OPRF's large reserve

Opinion: Columns

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Terry Finnegan

As the board prepares to vote on the proposed tax levy this week, questions have been raised about why a levy is necessary when the district has a sizeable fund balance. To understand this issue, imagine that you were to receive your entire annual income in two payments a year. If you were to look at your bank balance the day after a payment, you might conclude you had plenty of money to buy a new car or a lavish vacation. But you wouldn't be managing your funds wisely if you ran out of money before the next check and couldn't cover your rent or mortgage.

District 200 is in a similar situation. The district receives 92.8 percent of its funding from local sources, the majority being property taxes. In Cook County property taxes are received in two installments: The spring payment is for the next fiscal year, which begins July 1. The fall payment can be received from the county anytime between September and December.

The district's fund balance is measured annually when it is at its highest, on June 30, the day before the new fiscal year begins. The majority of the district's annual spending occurs over the summer, months before the district typically receives the second tax payment from the county. Because the district must have enough cash on hand to cover all expenses, OPRF High School adheres to the strategy of maintaining at least nine months of cash reserves to support operations between property tax payments.

Adequate reserves also are necessary because of the structural imbalance that exists in school funding in Illinois, where districts are more reliant on property taxes than in other states. The maximum amount a district can levy is 5 percent or the Consumer Price Index for all Urban Consumers (CPI-U), whichever is less. The CPI-U is based on a specific list of goods consumers typically purchase — including cigarettes, televisions, and pet products — not the items a school district must pay for, such as health-care insurance for employees, which can increase annually by as much as 10 percent.

Because of this imbalance, school districts eventually go into deficit spending, triggering the need for a referendum. If approved, a referendum typically creates a more significant tax increase than the incremental increases of annual levies. The board intends to delay the next referendum as long as possible, and having adequate reserves allows us to do so. The reserves also will enable the district to pay off debt on the call date, thereby saving the community $1.2 million.

Paying the bills isn't the only rationale for having a healthy fund balance. One of the most important reasons is that it allows the district to create and sustain educational programs over the long term, benefiting not just current but also future students. In comparison, other districts typically create a rash of programs after a referendum passes, and then cut them just as quickly once they start to deplete their reserves.

Among the long-term programs the district recently has created are a reading program, double math periods, and the Tutoring Center, all of which help students who need extra academic support. The district's reserves are likely to take a significant hit in the next few years from pension reform. In addition, enrollment is projected to increase by roughly 700 students in the next decade. Property tax revenue, however, does not increase with increased enrollment. Yet because of our healthy reserves, we expect to still be able to offer these programs to the current middle and elementary school students who eventually will walk through our doors with academic needs and the expectation that we will be able to support them.

One final note: A letter in last week's Viewpoints section alleged that the district's reserves have not been managed well because of the low rate of return on investments. The school district investments are managed by PMA Financial Network, and as school-finance experts know, public school funds may be invested only in low-risk, government-backed securities and CDs, which currently have a very limited rate of return.

Terry Finnegan is president of the District 200 Board of Education.

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Reader Comments

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Unfortunately  

Posted: December 21st, 2012 10:24 AM

@Numbers. 1.) OPRF max Baby Boom enrollment was approx. 4,000. 2.) OP and RF population is today 20% lower. 3.) Most of that decline is due to less children in homes/apts. 4.) All-day kdg has artificially swollen enrollment 5.) Julian/Brooks are near capacity and so "increase" IS spread out 6.) D97/90 spread over 9 years and not 4 7.) OPRF hired a consultant for this? No one on staff could add 97/90 #'s? NOW do you understand my skepticism and "logic" with this rationale for large tax surplus?

j.oakpark  

Posted: December 21st, 2012 6:20 AM

so did d200 vote? what was the outcome of the vote?

Corpspeak Translator from Oak Park  

Posted: December 20th, 2012 4:35 PM

Decoding Incoming Letter... "We have over-taxed you. We will not refund your money. Move along..."

Numbers?  

Posted: December 20th, 2012 4:28 PM

I fail to see your logic about growth. If D97 has about 650 more students now than 5 tears ago, this growth will continue to move up the chain, eventually hitting OPRF. Even if D97 slows its growth, those 650 more kids will be in the high school someday. Any growth in at D90 would add to this, too. Now, they won't all be in grades 9-12 at the same time since they are spread over K-8 now, but even half would apply toward the 700 student growth they are expecting.

Unfortunately  

Posted: December 20th, 2012 3:58 PM

"Enrollment is projected to increase by roughly 700 students in the next decade." Really? I have in front of me D97 figures for '02 thru '12. The figures hovered around 5,000 students between '03 and '08 and then 5,247 (09), 5421 (10), 5580 (11) and 5625 (12). Umm, what year did all-day kdg begin and thus bring a spike in enrollment for D97? I'm guessing that this played a LARGE role in the increase and would have NO EFFECT upon OPRF. 4,000 students were OPRF baby boom #'s and larger families.

