time that the proposed contract was voted on, it was unclear whether this provision was legal.  As a consequence, the motion that was voted on provided that the proposed contract be accepted pending further consultation with the school district's attorneys.  Since the proposed contract was presented to the school board for the first time at some time after 10 p.m. on the night of the meeting, it would have been difficult to consult the school district's attorneys before the vote was taken.

For those who like to put the pieces together and see the big picture, see my previous posts regarding financial projections, unsustainable spending, and underfunded pension systems.  The most difficult thing about being an elected official is that it is easy to spend other peoples' money (Margaret Thatcher had a famous saying about spending other peoples' money).  It is much more difficult to enforce discipline.  There is something akin to a moral hazard at work.  If you need proof, you can merely look to the budget deficits of the federal, state and local governments.

Bumps in the Road: Part 2

So here is Governor Quinn's pension reform plan.  As you can see, the plan calls for an increase of 3% to employee contributions, reduction of the cost of living allowance (COLA), delay of COLA, increase of the retirement age to 67, and shifting the state's current payment responsibility to local school districts, community colleges and public universities over a period of years.  Of course, this is merely a plan at this point and will be subject to political deal-making and subsequent modifications.

Next Minooka 201 School Board Meeting and Superintendent Contract

The next meeting of the Minooka CCSD 201 school board is Wednesday, April 25, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by the regular Board Meeting at 7 p.m. Both meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here.  You may notice that one of the action items on the agenda for the regular Board Meeting is the superintendent's contract.  Hiring and reviewing the superintendent is one of the most important functions of the school board (some would say the most important function).

Bumps in the Road

I saw this article about municipal defaults, and it reminded me about the bumps in the road.

Seeing the Bumps in the Road

What happens when the future does not look like the recent past? Psychologists tell us that human beings are subject to something called "normalcy bias." In essence, it means that human beings believe that their future will look a lot like their past (typically, their more recent past). According to the "normalcy bias" theory, we humans have a hard time seeing the bumps in the road ahead, and the larger the bump, the harder time we have seeing it (as counterintuitive as this may seem).

So why do I bring this up? Because, it has something to do with what is likely coming down the road in terms of our school district. In order to see what the future holds for our school district, we have to see beyond the borders of our district and look at the bigger picture (i.e., what is happening at the state level and the federal level). Most of us know that both the State of Illinois and the United States government have budget problems. But, how many have thought about the true extent of those problems, the likelihood of any constructive solutions to those problems and what this means for our school district? If we are being brutally honest with ourselves, we must accept that due to political constraints, neither the state nor the federal government are likely to solve their budget problems until they are forced to do so.

Illinois will be forced to confront its budget problems much sooner since Illinois does not have the ability to print money like the federal government. In fact, Illinois is in the beginning stages of really confronting its budget problems. I say "confronting" rather than "solving" because many of the strategies that are being floated are methods of shifting the burdens caused by the state's profligacy to the municipalities and school districts in Illinois. So, for example, some of the strategies being discussed are (1) cutting back on transportation funding for school districts (see here); and (2) shifting the burden of teacher's pensions to the local school districts (see here and here). Other strategies would hit retired teachers directly (see here).

Now, the discussion of these strategies are largely preliminary at this point.  Some strategies will be followed and others will be discarded.  However, it should be clear that in the future (the very near future), education funding from the State of Illinois will be dropping significantly (more than it already has).  It is also likely that at the same time that the amount of state education funding is dropping, the state will be shifting additional financial burdens (at least some portion of unfunded pension burdens) to the local school districts.  We should not assume that federal funding will replace state funding, since even though the federal government can print money to finance its deficits, it can not do so without causing inflation.  Also, the federal government's budget problems are just as serious, if not more so, than those of Illinois.  For those who think that the economy is on the mend and the financial crisis is a thing of the past, all you have to do is compare the annual growth rate of federal debt (roughly 10% per year) to the annual growth rate of the U.S. economy (roughly 2 or 3% per year, if we are lucky).  Perhaps this is an opportunity for us to teach our children what it means for something to be "unsustainable."

So, what is a local school district to do?  I would suggest that Illinois school districts like ours should plan for the future by preparing for zero funding from the state and federal government.  This will, of course, imply changes to the operation of our school district.  The loss of transportation funding would be a large adjustment on its own.  The more difficult adjustment, however, would be the possibility that, in the not too distant future, the cost of all local teachers' and administrators' pensions will be borne by local school districts.  The adjustments will be even harder if we allow ourselves to be lulled into complacency by the "normalcy bias."

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, March 28, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by the regular Board Meeting at 7 p.m. Both meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here.

Minooka CCSD 201 Should Consider Incorporating Online Education

As I have written about previously, the internet has the potential to transform the way in which we educate our children. Online education continues to provide better and better educational content at ever decreasing costs. The public schools of many states have embraced online education as a way to provide traditional curricula as well as expanded class offerings in a very cost effective way. There are many ways that this can be done. Imagine, for instance, 7th and 8th grade students being able to take many of their elective classes in an online format. These could be provided in a school computer lab or students could be allowed to complete these classes on their own time. Examinations could be completed in a school computer lab where they would be observed by the computer lab teacher. There are many advantages to embracing online education. For the students, it would provide increased choice in classes as well as flexibility in completing the material. It would also expose them to a method of educational delivery which is becoming more and more prevalent at the university and high school level. For the district, the advantages might include the ability to provide education for more students with the same number of teachers and the same buildings, saving the taxpayers money both in terms of salaries and benefits and investment in new school buildings.

