Tiny Rhodes school district in River Grove is so strapped for cash that it had to borrow money in the fall to pay its teachers. In Homewood, grade schools had to cut back on supplies as basic as chalk and paper.
And in Lake Zurich, class sizes have swelled because the school district can’t afford to hire more teachers for its growing number of students.
Across Illinois, hundreds of school districts are failing to make ends meet, state records show, and are staying afloat by drawing down reserves to cover payroll, borrowing money for operating expenses, or cutting everything from school supplies to academics to sports programs.
Educators and state officials say the financial hole is getting so deep that some districts may not survive, forcing students to attend school in neighboring districts.
Deficit spending has skyrocketed since the mid-1990s. Illinois schools spent $885 million more than they took in during the 2000 budget year, up from $31 million five years earlier. A Tribune review of Illinois State Board of Education data reveals that 415 districts in 85 counties–nearly half the districts in Illinois–showed expenses exceeding revenues that year.
The year before, the last year for which the U.S. Department of Education had data across all the states, Illinois districts combined to post the third-highest deficit in the nation, behind only Texas and Michigan. Other states with similar or larger school populations had deficits smaller than the $917 million in Illinois, according to the federal figures, while California and Ohio had surpluses that year.
“We’re in terrible shape. This is a very, very troublesome issue,” said Ronald Gidwitz, state school board chairman. “This is a real funding crisis.”
A one-time deficit is not alarming, school finance experts say, but repeated deficits are unhealthy because they eat up savings and lead to a cycle of borrowing that adds interest costs to the financial burden, increases debt to taxpayers and can affect a credit rating.
Moreover, operating deficits can be a symptom of more fundamental financial trouble that has not yet surfaced. In the worst cases, districts that can’t live within their means eventually go out of business, folded into other districts. Consolidation is a particularly troubling prospect in Illinois, where local communities pride themselves on controlling their schools.
“I think we will see more and more consolidations,” said former state schools Supt. Glenn W. “Max” McGee. “There are districts holding on by their fingertips. One by one, the fingers are peeling off, and [the districts] will have to consolidate.”
Parents and taxpayers may be unaware of the widespread financial decline because local districts operate so autonomously, McGee said.
In addition, state officials say the government hasn’t always provided adequate information about school finances. A “school report card” sent annually to parents lists how much schools spend but not how much they take in, so parents can’t tell whether their school district is running a deficit.
And an annual state review of school finances is so lenient, many local educators say, that very few districts land on a widely publicized “financial watch list” intended to identify districts in trouble.
Spending on schools up
By some measures, Illinois school funding looks strong. Spending on public schools rose from $11.8 billion in fiscal 1995 to $17.1 billion in 2000. Nationwide, Illinois ranks 19th of the 50 states in average spending per pupil, according to the most recent federal figures.
But state and local educators say those spending increases have contributed to a financial mess that has been building for at least a decade, propelled by a host of factors that have held school revenues down.
State mandated tax caps limit property tax increases to 5 percent per year or the rate of inflation, whichever is less. The caps applied first to collar counties, in 1991, and to Cook County in 1994. In recent years, the cap limited local tax increases to as little as 1.6 percent, while teacher salaries were increasing by at least 3 to 5 percent.
At the same time, an increasingly popular tool for municipal development, tax increment financing districts, has funneled tax revenues into blighted areas to help attract investors. But for many years, schools don’t get access to the new tax revenues generated by the districts because those dollars are funneled back into the development districts for improvements.
State and federal subsidies and grants have not always kept up with rising student enrollment. Many districts get extra money to educate disadvantaged children under a variety of programs, but the grants are based on 1990 poverty statistics. So in districts where the number of impoverished students has grown, there is no new money to bolster the budget.
And although voters in many districts have resisted tax increases for schools, many districts have been reluctant to cut education programs that parents have come to expect.
“I’ll be darned if we’re going to cut services just to keep the state happy,” said Michael Chinino, superintendent of the impoverished Calumet City School District 155.
He said his district has suffered because of a threefold increase in the number of poor students without any corresponding increase in state funding.
The district drained its reserves to cover deficits and build more classroom space, and it had to borrow $1 million in the fall just to cover payroll.
