What's Wrong with Illinois School Finances?
By Diane Rado
A disturbing number of Illinois school districts are in poor to dire financial shape, with 121 getting low or dismal ratings in the state's annual financial report card for schools.
That's more than double the number of districts in the two lowest categories just two years ago, the result of districts struggling with less state aid, higher costs and a weakened economy.
The analysis of school finances also examined operating budgets for the current school year, estimating that 62 percent of districts are now deficit-spending, including affluent schools in Winnetka, Wilmette and Kenilworth. In addition, the data indicates that districts are borrowing more money to stave off deficits, in the process burdening taxpayers with more debt.
"This is a highly dangerous practice," said Gery Chico, chairman of the Illinois State Board of Education.
State School Supt. Chris Koch said the financial struggles are having an impact on everything from class sizes to the elimination of art and music and a reduction in high school course offerings. Particularly troubling is that dozens of districts with the two lowest financial ratings encompass almost a third of the state's school population, officials said Wednesday. Those districts include the massive Chicago Public Schools system, which dropped one level this year and received the second lowest of the four ratings used in the state's analysis.
Also on the list for districts in the second lowest category were Will County's sprawling Plainfield District 202 and Kane County's West Aurora District 129.
Meanwhile, six districts in the Chicago region hit rock-bottom in the financial ratings. Those include Cook County's Prairie-Hills District 144, and Lake County's Big Hollow District 38, both of which dropped in status from the year before.
The financial ratings approved by the board Wednesday are based on the budget year ending June 30, 2013. Districts are judged on categories including how much they spend compared to what they take in; the health of their financial reserves and how much debt they've accumulated.
Koch is scheduled to appear Friday before a legislative committee to discuss potential cuts in education. He said he plans to let lawmakers know about the school system's financial stress.
With the state's budget in crisis, schools have been getting less money than they are entitled to receive under the formula used to distribute funds to schools. At the same time, costs are going up, putting pressure on schools to make cuts or deal with red ink.
In Plainfield 202, spokesman Tom Hernandez said the district has cut about $42 million in expenses, eliminating 345 staff positions, a reading specialist program and the elementary school band. The district has been borrowing against future tax collections to cover its bills.
When the state sends less money, "It is a very, very desperate, difficult situation for us," Hernandez said.
The district has been making improvements. It was in the worst category of financial health last year, but has moved up to second-lowest.
In West Aurora 129, the district sold bonds in 2010 to raise money, mostly for operations and maintenance.
"It was in response to the recession and the darkest moment when the state stopped paying its bills," said spokesman Mike Chapin.
While some might criticize the district for borrowing money to stay afloat, Chapin said, "Our take on it, is, we are surviving."
Anti-tax groups often criticize school districts for overspending, and even school proponents sometimes question where all the money is going.
The state's analysis suggests that districts overall are not dipping more frequently into their reserves, money that could be used to cover deficits.
State board member Vinni Hall pointed out Wednesday that state has more than 860 school districts -- some with just a few dozen students. Administration costs add up in those districts and historically, many have been reluctant to consolidate and save money on administrative expenses.
The four ratings used by the state, from best to worst, are: "financial recognition," financial review," financial early warning," and "financial watch."
Most districts in the state -- 560 -- achieved the highest financial rating. But that figure is down slightly from the year before, and has dropped significantly from two years ago, when 670 districts earned "financial recognition" status.
The lowest rating, "financial watch," is reserved for districts in the most severe trouble. There are 49 districts in that category, six in the Chicago region: Beach Park District 3, Big Hollow District 38, and Millburn District 24 in Lake County, and Bellwood District 88, Prairie-Hills District 144 and Sandridge School District 172 in Cook.
Statewide, 72 districts are in the second-lowest category, "financial early warning," up from 67 the year before. Those districts include Evanston School District 65 and several districts covering impoverished communities in south Cook County.
CPS, also in the "early warning" category, posted a $604 million operating deficit for this budget year, according to the state's analysis. CPS pokesman Joel Hood said that the district has cut spending by nearly $700 million over the last three years, but the deficit remains a challenge, particularly if lawmakers do not take action on the pension issue.
"In the absence of legislative action to reform a broken pension system, CPS projects a near billion-dollar budget gap in each of the next two years," he said.
That will force the district, he said, to make further cuts in essential educational programs and social services.
The state also averages the financial ratings for all districts, and that collective figure also went down this year.
Last year, the average was in the top "recognition" category. This year, the average dipped to the second-highest category.
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