District 52 projected to be $750,000 in the hole

This is the second of three articles explaining the financial situation of Washington Grade School District 52 (Lincoln and Washington Middle schools). In the first article, I outlined the impact that the state financial crisis is having on D52. To sum it up, D52 could potentially lose around $700,000 of state revenue over the next couple of years. Ouch! Also, in the article, I mentioned that the district has started deficit spending in the last two years. 

The purpose of this article is to explain the deficit spending. But before I go on, let me say once again that D52 is not in a financial crisis today. My purpose is to inform the board of education, D52 staff and the public so that we may act now and act prudently to avoid a crisis in the future.

Before I get into the numbers, please let me lay a bit of ground work. To simplify the complicated maze of school finance, I will write only about the education fund, which is by far the largest of the funds. The education fund comprises nearly 85 percent of expenditures for the district and pays most salaries, benefits, purchased services and supplies.

First let me explain exactly where D52 is financially. Bear with me as I lay out the numbers, and please, no snoring! At the end of the 2008-09 school year, our audit showed the district was deficit spending in the education fund around $269,000. All other funds were balanced. Further, the savings D52 has available to use in the education fund was about $5.2 million. A recent analysis of education fund spending projects the current deficit to be about $750,000. This means that the district will likely spend $750,000 more than it will receive in the education fund this school year.

So, what is the problem? Why not just use D52’s savings to cover the deficit amount? The answer lies in the fact that these deficits do not merely go away at the end of the year. Without increases to revenue (which are unlikely given the state’s financial problems) or cuts in expenditures, the deficit will continue and will likely grow. Left unaddressed, the deficit would lead to a depletion of the school’s funds in very short order. The more prudent approach is to avoid paying ongoing expenses from our savings. This is the same approach that people take with their own finances at home. The goal is to pay for recurring expenses out of their paychecks rather than depleting their savings every month. 

D52 is blessed with a terrific staff that does an exceptional job in meeting the needs of students. During the last contract negotiations, the board and union worked together to address an important issue: the teachers’ salary schedule was below the average of similar area districts. The board and union agreed on a series of raises that has created a much more favorable salary schedule. A recent analysis demonstrating these efforts has made district salaries much more competitive with other comparable districts in the area.

The board of education is committed to treating our teachers fairly, as well as being sound fiscal managers. Therefore, the board is considering three very important financial goals. First, achieve a balanced budget in three years. Second, for the short term, use fund balances to cover deficits or any state revenue losses. Finally, make expenditure reductions that correspond to new ongoing expenditures.

I am confident that the board and staff will find the best possible way to continue the excellent service to students as we work together through this tough financial time.

Again, D52 is not in a financial crisis — today. However, the district must take careful and prudent actions now to avoid future troubles. In the next and final article, I will outline a three-year plan to create a balanced budget.

Feel free to comment directly to me at: jtignor@d52schools.com

Working Together / Achieving Excellence, John Tignor, Ed.D. Superintendent, Washington GSD 52