“I told my board, `Put your seat belts on. It’s going to be a rough ride,'” said Chinino.
He said the district isn’t spending wildly: His per-student spending of $5,918 is less than the state average, and his top administrative staff is kept to a minimum.
“I am chief educational officer here. I have no business manager, no curriculum director. I am it,” he said. He works out of a mobile unit built in 1972. “If there’s a tornado, I’m gone.”
To stay afloat, the district plans to borrow more money this spring, issuing a type of bond that does not require voter approval. In addition, Chinino said, there is some relief in sight: Calumet City and other impoverished districts should see increases in their poverty grants over the next two years because 2000 census data are now available to update the poverty statistics used for the program.
`We’re dying’
In Rhodes School District 841/2, Supt. Edward McNally has been struggling to hold off on major cuts in academic and extracurricular programs.
“We’re dying,” said McNally.
The district, made up largely of commercial and industrial properties, has been hurt by successful tax challenges by companies, he said, which means less money for schools.
“Last year, I lost $450,00 alone to tax objections,” he said. “My total budget is $6.6 million. It’s a ton of money for us.”
The district has eliminated a remedial math class, cut textbook and supply spending by 20 percent–which means outdated books can’t be replaced–and halted equipment purchases.
After depleting the district’s reserves to cover deficits and pay bills, Rhodes got in trouble in September when tax collections were held up, and the district had to borrow $1.4 million against future tax revenues to cover payroll.
The so-called tax anticipation warrants incur interest and are a sign of fiscal trouble because they show districts have drained reserves needed for unforeseen expenses. School finance experts say that it’s best to have enough savings to cover at least three months of expenses.
McNally expects deeper cuts if voters don’t approve a proposed tax increase in March to increase education spending. But gaining such approval can be difficult for any school district.
Statewide, four of every 10 referendum proposals for a tax increase for education that exceeds the tax cap were approved by voters between February 1997 and April 2001, state records show. Bond issues, such as borrowing for school construction, fared better during that period, with seven of every 10 approved.
Meanwhile, districts were continuing to spend more than they take in.
In the 2000 budget year, 166 districts in Cook, DuPage, Kane, Lake, McHenry and Will Counties spent $769.4 million more than they took in–the lion’s share of the statewide deficit total that year, state records show. In all, 415 districts, nearly half the districts in Illinois, posted deficits.
Chicago Public Schools showed expenditures of $3.77 billion that year, $242 million more than revenues.
Kenneth Gotsch, chief fiscal officer for the Chicago schools, said that the state’s deficit figures include money for large capital projects in the Chicago school system. He said those items distort the picture because they show up in the budget one year but actually span several years.
State education officials acknowledge that they include capital expenditures in their figures. But they also evaluate districts by looking at the three main accounts used for day-to-day school expenses: the educational, operations and maintenance, and transportation funds. Under that scenario, Chicago school system does not show a deficit in 2000.
But 354 other school districts still do show a deficit over those three accounts–40 percent of all school districts in Illinois. In the majority of districts, a pattern of repeated deficit spending emerged, with 221 of the districts posting deficits for at least three of the five budget years between 1996 and 2000.
And 49 districts showed deficits for five years in a row during that time, including 21 in Cook County, eight in Lake and three in DuPage.
Hiring freeze in Lake Zurich
Lake Zurich Community Unit School District 95, one of the districts with five straight years of deficits, cut $2.6 million from its budget this school year, including half the budget for textbooks and $500,000 for maintenance projects. The district also instituted a hiring freeze that led to larger classes as enrollment grew. Classes that used to have 24 students are up to 27 in elementary school and as many 33 in high school, said district Supt. Michael Paskewicz.
“The tax cap has caught up with Lake Zurich,” he said.
With limits on tax increases, there’s not enough money to pay for all the new students–enrollment has risen by at least 3 percent every year. And the district has been unable to persuade voters to exceed the tax cap to boost education spending.
In Homewood School District 153, which also has run repeated deficits, teachers have been told to cut back on books, paper and chalk.
“We were very generous. Now it’s, `Do you really need them?'” said Supt. Barbara Ramsey.