I believe that the district should begin to consider how online education might be implemented to provide the same or increased educational opportunities at lower and lower costs. Whether we in Minooka embrace it or not, I believe that the internet is going to transform education in much the same way it has transformed other areas of our lives. Many other states and school systems have seen the benefits and are implementing these programs.

Links to Most Read Topics

I decided to add a post with a link to the most read topics in this blog (as more posts are added, finding these posts becomes harder):

Next Minooka 201 School Board Meeting and Finance Committee Meeting

The Back Door Referendum

Link to Updated Financial Projections for Minooka CCSD 201

These posts have garnered hundreds of "views" by readers, making them the most popular posts on this blog.

Minooka 201 Salaries, Benefits and Contracts for 2012

The Minooka CCSD 201 salary, benefit and contract information for 2012 (including collective bargaining agreements) is now available. Click the following links to be taken to this information: support personnel contract, teacher contract, and administrative and non-union salaries.

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, February 22, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by the regular Board Meeting at 7 p.m. Both meetings are open to the public, and everyone is encouraged to attend. You can find the agenda for each of the meetings here.

Media and Its Effects on Our Children (Especially Our Daughters)

Sexism is still rampant in our society, and the media (TV, Internet, print, etc.) is constantly bombarding our children with messages that reinforce that sexism. Our daughters learn false messages about their place in society, messages that tend to convince them that certain roles are only open to men and that only certain behavior is appropriate for women.

Well, there is a new movie out which deals with the topic of sexism and the media. No, it is not a big budget Hollywood production. It premiered at last year's Sundance Film Festival and has received some acclaim. The movie is entitled "Miss Representation." Click here for the "Miss Representation" website to find out more about the movie and, perhaps, to find a screening.

Link to Updated Financial Projections for Minooka CCSD 201

Click here for a link to the updated financial projections which Mr. Gegenheimer presented to the Finance Committee on January 19, 2012. I encourage you to review this presentation. Pay particular attention to pages 12 and 18 of the slide show. Page 18 shows the deficits that Minooka CCSD 201 will run in the future unless we adopt additional deficit reduction measures. Page 12 shows the significant assumptions that were used to produce the projections. You should note in particular assumptions numbered 1,2 and 9. Assumption number 1 is what is, in large part, driving the deficit problem. The assumption states that our costs will increase at roughly 3% per year. Now 3% does not seem like a lot. However, 3% per year is a description of what in math is called an "exponential function." The interesting thing about exponential functions, as any math teacher can tell you, is that the quantity described by any exponential function where the growth rate is greater than 1 (such as here where the rate of growth is 1.03 per year or 3% growth per year) grows at an ever-increasing rate due to the "magic" of compounding. Click here for a graph of an exponential function, and you can visualize what I mean. This phenonmenon of exponential growth in expenses is what is bankrupting our federal, state and local governments. It comes down to a failure to control costs. Without aggressively controlling costs, the only way to stave off deficits and eventual bankruptcy is to continually increase taxes. This, of course, shifts the problem with the exponential function to the taxpayer and merely delays the inevitable, since there is only so much the taxpayer is willing or able to pay (and we should recognize that those industrial and commercial taxpayers who ostensibly don't get to vote in our elections for school board or our referenda do have the ability and willingness to "vote with their feet" and leave a district where taxes become too high for them to bear or significantly higher than other districts where they might locate). Now, while our district has a deficit problem, we do not yet have operating debt (as opposed to debt from capital improvements) nor are we anywhere close to bankruptcy. This does not mean, however, that we should not aggressively attack our deficit problem by controlling costs. On the contrary, it is precisely now that we should be making cuts, since smaller cuts now will preclude the need for larger cuts later. Assumption number 2 states that the district's equalized assessed valuation (EAV) will remain flat for three years then grow at a rate of 3% per year. The problem with this assumption is that it likely paints an unrealistic picture of the future. EAVs in Illinois are based on the market values in the prior three years, so the 2011 EAV is based on market values for 2008, 2009 and 2010. Real estate market values continued to drop throughout 2011 (as most of us know all too well) and this drop is not yet reflected in the district's EAV. The 2012 EAV will most likely be another 3 to 4 percent lower than the 2011 EAV. Even if real estate values stabilize in 2012, the 2011 decrease is not reflected in the projections. Assumption number 9 states that there will be a gradual increase in the total tax rate after the 2011 levy. There are a couple of problems with this assumption. First, this would require successive votes of the school board in each of these years. Second, without this assumption, the financial projections would be worse than what has been presented. I have asked for this assumption to be removed and the projections to be revised. I will post them as soon as they are available.

Click here for a link to the Finance Committee page on the district's website. The meetings of the Finance Committee are open to the public, and everyone is welcome to attend.

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, January 25, 2012. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. The Committee of the Whole Meeting will be followed by the regular Board Meeting at 7 p.m. Please be sure to mark your calendars. You can find the agenda for each of the meetings here.

Finance Committee Meeting Today

Sorry for the short notice, but I almost forgot. There will be a meeting of the Minooka CCSD 201 Finance Committee today, January 19, 2012. The Finance Committee meeting starts at 6:00 p.m. in the board room (the old library) at the Minooka Primary Center located at 305 Church Street in Minooka. If you want to have some input into the Minooka CCSD 201 finances, you may want to attend this meeting. There should be updated projections as to the financial position of the school district in the coming years.