Why should school funding (& the tax levy) increase to align with inflation?
1. INVESTING IN SCHOOLS IS SMART.
History shows the impact when a district falls short in its investment in education. In 1990, the D39 Board of Education decided in a 4-3 vote not to fully extend the levy. The ramifications of that decision lasted a decade. In this video, Tom Nathan, (Board Member 1989-1997, President), explains how D39 was unable to retain teachers. To regain financial stability, the District increased class sizes, cut nurses, gym classes, art instruction and music. Parents were unhappy. Teachers left D39 and threatened to strike. It took 10 years to reestablish stability and confidence in D39 schools. The result was not good for students, not good for families, and not good for property values. As citizens, by far the most important commitment and investment we can make is in the education of our students.
2. D39 IS EFFICIENT & FISCALLY CONSERVATIVE.
District 39 is the most fiscally conservative district of all New Trier feeder districts. D39 has the largest student-to-teacher ratio, the lowest per-pupil spending, and the highest pupil-to-administrator ratio. D39’s efficiency and fiscal conservatism is evident as we compare those same metrics among 15 area schools.
D39’s budgeting process takes into account: (a) revenue projections, including a cost of living increase (limited by PTELL) and the value of new property growth, and (b) expenditure projections. These projections are calculated for the following year and for five years into the future. In formulating financial projections, D39 follows a fiscally conservative financial philosophy, and seeks to maintain a minimum fund balance of 30% of its budgeted expenditures. D39’s minimum fund balance target is far lower than that of other NT feeder districts. With a 30% fund balance, D39 would have three months of working capital on hand. In Illinois, if a school district’s fund balances dip to 25%, the district is placed on a financial watchlist, and its bond ratings are negatively impacted. D39 puts tax dollars to work, and does not accumulate longstanding, large fund balances, while maintaining the ability to manage any unforeseen situation that may arrive – effective risk management.
In 2011, the community passed a referendum to increase property taxes for District 39 schools. In so doing, the District committed to not asking the community for another referendum for at least five years. D39 succeeded in meeting that five-year commitment, and has in fact exceeded expectations in part by effectively managing the revenue portion of its budget through the tax levy and by continuing to effectively control expenditures through cost containment. D39’s proposed tax levy for 2017 would translate into approximately $366 for each $1000 paid on a tax bill (i.e., $3,660 of a $10K tax bill). Based on the proposed 2017 tax levy, the amount attributable to a CPI-based increase would be $7.69 on a $1,000 tax bill, or $76.90 on a $10K tax bill.
3. FAILING TO EXTEND LEVY WILL COMPROMISE OUR SCHOOLS.
The D39 Board of Education will vote whether to extend the levy to align with a CPI increase on December 18, 2017.
D39’s current financial forecast shows strong fund balances through at least 2023. This baseline forecast assumes D39 will extend the levy by CPI (the rate of inflation) each year, plus an extension for the value of new property growth. D39’s projections also include $13.6M in capital projects over 5 years and health-life safety projects of $2.2M over 5 years.
In making financial forecasts, D39 must also consider outside actions that may negatively affect funding – such as the potential for a shift in responsibility for pension payments from the state to D39 — and legislation imposing a two-year property tax freeze (IL House passed a bill with a 2-year tax freeze in Nov. 2017; IL Senate expected to vote in spring 2018). If the State imposes a two-year property tax freeze for 2018-2019, D39 will face inflationary cost increases without adequate revenue to keep up, thereby depleting fund balances at an accelerated pace. Moreover, depleting fund balances impedes D39’s ability to proceed with capital improvements and maintenance to the detriment of students. With this in mind, if D39 were to self-impose a tax freeze in 2017 by not extending the levy (Board will vote on 12/18/17), D39 could face a 3-year property tax freeze (when combined with a 2-year property tax freeze that may be imposed by the State). The compounding effect of a 3-year property tax freeze on D39’s fund balances is clear.
D39 is not only efficient, but also effective in delivering a top quality level of education — producing high-performing students who are well-prepared and successful after graduating from District 39 schools. D39 students perform and excel in all manner of tests and subjects. D39 prepares students for high school and provides the foundation for outstanding contributions by D39 students to music, the arts, and foreign language – all areas that would be hurt by budget cuts.
4. COMMITMENT TO SCHOOL FUNDING IS GOOD FOR HOME VALUES; UNCERTAINTY HURTS HOME VALUES.
A strong investment in schools shows community stability, improves property values and facilitates home sales. Conversely, when a community demonstrates uncertainty in its commitment to education, home sales and property values are hurt. In the months prior to the 2011 referendum, the median Days On Market for homes within D39 languished at 116 days. Within a few months after the referendum, (and after an increase in taxes), Days On Market dropped significantly to 62 days. Realtors witnessed firsthand the manner in which school-uncertainty deterred prospective home buyers from placing offers on homes in D39, while a clear commitment to education had a positive effect. In the five years after the referendum, median home sales prices within D39 have increased over 30%.