District 65 Projects $8 million 2025 Budget Deficit

Uh guys, this is starting to get really bad.

For the second week in a row, District 65 dumped out bad news on a Friday night. Evanston Now beat me to the scoop and you can read their story. I need to go to the Farmer’s Market and stock up on tomatoes to can, so I’m writing this quickly.

The high level summary is:

• The District 65 Administration is projecting a $7,945,000 deficit in fiscal year 2025, which goes from July 2024-June 2025.

• This budget includes no budgeted increase in teacher salaries. Recall that this week, teachers are going back to work without a contract and D65 teachers are paid 20% less than their ETHS counterparts.¹

• This in on top of surprise budget deficits from from the last two years, which amount to nearly $20 million dollars. In both years, the board was presented with a balanced budget in September and then surprised in July of the following year.²

• The District received almost no additional state revenue from the state’s evidence-based funding. The is the only notable revenue that D65 receives which is directly tied to enrollment.³

The budget comes with a letter from the Dr. Robert Grossi, the President of Illuminate Incorporated and D65’s financial consultant. In this letter, Dr. Grossi alleges some serious financial impropriety on behalf of prior district administrations;

This is evidenced by two poorly developed budgets, inaccurate information of the financial implication in the construction of the new school, monthly financial reports that reflected data that were more than two months old, and financial reporting that positively skewed the District’s financial condition through techniques that included delaying the payment of bills and accelerating the receipt of grant revenues into the District before the associated expenses actually occurred.

These actions are irregular and not consistent with best practices. The Board of Education and community deserve fidelity in the data that is presented. Had the Board received accurate information on the cost and savings generated from the Fifth Ward School, I believe their decision making related to the new building would have been different, at least in scope and these real expenditure reductions would have started sooner. I also believe that the deficit reduction plan would have been accelerated.

Read that first paragraph again! Accelerating receipt of grant revenues! Delaying bills to positively skew the financial condition! This is a big deal.

Foster School Troubles

Most of these issues I’ve written about previously, especially regarding Foster School⁴. In particular, the origin of the $3.0 million bus savings lie remains unknown. Below is the slide presented to the Board by Raymond James, who has not responded for comment, that has the earliest known version of this estimate.

Where did this number come from?

I FOIA’ed copies of records relating to the number in October 2023. 4 records exist but they were denied for being “predecisional.” I haven’t had the chance to appeal this but I don’t think I need to - I get the sense from his letter that we’ll see some resolution to this in the coming months.

I visited the site in the end of July to see if work had progressed and it was still an empty field, with a hole from the groundbreaking event and a sad Cordogan-Clark sign blowing in the wind.

7/31 State of Foster School Field - holes where shovels were dug and a damaged Cordogan-Clark Sign

It’s somewhat unclear to me how they’re going to be able to begin/continue construction on the Foster School now. Consider the following back of envelope math:

• Cordogan-Clark has estimated $48 million for construction - $42 million from the lease certificate funds (for construction costs) and $6 million from general funds and/or reserves (for stuff inside the school)

• The District last year had about $30 million in reserves set aside from the 2017 referendum. I don’t know what that number is right now (they changed reporting) but I suspect it is around $30 million - $10 million (2024 deficit) - $8 million (2025 deficit) = $12 million left over.

• If you take another $6 million out of that, you’re cutting it really close. There’s not really any backup funds after that. The Board’s own resolution from 2017 doesn’t really permit for this.

I don’t really know how they proceed from here. If I was on the Board, I would be freaking out because I get the sense that there are lots of unknowns:

• How much cash is in the lease certificate fund to pay for construction, including interest? What’s the number right now?

• How the hell do we pay for stuff going inside the school? Where do we get that $6 million dollars without ruining the reserves further?

• How do we re-build the reserves? Do we need a referendum? How the hell do we sell that to taxpayers?

• Who lied about the bus savings? What’s the origin of that number? Was Raymond James, our financial advisor complicit in this lie and to what degree are they responsible for impropriety with the prior administration?

And even more importantly, it’s now obvious we need to close more schools. What’s the long-term plan for consolidation? The Board essentially punted the question to the administration via the closed-door SAP3 committees - why outsource this decision?

1. 2024 Actuals = $45,309,063.79.
2025 Budget = $44,464,700.00

I realize there have been some minor reductions in force due to retirements but I don’t think the overall number of educators has changed significantly.

2. Fool me once …

3. They can blame the state all they want but plenty of school districts saw sizable increases in state funding, which is directly tied to three year averages for enrollment.

4. I’d like to think that Dr. Grossi is a reader!