Showing posts with label budget. Show all posts
Showing posts with label budget. Show all posts
Sunday, September 18, 2016
Next Minooka 201 School Board Meeting
The next meeting of the Minooka CCSD 201 school board is Monday, September
19, 2016 (regular meetings are now on Mondays instead of Wednesdays).
The Committee of the Whole Meeting starts
at 6:00 p.m. in the board room 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.
Each of the meetings is
open to the public, and everyone is encouraged to
attend. Information for the Committee of the Whole Meeting and the
regular Board Meeting can be found here. The main item on the agenda for this meeting is the budget. The district continues to pass unbalanced budgets (expenses exceed revenues). Based on the proposed budget, which I oppose, the Education Fund will be almost depleted by the end of the current fiscal year. There will be roughly $410,000 left in the Education Fund at the end of the fiscal year. As a comparison, the Education Fund had a balance of approximately $10,500,000 a mere eight years ago. After the Education Fund is depleted, if the school district does not address the deficit spending issue, they will start to raid the Working Cash fund which will set the stage for a possible "back-door" referendum.
Monday, December 7, 2015
Finance Committee Meeting
There will be a meeting of the Finance Committee of the Minooka CCSD
201 school board on Wednesday, December 9, 2015 at 6:00 p.m. in the board
room at the Minooka Primary Center located at 305 Church Street in
Minooka. The meeting is open to the public, and everyone is encouraged
to attend. You can find the agenda for the meeting here.
Thursday, October 22, 2015
Finance Committee Meeting
There will be a meeting of the Finance Committee of the Minooka CCSD
201 school board on Monday, October 26, 2015 at 6:00 p.m. in the board
room at the Minooka Primary Center located at 305 Church Street in
Minooka. The meeting is open to the public, and everyone is encouraged
to attend. You can find the agenda for the meeting here.
Friday, September 25, 2015
Next Minooka 201 School Board Meeting and Budget Hearing
The next meeting of the Minooka CCSD 201 school board is
Wednesday, September 30, 2015. The Committee of the Whole Meeting starts
at 6:00 p.m. in the board room 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. 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. In addition, you can find the background information for the meetings here.
Sunday, August 23, 2015
Finance Committee Meeting and Next Minooka 201 School Board Meeting
There will be a meeting of the Finance Committee of the Minooka CCSD 201 school board on Tuesday, August 25, 2015 at 6:00 p.m. in the board room at the Minooka Primary Center located at 305 Church Street in Minooka. The meeting is open to the public, and everyone is encouraged to attend. You can find the agenda for the meeting here.
The next meeting of the Minooka CCSD 201 school board is Wednesday, August 26, 2015. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room 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 7:00 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.
Information for the Committee of the Whole Meeting and the regular Board Meeting can be found here.
The next meeting of the Minooka CCSD 201 school board is Wednesday, August 26, 2015. The Committee of the Whole Meeting starts at 6:00 p.m. in the board room 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 7:00 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.
Information for the Committee of the Whole Meeting and the regular Board Meeting can be found here.
Friday, October 3, 2014
The Most Recent Budget Vote
At the recent Minooka CCSD 201 school board meeting on September 24, the board considered the district's proposed FY 2015 budget (see here). My thoughts regarding this proposed budget are detailed in a previous post (see here). I made a motion to approve the budget with the following modifications: (1) the expenditures in the Education Fund be revised to match the projected revenue in that fund (still more than a $1 million increase from the previous year); (2) the expenditures in the Operations & Maintenance Fund be revised to match what they were in 2014 (still representing a more than $300,000 deficit); and (3) that the expenditures in the Tort Fund be revised to match the projected revenue in that fund. Adopting a budget with these revisions would still have left the district in a position of deficit spending but would have represented a significant move in terms of controlling expenditures and reducing the deficit over time. The motion "died for lack of a second." Subsequently, it was moved and seconded that the proposed budget be approved as presented, and, after some discussion, the board voted to approve the proposed budget by a 4 to 2 vote (Hannon was absent). Those voting "yes" were Skwarczynski, Clucas, Allen, and Satorius. Those voting "no" were Crouch and Martin.
