“We’re just spending too much”; “It doesn’t add up to me, so I think it’s worth us taking a closer look”; and “What’s really important, too, is just no surprises.”
Those were the reactions of two District 65 school board members and the business manager last August and September after the district reported an unexpected budget deficit of nearly $7.5 million for the 2023 fiscal year.
All three vowed to “take a closer look” going forward, as Finance Committee Chair Joey Hailpern said. “Are we landing where we’re expected to land on a monthly or quarterly basis so we don’t have surprises?” Vice President Mya Wilkins asked.
That was nearly a year ago. In September 2023, the board unanimously approved a balanced budget with a projected surplus of $276,000 for the 2024 fiscal year. But Monday night, Superintendent Angel Turner announced the district actually finished the year with a $10 million shortfall, even worse than in 2023.
In an initial review of Turner’s statement, the RoundTable could not find any evidence that the district went into the 2024 fiscal year with a “budgeted deficit” of nearly $2 million, as the superintendent suggested. But in a follow-up statement shared on Tuesday afternoon, Communications Manager Hannah Dillow clarified that the budget approved last September was indeed balanced by Illinois State Board of Education Standards, and that District 65 financial advisors applied their own analysis to get to the budgeted deficit number.
“While the Illinois State Board of Education considers a budget balanced when revenues exceed expenditures in a school district’s operating funds, District 65 financial advisors rely on reporting all funds excluding capital projects to provide a clearer picture of financial performance. When reviewing the District’s FY2024 budget through the ISBE lens, the budget reflected a surplus of $46,146; however, when reviewing all funds of the district’s FY2024 budget excluding capital projects, the result is a deficit of $1,946,107,” Dillow said.
“We stand by our statement that the FY2024 budget reflected a projected deficit of $1.9 million when considering all funds except capital projects and acknowledge that the ISBE standard reflected a balanced budget for the year. Additional information will be shared at the August 5 Committee of the Whole meeting.”
The budget publicly presented and approved by the board last year was the one showing a surplus using ISBE standards. The deficit projected by excluding capital projects was never presented publicly.
Diving into reported expenses
In her Monday announcement to the community, Turner said the deficit “almost exclusively occurred within the transportation and special education budgets.”
Reports on actual expenses for the 2024 fiscal year through April are publicly available through the district’s school board web page. According to the April expenditure report, District 65 had spent about 75% of its $211 million budget by the start of May.
At that time, transportation costs were within budget and in line with the 2023 fiscal year as well. The district budgeted $10.1 million for transportation and had spent $8.7 million through April. Transportation Services Coordinator Lou Gatta also reported to the board in June that total costs were “looking to come in $1.1M under my projections.”
The RoundTable reviewed the April expense report and found seven line items that had gone the furthest over budget by that point in the year:
- “Transfers” in the building fund: budgeted $0 for the year, had spent $3.08 million through April.
- “Other professional/tech services”: budgeted $66,746, had spent $342,675 through April (513% of budget).
- “Summer help”: budgeted $30,000, had spent $146,555 through April (488% of budget).
- “Agency service/other temporary help”: $718,339 budgeted, had spent $3.15 million through April (438% of budget).
- “NSSEO” – the Northwest Suburban Special Education Organization: budgeted $234,192, had spent $892,604 through April (381% of budget).
- “Telephone”: budgeted $45,000, had spent $102,161 through April (227% of budget).
- “NSSED” – the Northern Suburban Special Education District: budgeted $257,230, had spent $546,387 through April (212% of budget).
Even though the district’s overall expenditures through April totaled 75% of the budget for the whole year, these seven line items were $6.2 million over budget as of May 1.
The “transfers” item, though, appears to be a transfer of money between district funds, as the revenue report lists the same amount coming into the building fund as “perm. transfer bet. funds.” Taking that item out brings the other six categories to $3.2 million over budget.
As for the impact of special education expenses, the district had spent $3.1 million from the special education fund itself through April, about $300,000 more than the special education fund’s budget for the whole year. The “NSSEO” and “NSSED” categories are listed within the broader education fund.
Analyzing the most recently available expense report shows how the district had severe cost overruns in certain categories through April, but – since overall spending remained at just 75% of the budget with two months left in the fiscal year – it’s still unclear what exactly led to the overarching $10 million deficit.
