Cash crunch: Schools face toughest financial month of the year

Published: Friday, April 12, 2013 5:30 a.m.CDT
Caption
(Rob Winner – rwinner@shawmedia.com)
Michael Thornhill, 6, sings "Let's Go Fly a Kite" on Thursday with his kindergarten class during a music lesson at Gwendolyn Brooks Elementary School in DeKalb.

SYCAMORE – It has been seven months since Sycamore School District 427 has seen a monthly budget in the black.

April marks the final month of the annual property tax revenue drought for school districts, which only receive the local funds in May, June, August and September. Luke Glowiak, assistant superintendent of business for District 427, said that makes the next few weeks the most difficult for schools from a cashflow perspective.

“Where it really gets tough for districts is on May 15,” Glowiak said of the final payroll period before property tax starts to come in at the end of the month. “You pretty much drain down your financial reserves by that time.”

Outside of the four months when the district receives property tax revenue, Glowiak said there could be a monthly deficit of anywhere between $1.5 million to $2.5 million because general state aid payments are minimal.

But because of what Glowiak called excellent financial stewardship by the board, Sycamore schools still are in good condition. The district has maintained about $26 million in reserves, a roughly 42 percent fund balance.

Brad Shortridge, assistant superintendent for business at Genoa-Kingston School District 424, said the long period between significant revenue has always been a challenge for school districts, but it is becoming more of a problem because of cuts.

District 424 has seen its reserves fall from $9.8 million to a projected $8.8 million, although it could be worse as it sits at $7.3 million before the property tax installment. Shortridge said the district could lose another million next year because the state is going to prorate per-student aid payments, possibly providing 82 percent of the foundation level, which this year was $6,119 per student.

Among local school districts, Genoa-Kingston is one of the most heavily reliant on general state aid, which comprises almost 40 percent of its budget.

“There is no building it back up,” Shortridge said of using reserves. “Even with a reduction in spending, I don’t know that you ever could in the world we live in.”

Even when the district receives the property tax payment, Shortridge said the state will skip an aid payment in July, leaving districts to burn through the local funds faster. There are 22 annual General State Aid payments.

Andrea Gorla, assistant superintendent of business for DeKalb School District 428, said because fund balances are often referred to as “reserves,” some people have a misunderstanding of where the money should be dedicated.

She said the money cannot be viewed as reserves that can help restore or add programs, but must be used as a last resort to make up for shortfalls in providing vital services, such as transportation and payroll as the state continues to cut back funding levels and delay payments.

“It is not at all a rainy day fund,” she said. “The state has so many delayed payments, which means school districts need the cash on hand or need to do some sort of interim borrowing.”

The only consistent state payment remaining, Shortridge said, is general state aid. If those payments were delayed even slightly, it could mean major problems for districts such as Genoa-Kingston, which has enough cash to operate for six months under a worst-case scenario.

“That would be really scary,” Shortridge said. “I can’t even think about that.”

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