Friday, September 19, 2014
Next Minooka 201 School Board Meeting and Budget Hearing
The next meeting of the Minooka CCSD 201 school board is
Wednesday, September 24, 2014. 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.
Tuesday, September 2, 2014
Once More Unto the Breach: The Budget Deficit
At its most recent meeting, the Minooka CCSD 201 school board
considered the district's preliminary budget for the current school
year. Once again, the district budget calls for deficit spending (see here
for the proposed FY 2015 budget). And, once again, I called for the
district to tackle the deficit problem by controlling spending to
eliminate, or at least reduce, the deficit.
The response from the superintendent was that we cannot possibly cut the deficit (even though his proposed budget calls for a $2.4 million increase in spending in the operating funds). To put this into perspective, let's look at some data. Last year, the district spent $28.6 million in its operating budget (which consists of the Education Fund, the Operation and Maintenance Fund, the Transportation Fund, and the Working Cash Fund). The proposed budget for this year calls for spending of almost $31 million (after adjusting for certain flow through payments), an increase over last year of $2.4 million or approximately 8.4%. The projected budget deficit for this year is just over $2 million.
What I am advocating is a balanced budget, which would allow for an increase of $400,000 rather than an increase of $2.4 million. An increase of $400,000 would still represent an approximately 1.4% increase from last year's spending. So, in reality, I am not advocating a cut in spending. I am merely asking for a smaller increase in spending. In addition, if we drill down into the separate funds that comprise the operating budget, we would see that the budget for the Education Fund could increase by $1 million (a 4.3% increase over last year's spending) and achieve balance in this fund. Balancing the budget in the Operations and Maintenance Fund and the Transportation Fund would be more difficult, calling for reductions from last year's spending of $330,000 and $700,000 respectively.
Now, I understand that student enrollments are going up. They are not, however, going up as fast as the district's spending. As of August 19, 2013 (the beginning of the last school year), district enrollment stood at 4,175 students. As of August, 12, 2014 (the beginning of the current school year), district enrollment stood at 4,248 students. So, student enrollment from last year to this year has not gone up by 8.4% or even 4.3% but rather 1.75%.
The superintendent would have everyone believe that the only way to erase the deficit by controlling spending would be to cut teachers and harm the academic program. This is really just a scare tactic and is wrong for a number of reasons.
First, the largest projected deficits by percentage are in the Operations and Maintenance Fund (the fund out of which utilities and the upkeep of schools are paid) and the Transportation Fund (the fund out of which busing is paid), not the Education Fund (the fund out of which teachers' salaries and benefits are paid). The current projected deficit in the Education Fund is 4%. Meanwhile, the current projected deficit in the Operations and Maintenance Fund is 25%, and the projected deficit in the Transportation Fund is 19%. So, the big deficits (by percentage of spending) are not being caused by teachers and, therefore, cannot be addressed by cutting teachers. In other words, cutting teachers or academic programs, such as P.E. or Music or Art, will do very little to address the deficit.
Second, I am not advocating reducing the per pupil operating expense (which is the amount of operating money that is spent on each student) but rather controlling its increase. Therefore, as student population increases, spending would also increase. For example, if we assume the district's per pupil operating expense were held at $8,000, adding 100 students would call for an increase in operating spending by $800,000. What it would not call for is adding an additional $1.6 million of spending over and above the $800,000 and raiding the district's "rainy day" funds in order to pay for the additional spending.
Third, these measures to control spending could be (and could have been) phased in over time. Over the last seven years, the district's per pupil operating expense (as reported to the Illinois State Board of Education and calculated using average daily attendance rather than actual student population) has increased from $5618 in 2007 to $8477 in 2013, a 51% increase. Now, admittedly, I have only been advocating controlling the increase in spending since I became a board member in 2009. However, had the district limited the increase in the per pupil operating expense over the last seven year period to approximately 40%, we would have a balanced budget today. A 40% increase in spending per student over seven years hardly seems draconian.
