I could not help being disappointed to read the Kaneland School Board minutes of Jan. 14, 2013. I see administration recommended no significant cost containment measures would be needed in the 2013-14 budget development. Also was stated, no large scale manpower reductions were needed. Basis for both the above statements are in guidance of the PMA Financial Plan presentation of Dec. 10, 2012.
As the above statements are true, I really see little need for the FAC group to spend time making budget recommendations to the board. Looks like they have total confidence in PMA financial planning process. My concern with this position by the board is variations that exist from the PMA plan and the existing financial environment within our community.
Some variations from the PMA plan generating additional costs to the district:
1. Manpower: PMA projection 326.1 certified staff vs. actual 347. Manpower not presented in the plan is an additional 274-plus employees.
2. General State Aid foundation level currently $6,119 and funded at 85 percent allocation. The Aurora Beacon News on Feb. 13 reported 2012-13 GSA funding loss to Kaneland School District of $231,661 and $427,810 loss for 2013-14.
3. Salaries: PMA Assumption of FY14-18 at no annual salary increases except for teachers and retirement employees. KEA contract states teachers salary increase of 2.7% for 2013-14 plus open negotiations for 2014-15 are not presented in the PMA Plan.
4. Teachers Retirement System obligation is not included in the plan. ($223,000 per 1 percent). Michael Frances stated 1 to 9 percent could be transferred from a state responsibility to the School District’s responsibility. The School District is at 9 percent risk for $2,007,000 and unaccounted for in the PMA budget process. The state of Illinois could allocate the entire $22.3 million per year District 302 obligation to this local districts budget as rating agency pressures mount on politicians.
5. Kaneland School District cash reserves were not published by PMA Plan. Year-ending of fund balance of $8,820,167 for 2013 was presented. If this total fund balance or cash reserve is actual, why did the School Board raise our District 302 property taxes 3.83 percent when “no significant cost containment measures would be needed in the 2013-14 budget development”? Taxation-to-the-maximum culture is alive and well at our School District.
Existing financial environment within our community:
1. State of Illinois enacted General Fund Budget Plan for July 12, 2013, is appropriating $5.1 billion to Pension Contribution toward the $93 billion needed and $1.6 billion to Pension Obligation Bond Debt Service. The fiscal year ending plan is for the state to end with $3.97 billion overall budget deficit.
2. General Obligation Bond Credit Rating agencies downgraded state of Illinois to A- (one level above junk bonds). According to FITCH, “There is an irrevocable and continuing appropriation for all General Obligation debt service, and continuing authority and direction to the state treasurer and conptroller to make all necessary transfers from any and all revenues and funds of the state.” According to S & P, “The downgrade reflects what we view as the state’s weakened pension funded ratios and lack of action on reform measures intended to improve funding levels and diminish cost pressures associated with annual contributions.” According to MOODY’S, “Any meaningful pension reforms enacted in coming months are likely to be challenged in court, given the state constitution’s pension clause. This litigation threat and accompanying political pressures may once again deter action altogether or lead to reforms with little effect.”
3. Personal Savings Rate. State of Illinois Commission on Government Forecasting and Accountability Edward Boss, Jr., Chief Economist January 2013. Mr. Boss states, “Savings as a percent of disposable household income, that is money that households have available for spending and saving after income tax payments, has reached the lowest levels in the past 60 years with no improvement expected in the next few years.”
Now that I have shared my concerns with the present day actions of the Kaneland School Board and administration, I find myself searching for some logical and participative path to make some positive difference toward reducing financial risks. It is becoming more clear, the School District will not attempt cost containment programs as an example of fiduciary responsibility. On the contrary, please interpret the act of forced taxation investment into the School District is at least equal to the resultant lack of savings for tax payers who are scraping for disposable income.