Referendum reserves
In 2017 voters approved a referendum to give District 65 an additional $14.5 million in property tax revenue a year for eight years, totaling $135.6 million.
The referendum was intended to save the district from budget deficits projected for the 2018 through 2025 fiscal years. Going into the 2023 fiscal year, according to a financial analysis by Business Manager Kathy Zalewski, who resigned last month after 23 years on the job, District 65 had $37.9 million in referendum reserves. To cover the 2023 shortfall, the district drew on those reserves, bringing them down to $30.4 million as of September 2023.
On top of the $10 million deficit for 2024, the school board also approved a resolution earlier this year to spend $4 million or more in referendum reserves on non-construction costs related to the development of the new Foster School in the Fifth Ward. If the district has to draw on reserves for both expenses, the reserves could soon go as low as $15 million.
Not accounting for the 2024 deficit, Zalewski was already projecting last year that the reserve funds would hit $0 by the start of the 2028 fiscal year if the district didn’t deploy aggressive cost-cutting strategies.
At the time of publication, a district spokesperson had not responded to a question from the RoundTable about where the referendum balance now stands. Beyond the referendum reserves, the district had an “other operating fund balance” of $28.5 million, as shown in the graph below.
Best practice for fund balances calls for keeping the balance at a minimum of 25% of all operating expenses. Going into the 2024 fiscal year, the fund balance was at 35% of budgeted expenditures, but it’s unclear where that currently stands. Not including this past year’s $10 million deficit, Zalewski was projecting the fund balance to fall to 5% of operating expenses by the start of the 2028-2029 year.
Central office shuffle
At a school board Finance Committee meeting in March, Turner acknowledged past overspending on the central office administration, which Hailpern thanked her for bringing up. Last year, the RoundTable reported on the district’s ballooning expenditures on administrative staff.
“We know we need to create greater efficiencies in our central office and administration, which has a much higher admin-to-student ratio than our peer districts,” she said at the time.
In April, the board voted to reduce the district’s overall staff by 40 positions starting in the 2025 fiscal year, saving $5.1 million. Details on the cuts are available in the slides below.
The district recently updated its online staff directory, and the RoundTable noticed a number of administrators with new titles – some that were previously vacant positions and others that didn’t exist before:
- Charmekia McCoy, previously the interim chief of schools, is now the chief of academics and schools management.
- Stacy Beardsley, the longtime assistant superintendent of curriculum and instruction, is moving into the new position of assistant superintendent of performance management and accountability.
- Katie Speth is the new assistant superintendent of instructional leadership.
- There is also a new director of instructional leadership, Deborah Osher, who was promoted from the position of talent development coordinator.
- Melissa Messinger, the district’s lead spokesperson who has held several different titles over the last few years, was recently appointed the executive chief of strategic communications and project management, and she will now sit on the dais during board meetings.
- Kirby Callam, the former director of college and career, moved into the new position of director of strategic project management.
- Sabine Champagne recently joined the district as director of human relations.
- There’s also an executive chief of human relations, Tiffany Taylor.
- Ashley Bias moved from manager of temporary staffing to the senior manager of operations for human resources.
Messinger did not immediately respond to questions from the RoundTable about the formation of these new positions and about why some departments, namely human resources and instructional leadership, now have both a “director” and an “executive chief” or “assistant superintendent.”
Ongoing union contract negotiations
If growing budget deficits were not enough of a challenge, the teachers’ union – the District 65 Educators’ Council – is in ongoing talks with the administration on a new contract.
The existing contract expires on the first day of the upcoming school year, Aug. 22. The RoundTable has confirmed the two sides have not yet struck a deal on a new contract, something that happened in June of 2019 when the previous contract was up that August.
The current expiring contract included annual salary increases commensurate with the normal inflation rate around 2019, so base annual raises for teachers, not including the benefits for an additional year of service, started at 2.1% in 2019-20 and gradually declined to 1.5% last year (the U.S. inflation rate stood at 1.6% in June 2019).
Of course, inflation skyrocketed as the country recovered from the pandemic, peaking at 9.1% in June 2022, so the union will, in all likelihood, be looking for a big salary increase to start the 2024-25 school year to make up for inflation outpacing their scheduled raises over the last few years.
Analyzing District 65’s burgeoning budget crisis is from Evanston RoundTable, Evanston's most trusted source for unbiased, in-depth journalism.