In response to my calls for cutting the deficit by controlling spending, I was also told by the superintendent that because we currently have large fund balances, it would be irresponsible to cut the deficit right now. I find this to be somewhat baffling. It is true that we currently have fund balances (excess money in our bank accounts). These fund balances, however, amount to less than what the school district spends in a year. What is more, the money in the Working Cash Fund (half of the current fund balances) is used to even out seasonal cash flow and so is not really available to be spent. In addition, we are depleting those fund balances each and every year that we run a deficit. At current spending rates, those "large" fund balances will be completely erased in 3 to 5 years. So, now is exactly the time to control spending. Had we been doing a better job of controlling spending over the last seven years, we would not have a deficit today. Problems don't get better with age, especially spending problems. As I have been stressing for the last five years, small steps early allow one to avoid large sacrifices later.
Ironically, in our discussion of the budget, the superintendent made the remark that we could not look to the State of Illinois to bail out the district because the state was bankrupt and we could not look to the Federal government to bail out the district because the Federal government was bankrupt. My response was: the reason that they are bankrupt is because they did exactly what the district is doing right now--they spent more than they took in. And they kept doing it, year after year, even in the face of numerous calls for them to balance their budget.
I think it is irresponsible to continue to deficit spend in the hopes that someday soon the taxpayers will agree to provide more money through a referendum, which is what the current administration is counting on. I also think that it is irresponsible for the current school board to completely deplete the district's fund balances. At the end of my term on the board, I do not want to vacate the seat in favor of a new board member and tell them "good luck, we spent all the money, now you get to deal with the consequences."
The motion to approve the preliminary budget passed on a vote of 6 to 1 (I, of course, voted "No").
The response from the superintendent was that we cannot possibly cut the deficit (even though his proposed budget calls for a $2.4 million increase in spending in the operating funds). To put this into perspective, let's look at some data. Last year, the district spent $28.6 million in its operating budget (which consists of the Education Fund, the Operation and Maintenance Fund, the Transportation Fund, and the Working Cash Fund). The proposed budget for this year calls for spending of almost $31 million (after adjusting for certain flow through payments), an increase over last year of $2.4 million or approximately 8.4%. The projected budget deficit for this year is just over $2 million.
What I am advocating is a balanced budget, which would allow for an increase of $400,000 rather than an increase of $2.4 million. An increase of $400,000 would still represent an approximately 1.4% increase from last year's spending. So, in reality, I am not advocating a cut in spending. I am merely asking for a smaller increase in spending. In addition, if we drill down into the separate funds that comprise the operating budget, we would see that the budget for the Education Fund could increase by $1 million (a 4.3% increase over last year's spending) and achieve balance in this fund. Balancing the budget in the Operations and Maintenance Fund and the Transportation Fund would be more difficult, calling for reductions from last year's spending of $330,000 and $700,000 respectively.
Now, I understand that student enrollments are going up. They are not, however, going up as fast as the district's spending. As of August 19, 2013 (the beginning of the last school year), district enrollment stood at 4,175 students. As of August, 12, 2014 (the beginning of the current school year), district enrollment stood at 4,248 students. So, student enrollment from last year to this year has not gone up by 8.4% or even 4.3% but rather 1.75%.
The superintendent would have everyone believe that the only way to erase the deficit by controlling spending would be to cut teachers and harm the academic program. This is really just a scare tactic and is wrong for a number of reasons.
First, the largest projected deficits by percentage are in the Operations and Maintenance Fund (the fund out of which utilities and the upkeep of schools are paid) and the Transportation Fund (the fund out of which busing is paid), not the Education Fund (the fund out of which teachers' salaries and benefits are paid). The current projected deficit in the Education Fund is 4%. Meanwhile, the current projected deficit in the Operations and Maintenance Fund is 25%, and the projected deficit in the Transportation Fund is 19%. So, the big deficits (by percentage of spending) are not being caused by teachers and, therefore, cannot be addressed by cutting teachers. In other words, cutting teachers or academic programs, such as P.E. or Music or Art, will do very little to address the deficit.
Second, I am not advocating reducing the per pupil operating expense (which is the amount of operating money that is spent on each student) but rather controlling its increase. Therefore, as student population increases, spending would also increase. For example, if we assume the district's per pupil operating expense were held at $8,000, adding 100 students would call for an increase in operating spending by $800,000. What it would not call for is adding an additional $1.6 million of spending over and above the $800,000 and raiding the district's "rainy day" funds in order to pay for the additional spending.
