U-46 CEO: A few things could create $24 million deficit

Elgin Area School District U-46 could be up to $24 million in the hole this school year, CEO Tony Sanders says.

That could happen if a few things happen to contribute to the deficit.

If pension reform legislation, potentially shifting the burden to local school districts, is upheld by the state Supreme Court, the district could be looking at an $18 million hit the first year, and that deficit is expected to grow in future years.

Meanwhile, a state income tax increase enacted in 2011 is set to expire Dec. 31. If it does, income taxes will drop from 5 to 3.75 percent, forcing the state to cut more money from education and potentially prorating state aid.

"If the state does not have the money to fund education, we would be seeing significant reductions in our budget by this school year," Sanders said.

U-46 has roughly $57 million in surplus operating funds that could help bridge that deficit, Sanders said.

The $24 million deficit estimate is the worst-case scenario.

But Sanders said the state already has shorted the district $36 million in aid over four years.

"They could easily just withhold categorical payments," Sanders said. "Usually, when there's a shortfall, they will just stop reimbursing for transportation/early childhood (education)."

Another looming question is the fate of the School Funding Reform Act, also known as SB16, which aims to create more equitable funding of schools. Under SB16, U-46 stands to gain roughly $24 million, Sanders said.

"It changes the way the state apportions dollars," he said. "It's really letting the money follow the student."

Funding would be apportioned based on individual schools' needs, a weighted per-pupil formula and the percentage of low-income, English Language Learners and gifted students, rather than simply being based on local property values.

Sanders said if the school funding reform legislation becomes law, if the income tax increase is extended, and if there is no pension cost shift, the financial future of U-46 will remain stable.

That's a lot of ifs.

Most school districts are facing similar budget uncertainties.

"This is something that should be a concern for all Illinois school districts," Sanders said. "We cannot control any of it, other than letting our voices being heard at the capital."

Sanders said he will be in Springfield Nov. 18 to lobby legislators.

For this school year, the district would just have to absorb any deficit that materializes.

"We'd know that sometime in December/January," Sanders said. "In education, there is no way to cut a budget midyear, not easily. Seventy-five to 80 percent of any school district's budget is made up of people. By law, we cannot do a reduction in force until March. That would be for the following school year.

"It's more than likely we would have to deficit-spend this school year and make adjustments in the next school year."

"A few years ago we started making very serious cuts," Sanders said. "Our financial position is much better today."