A fiscal 2021 budget draft for Huntley Community School District 158 projects a $1.35 million cut in state funding, significant cuts to other major revenue areas and an increase in the amount of families who are unable to pay student registration fees.
In the district's May 21 school board meeting, Chief Financial Officer Mark Altmayer presented on the budget draft, saying that COVID-19-related costs and revenue losses will hit districts the hardest in fiscal 2021.
"This draft of the budget is showing almost a $2.1 million deficit, all driven ... almost all driven by the pandemic, COVID-19, and our response to COVID-19," Altmayer said. "But this number, I have to caution you, it could be double, it could be triple, right? Because we don't 100% know how we're going to operate come the Fall."
"Based on the new CDC guidelines, there may be a lot more additional costs that we're not covering here," he said.
It is precisely this combination of revenue shortfalls and unknown added expenditures that could spell serious trouble for local school districts, Altmayer said.
The largest revenue shortfall he identified centers around whether the state will be able to provide evidence-based funding to schools in fiscal 2021. If the state is unable to follow through on EBF payments, this would result in a $675,000 reduction in anticipated revenue for District 158.
"I feel pretty comfortable [in saying] that we're not getting that for sure," Altmayer said.
On top of this, there has been some discussion that the state may go back and rescind EBF funding provided to schools in previous years, according to Altmayer.
"There's talk that they can go back a year or two years or to the beginning of the Evidence-Based Funding and take our additional tiered dollars away," he said. "We've heard there's going to be a $2 billion cut to education and a $2 billion cut to education could mean a $5-9 million cut to our school district."
For now, Altmayer has budgeted for a $1.35 million decrease in state funding for fiscal 2021, which is two years of EBF funds.
As businesses and households across McHenry County feel the financial toll of COVID-19, the school districts they support will feel it too.
The fiscal 2021 budget draft for District 158 projects a 25% decrease in Corporate Personal Property Replacement Tax revenue. CPPRT revenue is dependent upon corporate earnings, which will likely still be down next year due to the effects of COVID-19 shutdowns, Altmayer said. A 25% reduction would result in $109,000 in lost revenue for the district.
Altmayer projected that the pandemic will cause an increase in the amount of families who are unable to pay registration fees for the upcoming school year, resulting in $100,000 in projected revenue losses for District 158 in fiscal 2021. This will also likely result in a significant increase in the use of the Free and Reduced Lunch program, according to Altmayer.
"We know one thing is for certain," he said. "Unemployment is way up and our 11-12% free and reduced rate, well that's going to climb as well."
An increase in the use of free and reduced lunch services could be a good thing for the budget as the district is projected to receive an additional $175,000 in federal funding for the program, Altmayer said.
Another positive revenue item is the $183,000 in federal funding through the CARES Act that District 158 expects to received sometime next year.
If the economy continues to suffer for an extended period of time as is predicted, Altmayer projected $200,000 in interest revenue reduction for fiscal2021 as well.
For fiscal 2020, local districts will see delays in property tax revenue as a result of the resolution passed by the McHenry County Board allowing delays in the first installment of this year's property tax payments for up to 90 days.
District 158 reduced its projection on property taxes for new construction of homes for fiscal 2021, which Altmayer said will result in $125,000 in lost revenue. These losses could be compounded if COVID-19 concerns end up causing a decrease in new construction or in the sale of homes, which Altmayer predicts will occur.
He projected a decrease in impact fees by $100,000 as well due to a decline in the sale of homes for the second half of 2020.
According to Altmayer, there will be additional costs associated with the district's food services beginning this fall, given that new CDC guidelines for schools recommend eliminating congregate dining for the upcoming school year.
"Will we need to hire additional folks to get lunches to classrooms?" Altmayer said. District 158 schools have yet to determine how this will be handled and how much it will cost them.
Food services are just one of many things that will have to change to reduce transmission of the coronaviurus when classes resume and most changes have additional expenditures attached to them, Altmayer said.
The cost of custodial workers contracted by the district will increase by $100-300,000 in fiscal 2021 as classrooms and schools must be disinfected more frequently.
"We're going to have to clean every room every day," Altmayer said.
The district will also see an increase in unemployment insurance bills amounting to an estimated $50,000 in added costs. Altmayer also added $100,000 in other COVID-19 supply costs as a placeholder until the district has a clearer picture of how much it will need to spend to keep students safe.
Newly installed solar panels will save District 158 $100,000 in energy costs. Building budgets and additional technology costs for the upcoming year have yet to be quantified, he said.
Altmayer predicted that COVID-19 shutdowns will actually save the district money on a few line items in the fiscal 2020 budget such as building supply costs like electricity, vacant positions that have remained unfilled and a decrease in the use of district health insurance, likely resulting from cancellations of elective surgeries.
Unfortunately, any small increases in favorability for the current year will pale in comparison to projected losses for fiscal 2021, he said. The initial decrease in insurance costs may cause a bounce-back in the use of insurance as district staff reschedule elective procedures for the upcoming fiscal year.
It is vital that "the board has a good understanding of the budget cuts and/or deferrals that need to take place to balance the budget in the next draft," Altmayer said.
Illinois Governor JB Pritzker has spoken about the possibility of federal bailouts for school districts or the issuance of bonds to help with revenue losses, but Altmayer said he is unsure whether this will be enough to close the gap.
"When you look back at the great recession, we took a much larger cut than $1.3 million," he said. "Education got hit really hard ... and this is way worse than the great recession of 2008."
"But we're being cautious here," Altmayer said.
District 158 will look to trim the budget where possible and will likely defer a number of capital projects for fiscal 2021, Altmayer said. The district will come up with another draft of the budget in the coming weeks.