Edwardsville school district to consider bond fix for budget deficit

News-DemocratDecember 15, 2013 

— School District 7 officials anticipate a $3.3 million shortfall next year, and will vote Monday on a plan to address the problem.

Superintendent Ed Hightower informed parents last week that the district projects a $3.3 million deficit in the 2014-15 school year budget. He said the deficit has built up due to the situation at the state, with payments made late and incomplete. For the past year or two, the state has pro-rated its payments to school districts, reducing the amount of taxes the schools are supposed to receive by up to 11 percent.

District 7 also has seen a decline in property tax revenue and property values, as well as increased payroll and personnel costs, Hightower said.

The state is about four months behind in payments and will owe District 7 about $3 million at the end of this school year, Hightower said. For the past five years, the district has used up its working cash reserves of $9 million and cut another $12 million from the budget by streamlining bus services, ending its partnership with the Edwardsville YMCA for before- and after-school care, frozen salaries, increased student fees and restructured the middle schools, among other cuts.

Now district leaders have several choices, Hightower said. One would be to turn to the voters for an increase in property taxes for the education fund. In order to address the deficit, the education fund tax rate would need to go up by 30 cents, which would cost a homeowner with a $100,000 house about $100 a year in additional taxes, he said.

But Hightower said he did not recommend this plan. "People are continuing to struggle in this economy, and we believe we can get through this financial crisis by implementing a more taxpayer-friendly, short-term solution," he said.

Board President Jill Bertels said district officials would consider a referendum "only as a last resort."

"We have other options to look at before we would (go to the voters)," she said.

But ignoring the problem wasn't recommended either, since Hightower said the district did not project a significant improvement in property values or the state's situation in the next year or two.

So Hightower recommended refinancing about $5.2 million of District 7's existing debt and issuing $9 million in working cash bonds, which he said would buy time for the economy to improve.

District 7's current tax rate is $4.20 per $100 of equalized assessed value. This plan would increase that to $4.22. The bonds actually would increase the tax rate by 7 cents, but the refinancing offsets that by 5 cents, Hightower said.

In the end, the plan has a total projected increase of $6.67 a year on a $100,000 house.

Hightower said that would keep District 7 with the second lowest tax rate in Madison County, after Roxana.

Other options that were considered but not recommended included:

* Dismantling extracurricular programs, massive layoffs, negotiate salary freezes and significant increases in class sizes. Hightower said this would have "a significantly negative impact" on educational quality.

* Borrow funds through tax anticipation warrants, which essentially works like a paycheck loan for a taxing body, borrowing on future tax receipts.

This would only postpone the problem a year, increasing the deficit to $6 million, Hightower said.

Bertels said most of the board members' comments would be made at the meeting Monday night, when they will vote whether to proceed with the refinancing and working cash plan.

"Personally, I think the recommendation of the superintendent is the most attractive," Bertels said.

Contact reporter Elizabeth Donald at edonald@bnd.com or 239-2507.

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