Our Very Own Fiscal Cliff

I hope everyone in Minooka CCSD 201 is prepared for our very own "fiscal cliff."  Yes, the school board and the superintendent have set up a situation in which the district is purposely spending more than its revenue.  And when the district runs out, they are going to go to the taxpayers for more money.  The school board and the superintendent are going to tell the taxpayers that unless the taxpayers give the district more money, educational programs and/or athletic programs will be hurt and it will be the taxpayers' fault if the district goes over the cliff.

In the meantime, the school board and the superintendent are going to act like they are doing something about the current operating deficit (which is in excess of $2 million per year).  The latest deficit reduction plan, passed at last month's board meeting (see here), consists mainly of "smoke and mirrors."  If you read to the end of the deficit reduction plan, you will see a projected savings of $768,000.  Two-thirds of that number (the $500,000 "Health Insurance Fund" surplus), however, consists of savings that have already been realized and are already accounted for in the calculation of the current deficit. 

You see, the "Health Insurance Fund" is part of the Education Fund.  And even though there might be a surplus in the "Health Insurance Fund" (which is not a fund recognized by the state for school budgetary purposes), there is a deficit in the Education Fund as a whole.  It is as if you decided not to spend the $100 in your left pocket (which you counted as a saving, which of course it was at the time) and later transferred that $100 to your right pocket (counting it again as a saving, which of course it is not).  You see, it is not just politicians in Washington D.C. and Springfield that engage in "smoke and mirror" games.  Local entities are just as adept at these type of shenanigans.  So, the real number is closer to $268,000 (though even that contains more than a little wishful thinking).

As you can see, the latest deficit reduction plan at best represents a mere 10% of the current deficit.  Within two or three years, the balance in the Education Fund will be depleted and it will start going "into the red."  Rather than trying to significantly reduce or eliminate the deficit, the school board and superintendent are choosing to run the district right up to the cliff.  Then when we are at the cliff, they will try to convince the taxpayers that the taxpayers will be responsible for going over the cliff unless the taxpayers give the district more money by passing a referendum to increase the tax rate.

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, March 20, 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 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 and here for information regarding issues that will be discussed at the Committee of the Whole Meeting and the Board Meeting.

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.  

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, February 27, 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 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 and here for information regarding issues that will be discussed at the Committee of the Whole Meeting and the Board Meeting.

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."

Next Minooka 201 School Board Meeting

The next meeting of the Minooka CCSD 201 school board is Wednesday, January 23, 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 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 and here for information regarding issues that will be discussed at the Committee of the Whole Meeting and the Board Meeting.

Five Candidates Run for Four Minooka 201 School Board Seats

Five people have submitted petitions to run for the four Minooka CCSD 201 school board seats that will be filled in the next Consolidated Election on April 9, 2013. The five people are Jim Satorius (incumbent), Doug Martin (incumbent), Don McKinney, Vicki Allen, and John Clucas.