The Coming Revenue Crunch

biggerpieceofpieThe village staff saw it coming.  Neither school district has, even as I write this.  Both school districts continue to seek maximum rate increases to try and keep up with deficit spending.  But the piper that needs to be paid has abruptly shown up at the door.  This may be the biggest influence on our local 58 and 99 school board elections, if anyone has the courage to bring it up at all.

cpi-2008-chartSchool district officials should be concerned about this.  58 just signed a three year teacher contract guaranteeing 3-3.5% yearly pay raises.  Non teachers are getting even more.  99 teachers are getting 3.85 and 3.44% raises their first two years of a four year contract, but the final two years are tied to the CPI, which as you can see is flatlined.  It remains to be seen if teachers, accustomed to annual 3+% salary increases, will be content with no raises for two years.

Compounding the problem?  For one, negative assessment multipliers of existing homes adjusting downward, reflecting loss of market values.

For a second, new construction has become a dicey affair.  Both school districts are frozen at 1997 levels in the CBD TIF district, where the vast majority of new construction, and new tax growth, has occurred.

Third PTELL limits the maximum growth rate of one key compnent because it is directly tied to the CPI, which is flatlined and may even go negative.  Has either school district budget officials considered these things?  From attending 58’s budget presentation, the answer is a resounding NO.  And from reading budget statements made by 99’s budget wonks, NO applies there too.

Why not?  One reason may be that school budgets look backwards at real estate tax funding levels instead of projecting revenues forward like the village is doing.

One thing the state may try to do to avoid school districts having to budget for a decrease in their levy is to change the PTELL segment that relates to real estate taxes to a more advantageous index.  One measures the increase in the cost of government;.  That’s a doozy-the more our government spends, the more they can spend.  most taxpayers will say “No thanks”, but taxpayers have no effective voice in Springfield.

The other is an employment cost index that rates salaries, health benefits, expenses of each employee.  That probably won’t fly when Springfield figures out small business is pounding down employee costs every year because they have to in order to survive as an employer, but if the state can somehow define the measured area to avoid efficiently run small businesses, and concentrate the definition on the bloated corporations that routinely raise pay and perks well beyond what Jane and Joe taxpayer ever see, who knows.

In the meantime, 58 and 99 are going to have some serious shortfalls to revenue next year, shortfalls that they apparantly have not seen and have not planned for.  So whomever gets elected to the school boards will have some serious problems barrelling down on them that have nothing to do with kids first and everything to do with short term and long term fiscal health.

In a sense, past spending habits have contributed to this mess.  The schools simply added up the maximum rate increases available, and year over year shifted a bit more of the budget into personnel and away from kids and facilities.  Facilities needs went from budget needs to referendum needs.  Now the endless increases may grind to a halt.

Is it possible for our two school administrations to do more with less? This year 99 spent an extra million they had in reserves against a rainy day.  But it just started to sprinkle, and the weathermen are predicting hurricanes, so the rainy day isn’t here yet.  58, as I’ve written about several times, just has demonstrated no clue about how to avoid falling into debt, even with blue skies and sunny days.  So what will give?  How will the shortfalls be made up?  Reduced or suspended personnel salary increases, facility funding shortfalls, or kids moving to the back of the funding bus?

Board members and candidates, you may have to pick more then one, but unless you refuse to face reality, you will have to pick.


2 Responses to “The Coming Revenue Crunch”

  1. Cliff Grammich Says:

    What is your basis for claiming, “It remains to be seen if teachers, accustomed to annual 3+% salary increases, will be content with no raises for two years”? My impression of CPI clauses, especially for longer contracts–and recall the D99 contract was the first four-year contract the district had signed–is simply to protect the “gains” of the initial years of the contract until renegotation. (Whether there really was a “gain” in the contract is an interesting point to consider, as I note below.) Has somebody in the union told you they won’t be happy if the CPI and therefore raises are low?

    What might be interesting to know is what happens if the CPI turns negative, something that doesn’t appear to have happened for a whole year since 1954 (cf. Would that mandate a cut? I could see that causing unrest–especially if teachers start to wonder how to pay large, fixed expenses in their lives (e.g., mortgages). Maybe I’m too gullible, but I can’t see unrest over no increases–if the CPI indeed does not increase.

    It’s interesting to note, by the way, that, although the CPI is cratering, with a December-December increase (as you noted) of only 0.1 percent, the May-May increase–that is, the increase for the previous year at the time the contract was signed–was 4.2 percent. So the pay hike negotiated for the first year of the contract doesn’t appear outrageous, at least as judged by the CPI. In fact, in real terms of the time, the teachers appear to have taken a slight cut.

    I agree the high rate of increase for non-teachers in the D58 salaries is curious, but I’d also still like to know what all they include. As I once mentioned (not sure if it was here), I can’t imagine there’s a special ed aide whose pay shouldn’t be hiked considerably. Whether there are resources to do that, of course, is a legitimate question, as are several others you raise above.

  2. Elaine Johnson Says:

    It’s an interesting question, Thoman, and one that will require an out-of-the-box answer, to be sure.

    Here’s one example:

    Do you think that could happen here?

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