Instead of celebrating the start of a new year later this week, District 65 school board members spent their meeting Monday night debating how to climb out of a growing financial hole.
The district has closed out two straight fiscal years with a significant deficit, and now, the tentative 2025 budget is predicting expenses to outpace revenues by $20 million.
“When I first started working on the tentative budget along with [financial firm] Illuminate, I think my first response, honestly, was yikes, when I saw where the budget was going to end up,” said Tamara Mitchell, who took over as chief financial officer on July 1. “That’s being 100% transparent with the board, as far as … coming in as a brand new CFO and seeing that projected deficit.”
What’s still unclear, though, is how exactly the district’s financial position got to this point. Robert Grossi, an independent financial consultant and president of Illuminate, wrote in a statement published on the District 65 website last week and reiterated to board members Monday night that he has found two key problems in previous budgets – moving expenses due in one year to the budget for the following year, and including grant revenue received over the summer into the budget for the prior year.
Rosier picture
Both of those strategies had the effect of presenting a rosier financial picture to the board than what was really the case, Grossi said. The 2024 fiscal year budget, for example, included $3.5 million in expenses that were supposed to be paid in 2023, Mitchell said.
“To the best of your knowledge, is it illegal?” board member Omar Salem asked Grossi about these financial practices.
“No, I don’t believe so,” Grossi replied.
Joey Hailpern, the board’s finance chair, asked explicitly if anyone had found out who was responsible for moving these dollars around. Grossi said he didn’t know who did it.
“I don’t know what we do if the information we’re getting is incorrect,” said board member Biz Lindsay-Ryan. “We have to trust every piece of information that’s given to us from every single person who works for the district. It’s a house of cards if you don’t. Obviously, we ask questions, but I’m struggling with what other things we can do and put in place that would prevent us from being in this spot.”
Grossi reassured Lindsay-Ryan and the rest of the board that he “would have made the same decisions that you did” with the skewed information board members received from district officials in recent years, adding that “generally speaking, you assume the data’s correct.”
Mitchell, the new CFO, also tried to assuage the board’s concerns about trusting financial data going forward.
“I don’t believe in putting numbers on paper that I would not 100% stand behind,” she said.
Grossi also described the district’s declining enrollment as “a positive opportunity” financially, because the board has options for “rightsizing” the district by closing more school buildings.
“Basically, you’re bringing in $175 million a year,” he said. “You’re spending $190 million a year. We’ve just got to figure out how to provide a good quality education for $175 million. I just believe, in terms of our percentage of the budget, we can adjust this thing and get it to a balance.”
Explanation not forthcoming
Several board members still wanted a better answer as to what went wrong, but a satisfying explanation wasn’t forthcoming.
“It’s just continued to pile on,” said board member Donna Wang Su.”It is our responsibility, as the board, to be fiscal stewards. I’m just feeling very betrayed. I think that’s the best word I can think of. We were told ‘balanced budget.’ We even won an award for our finances last year. And just hearing what happened last fiscal year and the year before, it just makes me wonder how much deeper are we going to be digging, and what else is [it] going to uncover?”
Reiterating those questions, Hailpern also said he interpreted Grossi’s recent statements as implying that previous financial officials had intentionally deceived the board. He quoted one of Grossi’s memos to board members, in which the consultant wrote that “it appears that more effort was placed on presenting a balanced budget than actually balancing the budget.”
Hailpern and Salem suggested the idea of working with the district’s lawyers to consider legal action against those responsible for providing the board with misleading financial information. They said that would be an item for discussion during a closed executive session of the board, where they can discuss specific employees.
Despite that emphasis on finding out what went wrong and how, both Grossi and school board President Sergio Hernandez said the priority right now is approving the 2025 fiscal year budget next month and launching the second phase of a budget reduction plan as soon as possible.
“We knew that we did have a structural deficit, that expenses were outpacing revenues,” said board member Soo La Kim. “So we knew we had to tighten our belts and make cuts. What this news is just emphasizing is that that process has to accelerate much faster than we had anticipated,”
“We thought we had a little more time to figure out how are we going to rightsize? How are we going to adjust to the lower enrollments? Where are we going to make efficiencies? What we’ve found is that we’ve run out of time,” she said.
‘We’ve run out of time’: District 65 board grapples with budget crisis is from Evanston RoundTable, Evanston's most trusted source for unbiased, in-depth journalism.