The district also has cut down on sending teachers to staff development workshops. Ramsey blames the financial struggles partly on a TIF that she says has diverted more than $3 million from schools since 1978.
State and local educators say that there is no quick fix to the financial problems and that the current recession will make them worse. Wide-ranging reforms are needed in the way Illinois funds public education, some say, but those aren’t expected in an election year.
“The outlook is bleak,” said McGee, the former state schools superintendent.
The only hope, he said, is that candidates running for office put school finance reform in their platforms. That might lead to reforms in 2003.
But Gidwitz, the state school board chairman, said reform won’t come until more parents realize how a school system in serious financial trouble affects their children.
“When they are impacted, we will get there,” Gidwitz said.
—-
Spending outpaces income in Illinois schools
Illinois school districts have had to borrow money or tap reserves for several years as they have spent more money than they have taken in.
%%
STATEWIDE DEFICIT IN PUBLIC EDUCATION SPENDING
In millions of dollars
SCHOOL YEAR REVENUES EXPENSITURES DEFICIT
1994-95 $11,795 $11,826 $31
1995-96 12,323 12,744 $421
1996-97 12,891 13,657 $766
1997-98 13,967 14,923 $956
1998-99 15,074 16,100 $1,026
1999-00 16,268 17,154 $885
%%
AREA SCHOOL DISTRICTS WITH MULTIYEAR DEFICITS
Forty-nine of the 895 public school districts in Illinois, including 32 in the six-county area, have had deficits in their main operating accounts for day-to-day expenses for at least five consecutive years through fiscal year 2000:*
COOK COUNTY
Alsip-Hazelgreen-Oak Lawn District 126
Atwood Heights District 125
Calumet City School District 155
Community Consolidated School District 62 (Des Plaines)
Community High School District 218 (Oak Lawn)
Elmwood Park Community Unit School District 401
Evergreen Park Community High School District 231
Franklin Park School District 84
Homewood School District 153
Homewood-Flossmoor Community High School District 233
Indian Springs School District 109
J. Sterling Morton High School District 201 (Cicero)
Lansing School District 158
Lincoln Elementary School District 156 (Calumet City)
Palos Community Consolidated School District 118
Posen-Robbins Elementary School District 1431/2
Skokie School District 69
South Holland School District 151
Thornton Township High School District 205
West Northfield School District 31
Westchester School District 921/2
DUPAGE COUNTY
Community Unit School District 200 (Wheaton)
Marquardt School District 15 (Glendale Heights)
Queen Bee School District 16 (Glendale Heights)
LAKE COUNTY
Adlai E. Stevenson District 125 (Lincolnshire)
Grass Lake School District 36 (Antioch)
Gurnee School District 56
Lake Zurich Community Unit School District 95
Mundelein Elementary School District 75
Round Lake Area Schools District 116
Waukegan Community Unit School District 60
Zion-Benton Township High School District 126
TO LEARN ABOUT YOUR SCHOOL DISTRICT’S FINANCES
The Illinois State Board of Education includes financial data dating to 1997 for every school district on its Web site, www.isbe.state.il.us. Click on ILEARN and type in your district or select the county in which it is located to find a district’s total annual revenues and expenditures.
*Includes educational, operations and maintenance, and transportation funds combined.
Sources: Analysis of Illinois State Board of Education data
Chicago Tribune
How Illinois compares
Illinois had the third-highest education budget deficit among the 34 states that spent more than they took in during the 1998-99 school year, the latest for which federal figures* are available.
%%
STATE DEFICIT
1. Texas $1.849 billion
2. Michigan $926 million
3. Illinois $917 million
4. Pennsylvania $818 million
5. North Carolina $575 million
6. Minnesota $568 million
7. New York $483 million
8. Maryland $376 million
9. Tennessee $343 million
10. Colorado $310 million
%%
California, with the largest school system in the nation, had a surplus of $29 million in 1998-99.
*Federal revenue and expenditure figures differ slightly from Illinois State Board of Education figures for 1998-99, which show a state deficit of $1.026 billion.
Sources: U.S. Department of Education, National Center for Education Statistics
Chicago Tribune
