From construction paper for kindergarteners to reconstruction of buildings where those kindergarteners learn, inflation will take a big bite out of revenues for Evanston/Skokie School District 65 in the upcoming budget.
The big reason? For the first time since Illinois’ property tax limitation law took effect in 1991, inflation is so high that that revenue collections will be capped at a 5% increase, even though the cost of living (and buying things for schools) is jumping at a higher rate.
The cap law restricts how many additional property tax dollars a school system can collect in a budget year to either 5% more, or to the rate of increase in the Consumer Price Index, whichever is lower.
In the last budget year, for example,the CPI was only 1.4%, so the cap did not take effect.
But now, Chief Financial Officer Raphael Obafemi told a school board committee on Monday that “the cost of everything that the district spends its money on has gone up.”
The school system, he said, “is not immune from inflation.”
A particularly dramatic example is the cost of much-needed renovations for District 65’s aging buildings, which average 77 years old.
Earlier this year, the district’s Master Facilities Plan said that repairs needed for all 18 schools would cost $189 million.
But inflation, Obafemi said, now pushes that to about $215 million.
Of course, those amounts are just a present snapshot in time, and there’s no way all the work can be done at once. With a roughly $150 million annual budget, mostly for employees, fixing everything simultaneously would wipe the district out.
It’s a long-term project, perhaps over 10-20 years, but Obafemi said it’s time to get going.
“We really need to start doing something about our facilities,” he told the board members.
“We know our facilities are in bad shape.”
Superintendent Devon Horton said that next month, the administration will propose how to spend $6-7 million on building improvements.
For the past few years, when interest rates were lower, the district was actually able to refinance some bonds, and use the savings for capital projects, such as installing energy-saving LED lights in 11 school buildings.
But with interest rates skyrocketing now, such savings are no longer possible.
Adding to the complexity is the way Illinois’ school finance laws are written.
Under the cap law, the CPI is determined by the nationwide urban consumer price index for December, which in this case is December, 2021.
But the year-long urban CPI up ’til now, according to the federal Bureau of Labor Statistics, is an increase of 8.2%.
Do the math. Costs are going up 8.2%, yet the district is capped at a 5% property tax increase.
(It’s also important to note that an individual’s property tax might go up more than 5% or it might go up less. There are a variety of factors such as property valuation and tax level appeals. The 5% cap law covers total district property tax collections.)
Now throw in this: Two of District 65’s labor union contracts, Clerical/Secretarial Workers and Child Care Professionals are expiring and will be renegotiated.
The unions won’t want any raises eaten up by inflation, but the district won’t want to give big pay hikes which could set a precedent for other unions,such as the teachers, down the road.
And there’s yet another factor, a potential recession. If that happens, future school district revenue will decrease, even if the system is locked into higher labor or construction costs now.
Construction costs could also fluctuate, at least in theory, for the new $40 million 5th Ward school the board has voted to build. Completion is not expected until spring, 2025, but inflation could be a wild card for the total price tag.
Of course, taxpayers may just ask “why not cut costs?”
Finance Committee Chair Joey Hailpern noted that “economic times are tough for everyone. People in the community say you’ve survived before with less.”
There have already been budget cuts, and more are likely as the number of District 65 students continues to decline. But budget cuts create more controversy, with jobs being eliminated, programs being chopped, and the long-term possibility of closing school buildings as part of the student reassignment process. (The Bessie Rhodes building is already slated for shutdown once the 5th Ward school opens, with the Rhodes program becoming a “school within a school” in Ward 5. Other closings are at least a potentiality).
However the difficult decisions play out, Obafemi told the board members “we plan to continue to live within our means. We will never run a deficit.”