District 65 to Hire Consultant to Determine School Closings

And some even worse very bad financial news, $13 million dollar deficit for SY2024-25

In tonight’s board meeting, Dr. Grossi presented some of the dire consequences of the District 65 budget for school year 2024-25. Grossi presented a few notable points:

• Changes in IL corporate taxes mean that District 65 will have $1.5 million less in revenue for this year, which was just discovered recently.

• District 65 will pay $3,228,000 in payments on the Foster School Lease Certificate this school year. This is the first year of a full payment.

• Health Insurance premiums rose 7-9%, increasing budgeted costs more than $1.1 million.

• District 65 Paid $2.5 million in prior year bills during the last year - these were the bills improperly held over from prior year budgets.

• There is still no contract with the Teachers Union, each 1% increase in compensation will result in a $750,000 increase in the budget.

Most notably, Grossi detailed that the SY2024-25 deficit will be around $13.2 million dollars. This is with the proposed $6.5 million dollar deficit reduction plan and is an increase over the previous amounts presented.

The implications are that the reserves will continue to shrink. The District changed the method they use for showing reserves - they used to show an approximate cash number, which was around $30 million last year. But now they show it as a total cash position at the end of the year and project that to a number-of-days reserve level. According to Grossi, the reserves have now dropped below 90 days.

The effect of the 2017 referendum and rapid draw down during the Horton years is very noticeable in the chart.

According to Grossi, there are implications of dropping below the 90 day mark, including slower payments from Cook County and a lower rating from the ISBE. No awards from the ISBE this year.

Further, the Board is now in violation of their own policy (4:22) which requires the School District seeks to establish a fund balance of 25% of the annual expenditures in the operating funds.

Academic and Financial Bankruptcy

After presenting the budget, Dr. Grossi made a very serious statement. I really recommend reading the full statement that I transcribed below (bold is mine);

As the District’s financial advisor, I cannot stress enough the magnitude of the financial challenges facing this District. The status quo will lead the District into either financial or academic bankruptcy. I’ve been appointed twice by the Illinois State Board of Education in my career to oversee school districts that have been taken over by the state due to fiscal insolvency. Unless decisions are made that are bold and immediate, it is my assessment that the District is heading in that direction. The Evanston-Skokie community should never experience the situation of losing governing control of this school district to the State of Illinois.

With rapidly depleted operating fund balances, this District has put itself in the position as early as the next budget year, where a delay in tax revenues from Cook County could require short-term borrowing just to cover payroll and other expenses. We have learned together in real time over the past several months, the fiscal challenges facing this District. With eyes wide open we now must solve this problem urgently. In January 2025, the Administration will propose options for the board to consider to necessarily stabilize the financial condition of the District.

Read that again - Grossi is suggesting that the situation is reaching a level of seriousness where the ISBE may step in. Later in the meeting, the Board inquired as to the seriousness of this situation, Grossi responded with an explanation of how short-term funding (i.e. tax anticipation warrants) works and;

The takeover is somewhat arbitrary, there is some metrics they cite in the code in terms of issuing two years of tax anticipation warrants but a lot of it is just an assessment. At some point in time they get on the state’s radar and they monitor what is going on and depending on the situation, they act accordingly.

After his first statement, they moved onto a discussion of the deficit reduction plan.

At this point, I don’t understand how they can complete the Foster School - the lease certificate is barely enough to pay for construction, any overrun at this point will result in the Fifth Ward getting their own pit — the pit is literally being dug now.

School Closure by Consultant

Part of the plan involves consolidating and closing schools. This process was originally outsourced to the closed door SAP3 Committee only a few months ago.¹ The key element of the new plan, presented by Dr. Turner, involves removing the decision from SAP3 and instead hiring an outside consultant to make the recommendations on school closures.

There was significant discussion on this topic. Ms. Lindsay-Ryan replied first, supporting the use of a consultant;

I think it’s always worth noting when we’re talking about cutting dollars there is always a discomfort when we say we’re going to spend some money on a consultant. And thinking about this in the scheme of what can that person save us. If we’re spending X million dollars but they’re helping us save ten million dollars, like that’s a good investment.

The rest of the board chimed in to support the idea of using a consultant to determine school consolidation. Board members suggested all sorts of reasons this was a good idea; the community wouldn’t bother staff members, the outside consultant could be truly objective, and one member suggested hiring a Northwestern PhD student to figure this out. There was a lot of talk about transparency and involving the community, in a very generic and unenforceable way.

I had to pinch myself during this conversation — like, the Board was sitting there, facing very dire financial circumstances and everyone agrees that the solution is to hire another consultant? That’s what got us here in the first place! In fact, according to records, the District has already spent $149,890 on consultants associated with the SAP1 and SAP2 committees.²

The Board, yet again, continues to abdicate their elected responsibility to voters, parents and students. The owe it to their voters and the families to do this work themselves, it is literally their statutory role.

As the last agenda item, Joey Hailpern earnestly advertised to the public that elections were coming up and there are resources for folks out there who want to run. Dr. Turner and the rest of the Board laughed (watch here).

1. SAP3 Update to the Board this month was “No Update”

2. Sagebird Consulting’s relationship with Dr. Horton is detailed in this Evanston Roundtable Story, where the Board agreed to review spending policies.