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Officials adopt fiscal year 2017-2018 budget

The New Lenox School District 122 Board of Education adopted its fiscal year 2017-2018 budget at its Sept. 20 meeting.

The tentative budget recently approved by officials had been on display at the district’s office since Aug. 17. It includes nine different funds in which money is accounted for.

Business Manager Robert Groos said D122 has “a lot of good news” to share financially, especially as a school district in the State of Illinois.

Staff typically examines the district’s funds for operations and maintenance, education, transportation, Illinois Municipal Retirement Fund and working cash to determine how much is accounted for in the fund balance reserves.

Consequently, D122 started the current school year with roughly $29.9 million, which is more than 58 percent of its operating expenditures. The minimum fund balance reserves recommended by the State of Illinois is 25 percent.

Groos said they are well over the minimum, and the public will see that reflected well in the fiscal year 2016-2017 audit.

D122 presented a budget for the year showing a deficit of $116,739 in the debt service fund. Typically, the district sees a break-even fund in terms of the money that comes in through property taxes to pay off bonds.

Groos tried to lessen the concern people raise for the budget.

“With some of our capital leases that we have in place now for the technology plan that we rolled out over the past couple years—with all our new iPads and our 2-to-1 and 1-to-1 goals that we’re trying to reach—we have been leasing a lot of technology, and based on our most recent audit, there’s a specific way to account for that,” Groos said. “I just want to bring this example because you see it in the education fund and the debt service fund, in terms of this [monetary] transfers in.”

Groos said it is important to couple the slight deficit and transfers in to determine if D122 is actually incurring a surplus or deficit.

“I would say even though revenue versus expenditure shows a slight deficit, we have that transfers in, and we see the fund balance actually increase,” Groos said.

The debt service fund, for example, features a $116,739 deficit that transfers in $583,253 to account for lease payments. That makes for a surplus.

The same effect holds true for D122’s education fund, which shows a $1.8 million surplus, a transfers in of $466,318 and a transfers out of $583,253. That money coming out goes toward the debt service fund to pay for lease payments, as well.

Groos said it may be a little difficult for people to examine the district’s current and past budgets for comparison purposes, but the new technology leases require use of the new accounting procedure.

Other transfers to note include a $3 million transfer from the Operations and Maintenance Fund to the Capital Projects Fund, as well as a $880,763 transfer from the Working Cash Fund to the Capital Projects Fund. That money flows out to pay for summertime improvements across the district. D122 has a history of keeping its expenditures lower than its revenues each year to create a surplus that can account for various projects.

This past summer, the district completed improvements to parking lots, replaced roofing at two schools, painted several buildings and worked on other renovations.

District 122 has utilized existing fund balances to fund capital projects on annual basis in recent years, which is not very common among public school districts. The capital projects are paid for out of the Capital Project Fund after operating funds are transferred into the Capital Projects Fund per board approval.

“Usually, school districts have to go out to the taxpayers, sell more bonds, get more debt, so they can do these special projects,” he said. “We’re trying to do that with our own existing money within our existing budget.”

Since the board took action Aug. 16 to approve the district’s tentative budget, additional revenue dollars were added.

Gross explained that with the recent passing of the new school funding formula, D122 updated its numbers for the final budget presented to the board.

The fiscal year 2018 legal budget assumes that D122 will receive two delayed fiscal year 2017 mandated categorical payments, as well as one current fiscal year 2018 categorical payment.

Groos said the main reason that D122 can expect more revenue than they project comes down to one main factor: the state’s new school funding formula.

“The way the new formula works is that it takes last year’s general state aid, plus last year’s [two] special education mandated categorical amounts, and rolls it all into one amount, and then sets a base funding minimum of ‘You will get the same amount that you got last year for those three things.”

At that point, the formula is computed to account for additional dollars.

Prior to the passing of the new school funding formula, D122 was projecting a decrease in general state aid funding. Now, the district anticipates receiving two categorical payments on time from fiscal year 2017. That puts D122 in a position to get its state-mandated categorical payments on time for fiscal year 2018.

During the public hearing, one constituent approached the school board with questions regarding changes exhibited in the fiscal year 2018 budget.

“It looks like the [operating expenses are] up over the FY ’17 actual by a little over 6 percent, and it’s [accounting for] low inflation — 2 percent less the last few years — and [there is also] flat, or slightly declining, enrollment,” said Steven Wahlert. “Could you explain the 6 percent increase?”

Groos said the increase was warranted, and it all comes down to the contracts secured with teachers and all other staff members, retirement contracts afforded to employees, higher salaries extended to professionals with advanced degrees, and increased health insurance costs.

Generally, salaries and benefits serve as the district’s biggest expenditures.

Groos stressed that while the budget for salaries and benefits increased, total non-personnel expenditures are decreasing 4.7 percent in the district’s operating funds.

“Some of the budgets are spending less, [and] some of the budgets are spending more,” Groos said.

School board accepts 2016-2017 audit report

Also at the meeting, the Board of Education was presented a report on the district’s audit.

MPS Certified Public Accountants had tested transactions, performed inquires, examined documents and formed an opinion.

“I’m pleased to say in that letter that there were no significant findings, no difficulties, no disagreements with management,” said Edward McCormick, a principal for MPS.

The school district’s audit presents both government-wide financial statements and Fund financial statements.

The government-wide financial statements are designed to provide a full accounting view of the organization and take into account all long-term debt such as bonds payable and all assets such as buildings and their related deprecation.

When looking at the district’s total balance sheet net position, which takes into account all long-term bonds still due, the district’s total net position is a negative $7.8M. This final net position is an improvement over last year’s negative net position of $8.3M.

The fund financial statements, unlike government-wide financial statements, focus on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. D122 had a $3,042,129 annual surplus within the district’s operating funds for fiscal year 2017 after accounting for capital lease transactions. The final total fund balance for all district funds on June 30, 2017 was a positive $36,286,623.

“Long-term perspective, it’s still a deficit, but it’s going in the right direction,” McCormick said.

Appreciation and long-term debt were taken into account to provide some perspective.

McCormick noted the district’s effort to provide supplementary documentation to provide a nice snapshot of the district and said it was helpful to see this information supplied to the firm.

McCormick concluded the report and went on to say that “We feel these statements are provided appropriately.”

D122 officials will have a final copy of the audit published and presented to them before Oct. 15.

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