January 18, 2011
By Cedra Crenshaw
cedra.crenshaw@yahoo.com
At the 1.10.11 school board meeting, Assistant Superintendent for Administrative Services, Gary Grizaffi, said the district is trying to get control of the structural deficit. I asked about the district's two biggest expenditures: salaries & benefits and debt service, which make up 90% of the budget. The questions I raised are very important in the upcoming election. The new board members will negotiate the next teacher contract and they will be encouraged to increase debt.
Debt service makes up 10% of the district's budget according to the 2010-11 budgeted expenditures. The board voted in favor of Action Report #0111-4130 which would enable the district to pay JAR Consulting $2,000/month over 12 months. JAR Consulting would lobby for HB5289, a bill that would enable Valley View School District to repay debts over 25 years instead of 20 years as they do now.
But on 1.10.11, the same day of this board meeting, HB5289 was passed by both houses of the Illinois General Assembly and was subsequently sent to Governor Quinn on 1.11.11. So what exactly is JAR Consulting being paid $24,000 of tax money to lobby for?
Asst. Supt. Grizaffi confirmed that extending debt repayment would increase debt service expenditures and allow the district to go further into debt, thereby adding to the structural deficit. Member Gougis said that it would allow the district more flexibility in terms of spreading out payments and allowing for property tax relief. [Notice the pivot from the reality of the structural deficit to the promise of tax relief?] That's how these "restructurings" are sold to the public. If we would only allow the district to spread the payments out over infinity, then we would really see some tax relief!
Member Evans said that school districts will always have debt and never repay it. I can appreciate that. The question is how much debt? How much debt is too much before districts should actively pay down the debt to prevent other needed programs/services from being crowded out?
Every time the district restructures its debt the bond issuer makes fees on these transactions. So the bond issuer has every incentive to do as many transactions as possible: restructurings, issuances, retirements, etc. - that's how they make their money. The district also has every incentive to restructure debt because they are held less accountable for increased spending as it is repaid over longer and longer periods of time. Where does that leave the taxpayer? Stuck with the bill and the phantom of tax relief.
Assuming all of the predictions regarding increased property values come true, there could be tax relief - at some point in the future. But why not build a foundation of tax relief on debt spending reductions not increases? If debt service payments are to be spread out, why not spread out less debt, not more?
Salaries and benefits comprise 80% of the district budget. The current teacher contract expires at the end of the 2011-2012 school year. The current contract, a 4 year contract, had 5% automatic yearly salary increases built in - regardless of economic conditions. The next teacher contract surely can't contain automatic 5% increases if the district intends to get a handle on the structural deficit.
Mike Francis of PMA Consultants, presented an analysis for years beyond the current teacher contract using 2% annual increases. Yet this more conservative increase still resulted in a deficit going forward.
To further illustrate how wildly out of step the 5% increases are in the current teacher contract, the next contract (assuming it was also for 4 years), would have to build in 1% yearly decreases in order to average 2% increases over the 8 year period from 2008-2016.
Controlling or better yet reducing a structural deficit can't even begin to take place if debt service and salary and benefit expenditures are not reduced. These two expenditures represent 90% of the budget. Any other spending cuts are just tinkering around the edges. That's why after $20 million in spending cuts, Valley View still has projected deficits into the foreseeable future. But that's what happens when 90% of the spending is on autopilot and climbing.
