Budgeting errors lands DuPage County school district in distress

Nestled in a leafy and prosperous swath of suburban DuPage County, Center Cass School District 66 in Downers Grove at first glance appears to exemplify the best of public education.

The district boasts three tidy and modern school buildings, enthusiastic teachers a reputation for academic rigor and plenty of personal attention for its 1,100 students in kindergarten through eighth grade.

But the district’s dire financial woes have resulted this fall in steep budget cuts, including reducing the number of teachers and building custodians, eliminating all extracurricular programs and athletics, cutting bus routes and shortening the school day.

“We are performing education triage,” said teacher Jake Little, who has taught social studies at District 66 for 18 years. “The needs of the students are so much greater than they were years ago. … We have some students reading five grades below, and we don’t have the resources for the interventions and attention they need.”

Now, weeks away from the Nov. 8 midterm election, District 66 teachers, administrators, parents and school board members are urging voters to support a property tax increase after years of low tax assessments and problematic budgeting practices have thrown the district into crisis.

The financial meltdown hitting District 66 has been brewing for years, officials said, and can be traced to the district’s relatively low tax rate and equalized-assessed value, or EAV, which is the value assigned to a property by the township assessor’s office.

Local revenue is calculated using the local tax rate multiplied by the EAV of the community within the school district’s boundaries. Of the 30 K-8 school districts in DuPage County, District 66 ranks in the bottom third for tax rate, EAV and revenue, officials said.

In addition, with very little industry in the area, 90% of the district’s property tax revenue is derived from residential homeowners, with just 10% of its budget coming from state and federal funding.

While the district’s finances are audited annually by outside agencies and monitored by the Illinois State Board of Education, one reason the district’s financial hardships were not revealed sooner is the way tax collections are delivered in DuPage County.

Unlike in Cook County, where districts receive their property tax revenues during the early part of the school year when the funds are meant to be used, districts in DuPage County receive money in late May or early June for the fiscal year beginning July 1.

District 66 was including those tax dollars in its year-end report for the fiscal year ending June 30, an accounting practice that makes the district’s fund balances look healthier than they are. And instead of rolling the funds over to the new fiscal year, the district was using that revenue to pay the current year’s expenses, a practice that started as early as 2014, District 66 officials said.

The practice had for years painted an inaccurate picture of the district’s health, failed to acknowledge mounting deficits and depleted reserve funds, District 66 board member Chris Esposito said.

Although using early tax dollars is not illegal, “it’s a practice that causes all kinds of trouble, like we’re seeing here,” Esposito said.

The school district has hired new auditors, cut $2 million from its budget over the past two years and issued tax anticipation warrants to cover payroll, “which is a fancy way of saying payday loans,” Esposito said.

“It’s not mismanagement of funds. We don’t have the funds,” said Esposito, who urged voters to attend the Oct. 12 District 66 school board meeting to learn more about what’s at stake in the referendum.

When District 66 Superintendent Andrew Wise took the helm in July 2020 at the height of the COVID-19 pandemic, he was impressed by Center Cass’ “great teachers, community, and awesome kids.”

But he found its financial picture troubling: Additional revenue was needed to operate, facilities were deteriorating, technology infrastructure was failing, the district’s financial profile with ISBE had dropped, and the district did not carry three to six months of reserves.

“What’s happened is the cost of educating students now includes funding for safety and security, technology. … So much has changed in the past 30 years, and the district’s increased revenue has not caught up with increased costs of educating a child,” Wise said.

“It was a perfect storm, and if it had been noticed earlier, we would have alerted people earlier,” Wise said.

Voters turned down an earlier request this summer to raise the district’s property tax rate. This fall, voters are being asked to increase the rate from $2.14 per $100 of a property’s equalized assessed value to $2.55.

If approved, it would mean a 19% increase in the property tax rate to the Center Cass District line item on a homeowner’s property tax bill, down from a 24% increase the district had sought with a referendum in June.

For a home valued at $300,000, a resident could expect an increase of about $377 a year, or $31 a month, officials said.

If the referendum fails in November, officials said, the district will face deeper cuts for the 2023-24 school year, including the potential cuts of eight additional teaching staff members, closing school libraries, removing curricula that aren’t mandated by the state — such as art, music, band and foreign languages — and further halting of bus routes.

Nevertheless, some opponents of the district’s referendum proposal say the solution is not raising local property taxes, but consolidating District 66 into one of the neighboring districts in DuPage County. In addition to Downers Grove, Center Cass District 66 serves students living in Darien, Woodridge and unincorporated DuPage County.

“When you look at the state of Illinois, we are probably the worst in the nation when it comes to too many school districts, and too few schools in each district,” said Eric Gustafson, alderman of Ward 6 in Darien.

Gustafson said taxpayers would benefit from the consolidation by slashing the number of administrators, which he said would dramatically reduce the funding needed for payroll.

“The money should be spent on kids,” said Gustafson, adding that his own three children “got a very good education at the school district.”

“My main question is, ‘Where did all of the money go?’” he said.

But Wise said consolidating school districts would “make the districts tax rate go up more than what is proposed with the referendum.” The tax rate in neighboring Woodridge School District 68 is $4.34 per $100 of equalized assessed valuation — almost twice that of District 66, Wise said.

Consolidation would also cause the district to lose local control over its decision-making, he said.

A spokeswoman for the Illinois State Board of Education said District 66′s financial profile score of 3.45 out of 4 for 2021 qualifies the district for financial review, a designation reserved for districts that score between 3.53 and 3.08. Those scoring 3.07 through 2.62 are put on financial warning, while those between 2.61 and 1 are on financial watch.

“The profiles examine five key indicators of financial integrity: fund balance to revenue ratio, expenditure to revenue ratio, days cash on hand, percentage of short-term borrowing ability remaining, and percentage of long-term borrowing ability remaining,” ISBE spokeswoman Jackie Matthews said in a statement.

Some supporters of the District 66 tax rate increase referendum have expressed concerns that the state could “take over” the district, as it did with North Chicago School District 187 in 2012. That district only just received the green light from ISBE to transition from a state-appointed board back to a locally elected school board.

But District 66 appears to be far removed from that fate, as a district’s financial profile score is different from the criteria the state uses to trigger a takeover of its finances. If a district does meet the criteria, it first must submit a financial plan to the state. The state appoints a financial oversight panel only if it determines the district has failed to comply with its plan, according to Matthews.

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Elizabeth Uribe, a volunteer with the community group Save Center Cass School District 66 and the mother of a District 66 kindergartner and second grader, said passing the referendum in November is critical to preserving the district’s reputation as a destination school system.

Despite deep budget cuts this fall, the community is rallying to support students, including hosting a community 5K race Friday afternoon for members of the cross-country team, whose season was quashed this fall due to budget cuts.

“I think it was a really tough decision, with the district cutting extracurriculars, but it has energized the community,” Uribe said.

“The kids are missing out on services, and the only things left to cut are hurting our kids,” she said.

kcullotta@chicagotribune.com

Twitter @kcullotta