District 112 Superintendent's Citizen Finance Advisory Committee Presents Findings

Members of the North Shore School District 112 Superintendent’s Citizen Finance Advisory Committee presented a report at the February 21, 2012 board meeting outlining the areas that they feel should be given high priority as the district seeks ways to ensure its long-term financial sustainability.

While the district has many strengths, it also faces some pressing challenges, committee members told the board. Despite trimming $3 million from its budget in the last two years, the district’s expenses have outpaced its revenues, and it has had to draw from reserve funding. Financial projections show that if spending and revenues continue at their current pace, reserves will run dry by 2017. If steps aren’t taken to address the district’s financial challenges within the next year or two, then the district “will pass the tipping point beyond which its financial failure may well become inevitable,” committee members wrote in their report, which is posted on the district website at www.nssd112.org.

North Shore School District 112 Superintendent David L. Behlow convened the advisory committee in order to share in-depth details about the district’s finances with the broader community, and to provide community members with an opportunity to ask questions and offer meaningful input. A call for committee members went out in October and November, and 48 community members applied to serve. In an effort to ensure that the committee would have ample opportunity for discussion and questions, participation was limited to 21. Three members became unable to attend during the course of meetings, so the final committee numbered 18. Care was taken to select a group representing every geographic area in the district, and many committee members who were chosen had professional backgrounds in private or public sector finance.

The committee members, who included 14 community residents and four North Shore School District 112 employees, began meeting in November and had their final meeting on February 8. Over the course of their meetings, they received in-depth information about the district’s budget and finances, including historical budget and demographic information, future financial projections, an overview of the district’s five-year strategic plan, and information about the state of the district’s facilities.

Four committee members presented the group’s findings to the board. Robert Bernat, Dan Littman, Todd Needlman and Leonard Tenner told board members that while they concluded the district has a number of financial strengths, including a strong fund reserve balance, an affluent property tax base, low debt levels and a strong credit rating, it also has a number of challenges. “The district is facing challenges from both a a revenue and an expense side,” Needlman said during the presentation. A main challenge facing the district is that its expenses continue to grow at a faster pace then its revenues, the committee concluded.
To have a lasting impact, the district must address its key cost-drivers and revenue producers, they told the superintendent and board members. They identified five general categories that they feel deserve high priority attention: Employee Compensation, District Facilities, Education Programs, Personnel, and Revenues.

Specifically, they recommended that the district administration and board members give high priority attention to the following items:

Compensation:

•Consider reviewing the structure of employee healthcare and other benefits
•Consider restructuring the salary model to include performance-based pay
•Consider restructuring the teacher lane advancement schedule, which grants raises to teachers who earn a certain number of post-graduate credit hours

“Rising personnel costs, including both salaries and healthcare costs, have been on a trend that is unsustainable, and this needs to be addressed,” committee Tenner told the board.

Facilities:

•Consider reducing the number of school buildings
•Consider re-organizing buildings into grade level centers (K-2, 3-5, 6-8)

Committee member Littman told board members that the committee concluded that a detailed cost-benefit analysis is warranted to explore whether it would make sense to reduce the number of current school buildings (the district currently has 8 elementary schools, 3 middle schools, and a building that houses its preschool and administrative offices). During the course of advisory committee meetings, committee members heard many details related to the cost-inefficiency of operating such a large number of buildings, and the financial challenges associated with operating and maintaining the district’s aging buildings.
Said Tenner: “We have facilities needs that cannot be underestimated. Our aging buildings are costly to repair. We can’t have our superintendent running around with thermometers in classrooms in the summer, and we can’t have our principals wearing boots in the winter because a heating system breaks down. Frankly, repairing these aging facilities is a losing proposition. Furthermore, our small buildings are inefficient to operate.”

Education Programs:

•Consider changes to the Dual Language and World Language programs to achieve cost savings
•Consider developing in-house programs to reduce the cost of North Shore Special Education District programs

“We do a phenomenal job of educating children with special needs, but we have to investigate ways to curb (special education) costs without casting these children adrift, which is not an easy task,” said Tenner.

Personnel:

•Consider further personnel reductions to obtain student/staff ratios that are more in line with district guidelines.
•Consider reviewing allocation guidelines for special education related personnel: teachers, social workers, speech therapists, classroom aides and paraprofessional staff
•Consider reducing the number of building and/or district-level administrative and support positions.

“The district’s largest cost drive is obviously personnel costs,” Bernat said. “The committee believes that if the board fails to reduce personnel costs, then all other efforts are going to fail.” He stressed that the committee felt it was important to maintain staffing within district and national guidelines, and conform to national best practices. The committee report noted that in the last 10 years, while student enrollment changed by a count of just 2, but that staff numbers increased by more than 100.

Revenue

•Consider pursuing a building bond referendum that would allow the district to undertake capital improvements and possibly reduce the number of buildings
•Consider the sale of real estate that would be made possible if number of buildings is reduced
•Consider an operating fund referendum

Asking the taxpayers to support a referendum that would pay for capital improvements or building consolidation, as well as for operating expenses, should be an important consideration. But, committee members stressed, the district would need to continue to cut costs and demonstrate that it is doing everything possible to keep costs under control. “We had significant discussions that without there being strong evidence of cost reductions, it is unlikely that there would be any chance of a referendum being approved by the public,” said Bernat.

Bernat concluded the group’s presentation by noting that there are many reasons to be optimistic. “This community values quality education, the board is committed to long-term financial success, and our finances are not yet broken beyond repair.” But, he added, it is imperative that the board act decisively within the next 18 months.

At the end of the report, board members and Superintendent Behlow thanked the presenters and the entire committee. “I believe the findings of your committee are important and deserve serious consideration. The information you gathered over the last several months will serve as a basis for informing the residents of our school district about our financial position,” Behlow said. “We will have to make some decisions about how we will adjust to the difficult financial landscape that we find ourselves in. But the constant here is one that has been in the district since its existence: We want to provide every child with a quality education, in the best possible learning environment, using the best professional, committed and dedicated employees that we can. It’s not only our challenge but also our opportunity. This report will become a major part of our ongoing budget deliberations as we work to ensure the future educational excellence and financial sustainability of our school district.”