Third, these measures to control spending could be (and could have been) phased in over time. Over the last seven years, the district's per pupil operating expense (as reported to the Illinois State Board of Education and calculated using average daily attendance rather than actual student population) has increased from $5618 in 2007 to $8477 in 2013, a 51% increase. Now, admittedly, I have only been advocating controlling the increase in spending since I became a board member in 2009. However, had the district limited the increase in the per pupil operating expense over the last seven year period to approximately 40%, we would have a balanced budget today. A 40% increase in spending per student over seven years hardly seems draconian.
In response to my calls for cutting the deficit by controlling spending, I was also told by the superintendent that because we currently have large fund balances, it would be irresponsible to cut the deficit right now. I find this to be somewhat baffling. It is true that we currently have fund balances (excess money in our bank accounts). These fund balances, however, amount to less than what the school district spends in a year. What is more, the money in the Working Cash Fund (half of the current fund balances) is used to even out seasonal cash flow and so is not really available to be spent. In addition, we are depleting those fund balances each and every year that we run a deficit. At current spending rates, those "large" fund balances will be completely erased in 3 to 5 years. So, now is exactly the time to control spending. Had we been doing a better job of controlling spending over the last seven years, we would not have a deficit today. Problems don't get better with age, especially spending problems. As I have been stressing for the last five years, small steps early allow one to avoid large sacrifices later.
Ironically, in our discussion of the budget, the superintendent made the remark that we could not look to the State of Illinois to bail out the district because the state was bankrupt and we could not look to the Federal government to bail out the district because the Federal government was bankrupt. My response was: the reason that they are bankrupt is because they did exactly what the district is doing right now--they spent more than they took in. And they kept doing it, year after year, even in the face of numerous calls for them to balance their budget.
I think it is irresponsible to continue to deficit spend in the hopes that someday soon the taxpayers will agree to provide more money through a referendum, which is what the current administration is counting on. I also think that it is irresponsible for the current school board to completely deplete the district's fund balances. At the end of my term on the board, I do not want to vacate the seat in favor of a new board member and tell them "good luck, we spent all the money, now you get to deal with the consequences."
The motion to approve the preliminary budget passed on a vote of 6 to 1 (I, of course, voted "No").
Friday, August 15, 2014
Next Minooka 201 School Board Meeting
The next meeting of the Minooka CCSD 201 school board is
Wednesday, August 20, 2014. 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. Information for the Committee of the Whole Meeting (including the proposed budget for the 2014-2015 school year) can be found here.
Friday, September 20, 2013
Next Minooka 201 School Board Meeting and Budget Hearing
The next meeting of the Minooka CCSD 201 school board is
Wednesday, September 25, 2013. 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. In addition, for those who are interested, click here and here for
information regarding issues that will be discussed at the Committee of
the Whole Meeting and the Board Meeting.
The proposed budget for fiscal year 2013-2014 can be found here.
The proposed budget for fiscal year 2013-2014 can be found here.
Thursday, April 25, 2013
Does Your Superintendent and School Board Want to Increase Your Sales Tax?
A little known provision of Illinois law, called the School Facility Occupation Tax (see here
for the text of the law), allows the school boards representing more
than 50% of the student enrollment in a county to place a question on
the ballot at the next election to raise the sales tax in the county up
to 1%. The proceeds from such sales tax must be used for school
facilities and are allocated to the schools based on student enrollment.
In the recent election on April 9th, voters approved the sales tax increase in 6 of 17 counties and rejected the sales tax increase in 11 of 17 counties. Across the state, the School Facility Occupation Tax has been approved in 17 of the 102 counties.
Grundy County voters may be asked to vote on the School Facility Occupation Tax in the next election. Grundy County superintendents and school boards are already looking into the possibility of gaining additional school revenues through such a sales tax increase. A number of school boards have been privy to presentations by Stifel, Nicolaus, an investment banking firm that specializes in bond financing, regarding the increased revenues available from a sales tax increase, the procedure for getting such a question on the ballot, and the keys to a successful vote.* See here for the presentation to the Finance Committee of Minooka CCSD 201 (Stifel's presentation begins on page 12 of 47).
