State finances could put school districts in precarious situations

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State finances could put school districts in precarious situations

November 30, 2020 - 20:34
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Illinois’ fiscal house is not in order and there’s no clear path to making it right, said Bloom Township School Treasurer Bob Grossi. Depending on the direction legislators take, schools could be negatively impacted.

Grossi, who spoke to the District 233 school board at its Nov. 17 meeting, said in his 30-plus years in school finance, discussion of cuts are most prevalent this year. 

Grossi's primary role is to invest funds for the 13 school districts in Bloom Township, and five school district or Regional Offices of Education outside of Bloom Township. Districts pay a portion of his salary. It is not part of township government. The office is overseen by an elected three-person board.

He applauded Homewood-Flossmoor High School for always taking a long-range view on finances, but the district could be strained if the state pushes teacher pension payments onto local districts. The state is paying $1 billion annually to the Teachers Retirement System of Illinois. 

The defeat Nov. 3 of the graduated income tax amendment, that would have enabled the state to impose higher personal income tax rates on persons earning more, was planned as part of the state’s effort to balance the budget. With its defeat, Grossi said the state likely will raise taxes but will sweeten the deal by imposing a property tax freeze — another action that will hurt school budgets. The state has already imposed a cap limiting the amount of property tax increase school districts can collect.

State support of schools could also be reduced because the state’s budget is severely in the red. 

“Last year when the state was considering the budget, it was the goal to keep funding the same for every program. In order to do that, it cost the state about $43 billion,” Grossi said. “However, the revenue projection from the state, partially because the state is running a deficit to begin with, and partially because of the COVID shutdown of the economy, they estimated they’d be $5.8 billion short. 

“So the state basically had a decision, (borrow) $5.8 billion from the federal government or they cut all the budgets by 35%, which is what they needed to do to be solvent. They actually seriously looked at those cuts, and I costed them out. They would be a loss of $1,000 per pupil (for every student in Illinois), so H-F would lose $2.8 million in state funding,” Grossi said.  

“Instead, the state decided to tap into a federal loan program that they have to pay back in three years. So they borrowed $5.8 billion to keep our funding the same” but Grossi doesn’t expect Illinois will be able to continue funding schools at the current rate.

Gov. J.B. Pritzker warned after the graduated income tax failed that the state will be forced to make painful cuts. Grossi said he knows decisions in Springfield are always political, and it goes without saying that “it is always politically incorrect to take money away from schools. So every time it was threatened some how, some way through smoke and mirrors schools got money even though the state didn’t have the money to give.”

“I think that the probability, whether it happens or not, I think everybody would agree the probability of the state cutting funding to education is higher than it’s ever been,” Grossi said.

“Also there has to be a recognition that although more money is needed to fund education and other programs, the other part of that taxation is why residents and businesses are leaving Illinois. So we have to be very careful how we address this problem and look at the long-term impact of these decisions in Springfield because bottom line is if we don’t have strong industrial/commercial property in Illinois for an extended period of time, that’s the engine that funds education long-term and that’s what’s necessary so when our kids graduate from our schools they stay in Illinois and have a job. So we have to keep that filter when we make those decisions,” he stressed.

Schools in the South Suburbs benefited from the Evidence Based Funding, a redesigned way of distributing state aid.

“The formula reads in essence to take some money away from the wealthiest districts in the beginning but after that they pro-rate the decrease equally from every school district in the state,” Grossi explained. “So if there’s a 5% decrease to the $7.1 billion in Evidence Based Funding, that 5% decrease is $355 million which means schools lose about $180 per pupil. 

“So just a note to keep in the back of your mind, H-F would lose about $500,000 for every 5% decrease in state funding,” Grossi reminded the school board members.

“Bottom line, and why we presented this, is that we think it’s a serious issue that’s not going to have a serious impact this year. Probably some impact next year, but long term it will have a serious impact,” he added.

“The district has always done a good job at maintaining fund balance reserves. The district is well prepared for the situation but it’s a long-term fiscal crisis. It will have an impact on all schools in the state, including H-F. The district should make its consideration on its tax levy based on its fund balance target, its capital needs and wants and its threats that may emerge in Springfield.”

The district adopted its 2020 $40.8 million levy following Grossi’s presentation.