Oak Park District 200 did not need a board policy in place in order to cut taxes last year, members of the school board said in response to recent criticism from the public.

The school board is slated this month to begin deliberations on whether to create a fund balance policy outlining how the district should manage its reserves. The matter came before the board’s Finance Committee on Sept. 2. The three-member committee discussed what such a policy would look like.

The committee also addressed criticisms that such a policy was needed before reducing its levy, as recommended by the district’s ad hoc Finance Advisory Committee last year.

The board in December 2013 approved a levy reduction of $10 million, which was one of the recommendations of the FAC to trim the district’s $100-plus million fund balance. It was also designed to give weary property owners tax relief after years of annual levy increases by the high school, the FAC said.

Cutting taxes by $10 million was among a range of options recommended by the FAC.

Responding to criticisms, Finance Committee members maintain that the board did not need a fund balance policy in place before reducing last year’s levy.

Increasing, reducing or maintaining a levy are routine actions taken by the board, the committee noted. The fund balance policy, however, will specifically outline how reserves are managed, the committee said.

For the current school year, the fund balance is roughly $125 million. The FAC recommended trimming that amount through a variety of means, including targeted and specified spending projects and tax relief for property owners.

The FAC recommended having a minimum fund balance of no less than 25 percent, or three months, of annual operating expenses. And if five-year projections show that the fund balance will reach that 25 percent threshold, planning for a referendum should begin.

By next June, the district estimates having 158 percent of expenditures, or roughly 19 months of reserves, said Tod Altenburg, the district’s chief financial officer. The fund balance is projected at roughly $109 million for Fiscal Year 2015.

Such language recommended by the FAC would likely end up in the district’s fund balance policy, said Finance Committee Chair Tom Cofsky, who also sat on the FAC, which was dissolved earlier this year. Cofsky noted that the district does currently have a policy on the books that addresses the fund balance, but it would be revised to include the FAC’s specific recommendations.  

The full board will tackle the fund policy on Sept. 23. If OK’d by the board, the administration will begin formulating a draft policy, which would then be vetted through the board’s policy committee.

The finance committee last Tuesday discussed what a fund balance policy would look like. The group also discussed the possibility of creating a policy or administrative procedures concerning managing the district’s structural deficit.

Cofsky said he strongly believes that a policy is needed for both the structural deficit and fund balance. Committee member Ralph Lee said he doesn’t believe these two areas should be in the same policy, that each should have its own.

“I’m very jittery about lumping them both together,” he said. “I see them as, obviously, related but not something I’m comfortable dealing with in such a way that what we say about one should be interpreted as meaning the same as the other.”

Committee member Jeff Weissglass, who chaired the FAC, agreed that a fund balance policy is needed.

“I think the policy to address the issue of fund balances not getting too high is something we should definitely put in place,” he said. “I don’t think this district should ever get into a situation again without explicit board action overturning a policy in place to have fund balances over 75 percent, or something like that.”

  Weissglass noted that the FAC recommended reducing the fund balance to less than 100 percent of the district’s annual expense level in 2-4 years, with additional reductions in the years after to 40 percent — but not below 20 percent — of annualized expenses.

 In his presentation to the committee, Altenburg talked about fund balance policies currently on the books in other neighboring school districts, including District 97. Altenburg said he liked how D97’s policy was written, which includes language specify a fund balance target of “25-75 percent of operating cash flow.”

 “What I like about this policy is that the first six points say if you fall below your 25- to 75-percent range, these are the actions that need to happen, or a combination thereof — curtailing hiring, curtailing implementing new programs, reducing salary and benefits. But the next four or five talk about if you exceed the other end and you’ve got more than 75 percent of fund balance, maybe you do an early payment of existing debt; accelerating technology, building repairs, levying less than the maximum amount that’s allowed, which are some of the things we’ve done.

“I’m not necessarily saying we need to do word-for-word what [District] 97 did, but I think it gives a very specific menu of items that can be done on the low end and a menu of items to follow if you exceed that 75 percent,” Altenburg said.

The D200 Finance Committee agreed to move this topic to the full board for consideration.

CONTACT: tdean@wjinc.com

Related article:

D200 board approves $10M levy reduction for 2013


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