A joint school board meeting of Grundy County school boards has been scheduled to discuss the School Facility Occupation Tax. The joint school board meeting will take place May 8th at 7 p.m. at the Coal City Early Childhood Center, 755 South Carbon Hill Road, Coal City, Illinois (for the meeting notice and the agenda of the meeting, see here). The public, of course, is welcome to attend and comment.
For recent coverage regarding the sales tax increase proposal in Grundy County, see here and here.
*Stifel's angle, of course, is to place itself to receive increased advisory fees from such school districts when they issue more bonds in anticipation of the revenue represented by the increased sales tax.
In the recent election on April 9th, voters approved the sales tax increase in 6 of 17 counties and rejected the sales tax increase in 11 of 17 counties. Across the state, the School Facility Occupation Tax has been approved in 17 of the 102 counties.
Grundy County voters may be asked to vote on the School Facility Occupation Tax in the next election. Grundy County superintendents and school boards are already looking into the possibility of gaining additional school revenues through such a sales tax increase. A number of school boards have been privy to presentations by Stifel, Nicolaus, an investment banking firm that specializes in bond financing, regarding the increased revenues available from a sales tax increase, the procedure for getting such a question on the ballot, and the keys to a successful vote.* See here for the presentation to the Finance Committee of Minooka CCSD 201 (Stifel's presentation begins on page 12 of 47).
A joint school board meeting of Grundy County school boards has been scheduled to discuss the School Facility Occupation Tax. The joint school board meeting will take place May 8th at 7 p.m. at the Coal City Early Childhood Center, 755 South Carbon Hill Road, Coal City, Illinois (for the meeting notice and the agenda of the meeting, see here). The public, of course, is welcome to attend and comment.
For recent coverage regarding the sales tax increase proposal in Grundy County, see here and here.
*Stifel's angle, of course, is to place itself to receive increased advisory fees from such school districts when they issue more bonds in anticipation of the revenue represented by the increased sales tax.
Tuesday, March 12, 2013
Our Children's Future
A recent article in the New York Times about the plight of Detroit (click here) got me to thinking. I sure hope that our children take better care of their children's future than we have taken of our children's future. You might ask, "what does the plight of Detroit have to do with my children's future?" Well, the quote from John Boyle at the end of the article sums it up nicely: “Detroit is a microcosm of what’s going on in America, except America can still print money and borrow." Detroit is indeed a microcosm of what is going on in America. From coast to coast and from local government on up, we have made promises that were unsustainable. We should have known that they were unsustainable when they were made. After all, a little basic mathematics, including an understanding of exponential functions, is all that is necessary to know that continuous growth in public sector wages, pensions and taxes cannot be sustained. That was then, and this is now. Now it is time to pay the piper.
We have created a society which our children cannot afford. And, what is worse, we continue to make the same mistakes at every level of government.
We have created a society which our children cannot afford. And, what is worse, we continue to make the same mistakes at every level of government.
Friday, February 1, 2013
Is This The Future Of Illinois?
This blog is about Minooka CCSD 201, but sometimes I post about happenings in other places in order to illustrate a point. (Also, because the school district is affected by happenings on the state and federal level). This is one of those times. It seems that Harrisburg, Pennsylvania is sinking, not only financially but literally (see here). You see, they spent money unwisely and took on too much debt. As a result, the city is on the verge of bankruptcy and is having difficulty getting a loan. Over the years, they neglected the maintenance of basic infrastructure like sewer and water pipes. Now, sink holes are opening up all around the city due to the sandy soil and the leaking pipes. The city not only neglected this maintenance but now is having trouble even making its payroll. The State of Illinois, meanwhile, had its credit rating recently down graded (again) by one of the major rating agencies (see here), leaving Illinois with the worst credit rating of any state in the nation. As a result, Illinois recently shelved plans to issue $500 million in bonds for school and transportation projects (see here). Now, Illinois may eventually issue these bonds, but the state (and, therefore, ultimately the taxpayers) will end up paying more in interest on the bonds due to the state's poor credit rating. This is a classic debt-spiral, which I have written about previously (see here and here). Harrisburg is merely farther along down the spiral than Illinois.
