As 2020 was coming to a close, Fox C-6 Chief Financial Officer John Stewart painted a grim picture of the district’s financial future.
During his Dec. 15 report to the Board of Education, he said the district would have a negative fund balance by the end of the 2024-2025 fiscal year if revenue and spending do not change.
“We are not allowed as a school district to have negative fund balances,” Stewart said. “The picture I’m drawing is that we will be OK at the end of this year. But, the next three years progressively get worse, if nothing changes.”
Fox is projected to close this fiscal year, which began July 1 and ends June 30, with $13,481,470 remaining in its operation fund balance, which is $181,470 more than the $13,300,000 the district ended with at the end of the last fiscal year.
The district saved some money at the end of the 2019-2020 school year when buildings had to be closed because of the COVID-19 pandemic. However, Stewart said the trend of the district increasing its fund balance will not continue if major changes are not made.
According to Stewart’s projections, if revenue and spending continue as is, the district would have $13,115,618 in fund balances at the end of the 2021-2022 school year and $10,430,617 at the conclusion of the 2022-2023 fiscal year.
Then, the Fox district’s fund balance would decrease by nearly half by the end of the 2023-2024 school year, falling to $5,478,617. When the 2024-2025 fiscal year ends, projections show the district with a negative $1,823,779 in fund balances.
“We are definitely in a situation that needs to be addressed, and we need to put together a solid action plan to help with our financial outlook,” said Superintendent Nisha Patel, who has announced she is leaving the district at the end of the school year to take a job as superintendent of the Clayton School District. “Part of this is creating a finance committee made up of staff, parents and community members so everyone fully understands the situation and we have full transparency.”
Stewart said there are two ways to fix the Fox district’s financial situation – cutting the budget or increasing revenue.
“If a substantial change in one of those two or both does not occur, it will hurt the educational environment here,” he said.
Board of Education president Vicki Hanson said school officials need to work harder to cut expenses.
“We do run a tight ship at Fox, but I think we can look at things and determine what is essential and see where we can cut expenditures.”
Stewart said cost-cutting measures could include decreasing budgets for various departments and spending less on supplies.
Fox already cut 5 percent from the 2020-2021 budget for supplies and purchases, saving about $1 million, he said.
Stewart also said freezing current salaries could be considered.
“I think all things are on the table,” Stewart said.
For this school year, board members approved a pay increase for just one Fox administrator, so the salaries for the remaining 72 administrative-level employees are the same this school year as last.
Luke Heitert, Fox’s director of technology, received the lone administrative pay raise – $1,573.16, which increased his annual salary to $113,000. That salary is the minimum the district pays for that position, according to district records.
Stewart said the problem with cutting the budget is the effect it eventually has on the level of education students receive.
“The big issue is our expenditures are 80 percent people,” Stewart said. “If you need to make large budget reductions, you can only push the needle so far by cutting from the 20 percent. And as you are reducing that 20 percent, you are affecting educational programs and supplies for educational programs. There comes a point when you are done cutting fat and you are cutting muscle. When you cut muscle, that hurts the organization, students and staff. That is not a preferred method.”
The district’s largest expenditure every year is for personnel costs. Fox is slated to spend $101,260,661.90 this school year on salaries and benefits for the district’s 1,866 employees, which is 84.34 percent of the 2020-2021 operating budget, Stewart said.
Hanson said district officials need to take a close look at every position that opens when an employee leaves and decide if it needs to be filled or if the former employee’s duties could be assigned to other staff members.
“You have to look at it with fresh eyes,” Hanson said. “What were the responsibilities of that position? Can it be divided up among existing staff so that nobody is overwhelmed.”
Stewart said another possible money-saving move could be to close one of the district’s 11 elementary schools, which could save the district about $1 million per year, Stewart said.
The district also has four middle schools and two high schools, as well as an early childhood center and the Bridges Alternative School.
In January, Patel said there are no plans to close a school at this time. However, she said if one of the district’s elementary schools were to be closed, it would be one with low enrollment.
The elementary schools with the lowest enrollment are Hodge with 341 students, Simpson with 344 students and Sherwood with 371 students, said JP Prezzavento, Fox’s communications and instructional technology coordinator.
“(The possible closure of a school) is a conversation that the board needs to be an integral part of as well as the community, and that is why it is prudent we establish a finance committee,” Patel said on Jan. 8.
Hanson, who in December talked about the option of closing a school, said she wanted the community to be aware it was a possibility. She also said she wanted board members to be aware of the option so they could make more informed decisions about how to spend money on maintaining buildings.
“I don’t want to close any elementary school,” Hanson said. “My preference would be to keep all of the existing schools open and find another use if there is extra space, like expand preschool or use that space for another district program. Each school has its own community, and they are important to the families.”
Fox has three main sources of income – funds from the federal government, funds from the state government and revenue from local taxes.
The district has no control over the funding it receives from the federal and state governments, and it needs voter approval to raise local taxes to boost its operating budget.
Fox district residents last approved a tax levy increase for the district in 2004, when 60.6 percent of the voters said yes to a tax levy increase of $1.2207 per $100 assessed valuation, which brings in about $11 million annually.
Fox’s overall tax levy is about $4.57 per $100 assessed valuation.
Patel said asking the school board to place a tax increase on a future ballot is “definitely in the realm of possibilities.”
Hanson said she does not believe the community would support a tax increase, unless Fox proves it already has exhausted every cost-cutting avenue.
“This is especially true now, with how the pandemic has affected people, with many losing jobs and having less income,” she said. “I think this community is a hardworking, middle-class community. Their expectation is that we are good stewards of their money. We are constantly evaluating that.”
One bright spot
Despite the bleak financial forecast, Stewart was able to deliver some good news during the December meeting.
Fox did not have to use a tax anticipation note (TAN), a type of loan, to cover expenses at the end of the year as he had anticipated when board members passed the 2020-2021 budget in June.
A few months later, in September, board members agreed to borrow up to $10,000,000 if needed to allow Fox to meet its financial obligations before the end of 2020.
Stewart said the district did not have to use the short-term loan, after all, because it received two property tax payments in December – just less than $1.1 million in tax revenue on Dec. 10 and $22.3 million on Dec. 17.
“We have borrowed zero of that $10,000,000, not that that has been easy,” Stewart said.
Even though Fox did not have to borrow money to make ends meet, it is clear that moving forward, either spending must be reduced or additional revenue needs to be collected, he said.