Edwardsville District 7 to issue bonds, consider tax referendum

An Edwardsville District 7 school bus leaves Edwardsville High School.
An Edwardsville District 7 school bus leaves Edwardsville High School. News-Democrat file photo

These days, no one it seems is immune to the state budget shortfall.

Edwardsville Community Unit School District 7, one of the more affluent school districts in the metro-east, intends to borrow up to $10 million to fund its operations for the next few years as it goes through another round of budget cuts and considers a tax referendum.

The school board recently voted to issue $10 million in bonds after years of draining the district’s working cash fund to keep the budget balanced despite declining revenues.

The estimated impact of the bonds is 10 cents per $100 of equalized assessed value over a 10-year period, if the full $10 million is needed. For a house valued at $150,000, the impact would be $50 per year.

While most school districts have already faced this dilemma, Edwardsville was able to avoid some of the economic repercussions of the recession because property values in District 7 kept increasing, sometimes by as much as 10-12 percent each year.

The district also had as much as $8 million in a surplus working-cash fund, so when state funding began to decline, they were able to weather the storm with savings. Two years ago, the working cash fund was emptied, but the district held off any drastic measures, citing hope that the state’s financial situation would improve.

“The board (members) have been very responsible stewards of public money,” Superintendent Lynda Andre said. “They have made tough decisions in the past to protect the education we offer students.”

District 7 Finance Director Dave Courtney estimates the district is shortchanged $7 million a year from the state, as funding has been pro-rated: the state only issues 89 percent of the money it owes school districts in per-student funding and has also cut transportation and special education funding. This has left the district with an estimated shortfall of about $4.5 million.

We need to make sure we’re doing all the things we need to do before we ask for money. We have a lot of work to do.

Dr. Lynda Andre, Edwardsville District 7 Superintendent

State funding in 2008 for District 7 was $16.7 million, including more than $5.7 million in transportation and special education. As of this year, the state is now giving the district $9.5 million, including $3.4 million in transportation and special education.

At the same time, student enrollment has gone from 7,379 in 2008 to 7,504 this fall, reaching its peak in 2013 with 7,611 students.

Courtney calculated the split between local residents’ payments to the school district and the state: in 2008, it was 68 percent local money vs. 27 percent state funding (with the other 5 percent coming from other sources). Over the last eight years, it has tilted so that now 78 percent of funding comes from local taxes, with 17 percent coming from the state.

As a result, the board will use its bonding power to issue up to $10 million in bonds, though the bonds will only be issued as needed, Andre said. Instead of issuing all $10 million at once, the bonds will be issued at the end of the school year, if necessary. If a projected deficit of $600,000 exists at the end of 2015-16 school year, bonds would be issued for $600,000, and so on, she said.

Andre said the bonds are not a permanent solution, but only to get the district through this school year and next. Long-term solutions under consideration include another round of budget cuts, raising student fees, and/or a referendum to raise the tax rate in the education fund. The school board does not need voter approval to issue bonds.

Even if a referendum was to pass in next year’s election, Andre said, the school district would not begin receiving the money until 2017-18, and the bonds would still be necessary to get them to that point.

No public vote needed

While they would get a say in any tax increase, some residents say they would also prefer to vote on the short-term bonds as well.

Pat Hulme of Edwardsville is circulating a petition to put the working cash bonds on the ballot.

“It needs to be put on a ballot of the taxpayers to make the decision about how they want to spend their tax money,” Hulme said. “The cheapest and wisest way for the school board to raise the money that they need for their expenses is through increasing the tax rate. With a bond, they have to pay financial fees and interest. … My sole interest is the right to vote.”

Hulme said she has to gather 3,400 signatures on a petition by Dec. 11 to force the district to put the working cash bonds on the ballot.

Andre emphasized that the district is committed to issuing the bonds only as necessary to finish the next two years, as the district does not have enough money to finish the current school year.

“It is important to remember that the earliest any longer-term solution, such as a possible education fund tax increase, would produce additional funds for the district would be in the 2017-18 school year,” Andre said. “The board and administration are fully aware of the impact issuing working cash bonds will have on the taxpayers of the district. However, both feel that it is better than the alternative of beginning a cycle of endless borrowing through the use of tax anticipation warrants.”

As for budget cuts, Andre said the district has cut $12 million from its budget since 2008, eliminating support staff, and reducing or eliminating third-party contracts while attempting to keep the cuts away from the classroom.

One of the more significant cuts involved eliminating the coordinated vocational program with Collinsville Area Vocational Center. Andre said enrollment in those classes was dwindling down to single digits, and so they chose to cut that program and focus on growth in the computer and network technology programs that were more in demand.

$10 millionThe amount in bonds District 7 plans to issue

$50The amount it will cost the average homeowner each year

$7 millionThe amount the state is shortchanging the district

However, both Andre and Courtney said they do not believe they can cut the budget enough to make up for the lost revenue from the state. Courtney said the shortfall is as much as 10 percent of the education fund.

“I’d have to cut 80 teachers to close that gap, and we’re not doing that,” Courtney said.

However, the reality is “the state is never going to reinstate the $7 million they cut,” he said. "It’s not going to come back. And there’s never going to be a day where we have (property value) increases of 12 percent like we had in the mid-2000s.”

In fact, District 7’s estimated assessed value had three years of stagnation from 2010-13, with a 0.2 percent increase in 2013 and 1.75 percent estimated for the most recent tax year. If property values went up 3 percent, Courtney said, it would generate more than $1 million in new revenue, but he does not believe they can count on that kind of increase.

Andre said she also fears the state will decide to further pro-rate its obligations, paying even less than 89 percent of the money they owe schools.

“This is the way it is in Illinois,” she said.

And there are other losses besides pro-rating funding. For example, when the state changes its education standards, school districts must change their curriculum and therefore their textbooks. The Illinois Learning Standards released in 1997 cost the Edwardsville school district $1.2 million in new textbooks, but the funds came from programs such as the Illinois Textbook Loan Program and Reading Improvement Block Grants.

But now those programs have evaporated, which has cost District 7 an estimated $1.5 million in the last five years even as standards are changing again and new textbooks will be needed, officials said.

I’d have to cut 80 teachers to close that gap, and we’re not doing that.

Dave Courtney, District 7 finance director

However, the school board has not decided whether to go for a tax rate increase in the education fund. Previous referenda in Edwardsville have had mixed results; some passed, such as the building referendum for Liberty Middle School and Goshen Elementary, and others have failed.

Edwardsville’s education fund tax rate is $2.15 per $100 of equalized assessed value, with a total tax rate of $4.15 per $100.

Courtney said Edwardsville has one of the lowest rates in Madison County; tax rates for Granite City are $2.55 for education, $4.38 overall; $2.55 for education and $4.48 overall for Collinsville; and $2.35 for education and $4.75 overall for Highland. Only Triad had a lower education fund tax rate at $1.84 per $100, but Andre said that did not include a 50-cent increase that was approved in the April 2015 election.

The last time an education-fund tax rate increase was approved in District 7 was 1977, Andre said.

“We certainly hope people want to fund the type of services we have, the educational system that has been developed,” Andre said.

But before they make that decision, she said, the board and administration will be looking at “a combination approach” of examining budget cuts and possibly increasing student fees before they decide whether to turn to the voters.

“We need to make sure we’re doing all the things we need to do before we ask for money,” she said. “We have a lot of work to do.”

Elizabeth Donald: 618-239-2507, @BNDedonald