So, what causes a debt-spiral and how does a state, city, school district (or nation, for that matter) avoid one (or, if it is already in one, how does it get out)? If you boil it down to its root cause, a debt-spiral is caused when an entity (state, city, school district, etc.) refuses to live within its means. Public sector entities are supported by taxes on the private sector (even money printing by a central bank like the Federal Reserve is ultimately a tax). However, there is only a certain level of taxation that the taxpayers (the private sector) are willing or able to support. It is sometimes difficult to determine what that level of taxation is for any given public sector entity since it depends on a multitude of factors. As is all too typical, once a public sector entity starts to bump up against that level of taxation and has trouble raising current revenue it enters the debt markets and floats bonds in increasing amounts to obtain current funds in exchange for future taxation. (Long term debt financing for necessary and prudent capital projects is one thing, but debt financing for current consumption is a clue that you have entered debt-spiral territory.) The interest payments on these bonds, of course, just make the current problems worse and the public entity finds itself going to the debt markets with increasing frequency just to pay for current services. (This is very much like a family that lives beyond its means and starts to use mortgage debt or a home equity loan to pay for day to day expenses.)
So, how does a public sector entity avoid a debt-spiral? The same way that an individual or a family avoids a debt-spiral: it lives within its means. For a public sector entity, that means that it must keep its expenses below (to be safe, well below) that level of taxation that the relevant taxpayers are willing or able to support. This is the crux of the matter since most people spending public money do not spend such money as if they were spending their own money. They tend to spend it much more freely. Once a public sector entity finds itself in a debt-spiral, how does it get out? There are really only two ways out: some form of debt restructuring (such as bankruptcy) or a bailout from a public sector entity higher up the food chain (also known as "kicking the problem upstairs"). In order to avoid going back into the debt-spiral again, the public sector entity must live within its means.
Calvin Coolidge (one of the most underrated Presidents of the United States) once stated the following: "I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant."
So, what causes a debt-spiral and how does a state, city, school district (or nation, for that matter) avoid one (or, if it is already in one, how does it get out)? If you boil it down to its root cause, a debt-spiral is caused when an entity (state, city, school district, etc.) refuses to live within its means. Public sector entities are supported by taxes on the private sector (even money printing by a central bank like the Federal Reserve is ultimately a tax). However, there is only a certain level of taxation that the taxpayers (the private sector) are willing or able to support. It is sometimes difficult to determine what that level of taxation is for any given public sector entity since it depends on a multitude of factors. As is all too typical, once a public sector entity starts to bump up against that level of taxation and has trouble raising current revenue it enters the debt markets and floats bonds in increasing amounts to obtain current funds in exchange for future taxation. (Long term debt financing for necessary and prudent capital projects is one thing, but debt financing for current consumption is a clue that you have entered debt-spiral territory.) The interest payments on these bonds, of course, just make the current problems worse and the public entity finds itself going to the debt markets with increasing frequency just to pay for current services. (This is very much like a family that lives beyond its means and starts to use mortgage debt or a home equity loan to pay for day to day expenses.)
So, how does a public sector entity avoid a debt-spiral? The same way that an individual or a family avoids a debt-spiral: it lives within its means. For a public sector entity, that means that it must keep its expenses below (to be safe, well below) that level of taxation that the relevant taxpayers are willing or able to support. This is the crux of the matter since most people spending public money do not spend such money as if they were spending their own money. They tend to spend it much more freely. Once a public sector entity finds itself in a debt-spiral, how does it get out? There are really only two ways out: some form of debt restructuring (such as bankruptcy) or a bailout from a public sector entity higher up the food chain (also known as "kicking the problem upstairs"). In order to avoid going back into the debt-spiral again, the public sector entity must live within its means.
Calvin Coolidge (one of the most underrated Presidents of the United States) once stated the following: "I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant."
Tuesday, December 11, 2012
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:
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% |
Monday, December 3, 2012
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.
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.
Thursday, October 25, 2012
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.
"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.
Tuesday, October 23, 2012
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.
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.
Friday, October 19, 2012
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.
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.
Tuesday, October 9, 2012
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.
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.
Wednesday, October 3, 2012
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.
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