Mr Finnegan Please Respond  

Posted: December 20th, 2012 8:50 AM

We require an answer to the question "to whom does the Board owe a fiduciary duty? The institution? Or, the community comprised of the current taxpayers who foot the bills in real time for your taxing decisions today, many or most of whom will not secure any advantage from a cash reserve meant to benefit taxpayers 20 years from now? Simple question, simple answer required.

OP Transplant  

Posted: December 19th, 2012 5:33 PM

Jim - Actually, this kinda IS what I expect from an elected official in Oak Park, but that doesn't make it good.

Jim  

Posted: December 19th, 2012 5:26 PM

I agree, it is time for Finnegan to resign! This whole issue is an embarrassment to our community, with the OPRF Board (present and prior) to blame. People are suffering out here, and Finnegan thinks it is right to raise taxes, just because he legally can. Add to this that he continues to berate those who question his wisdom. This is not what we expect from an elected official.

OP Transplant  

Posted: December 19th, 2012 5:06 PM

Let me get this straight; I'm being taxed now to raise revenue that won't be used to benefit my kids, who are in school now, but will rather be saved to benefit other people's kids in coming decades? I've honest-to-God never heard anything like it.

What  

Posted: December 19th, 2012 4:48 PM

Lets all pretend like you are running a business THAT DIDNT RAISE REVENUES for nth straight yrs and now you have to do more with less. Its a reality of today's world......except Dist 200.The entire board should be ashamed and FIRED

Fiduciary Duty  

Posted: December 19th, 2012 4:30 PM

Fiduciary duty to the community?? Exactly. What a simple concept. Not to the institution Finnegan, but the community as a whole. You have no right to burden existing taxpayers with unconscionable tax hoards that far exceed normal accounting procedures.

Finnegan Should Resign  

Posted: December 19th, 2012 3:41 PM

Please explain to a resident who just lost their job and cannot afford Xmas presents for their children why they should pay more property taxes to fund reserves to benefit people who will move here 10 years from now. Mr. Finnegan, your fiduciary duty is to the taxpayers and community at large -- today, not the taxpayers of the future or the institution. Please resign.

Mary Rodrigo from Oak Park  

Posted: December 19th, 2012 2:46 PM

I've owned in OP for 24 years. My income has increased 250%, until I retired. My home has appreciated 110%. My taxes have increased 650%. Yep, that's right. ACT NOW! Go to the D200 board meeting, Dec 20th, 7:30PM. in the board room. Say NO, to this tax levy. Do something.

Uncommon Sense  

Posted: December 19th, 2012 12:29 PM

on some. It is tough to swallow yet another tax increase when the district is sitting on a pile of cash AND running annual surpluses. My taxes have gone up probaby 50% since moving here. Well above rate of inflation and the kids at the school damn sure aren't 50% smarter.

Uncommon Sense  

Posted: December 19th, 2012 12:26 PM

Many of us who bear the large property tax burden are also being told we aren't paying our "fair share" at the Federal level as well. I just find it ironic that a left leaning burb like OP is complaining about tax rates but don't see that same fervor to cut spending and waste at the Federal level. Personally, I think our tax rates here are fair relative to what we get but when you factor the other costs increases unrelated to OP directly, I can see increases being a burdern

Jim from Oak Park  

Posted: December 19th, 2012 12:11 PM

D200 neither sees the taxpayer as a stakeholder nor works very hard on expense side of its budget. OPRF gets 35% more in tax from me than it did four years ago, and I'm probably not unique. I'm going to the board meeting: Not that it will change much, but at least they will have to look me in the eye as jack up taxes beyond any reasonable level.

overtaxed  

Posted: December 19th, 2012 10:45 AM

The plethora of Administrators and the rest of the HS staff have benefits that rival a US Senator's. They are treated like royalty while many folks in OP and RF struggle. Also, why is the Park District meeting and the OPRFHS meeting both on December 20th!

Monica from Oak Park from Oak Park  

Posted: December 19th, 2012 10:44 AM

I could not agree more with Frightened Taxpayer. This is just another example of elected officials gorging at the table of taxpayer's dollars. The end result will be an unaffordable community with sub-par schools.

muntz  

Posted: December 19th, 2012 10:41 AM

Tom brings up an excellent point. This article focuses entirely on revenue management and the logic of when those revenues are needed. If you take it at face value, it's mostly correct and makes sense, but it's only half the story. D200 needs to focus on reigning in expenditures to match the current revenue stream.

OPResidentfornow  

Posted: December 19th, 2012 10:10 AM

Our family is still reeling from the D97 tax increase.

Unfortunately  

Posted: December 19th, 2012 9:52 AM

@Greg from RF. Thanks - you saved me from performing the same exercise. Like I wrote last week, the D200 Bd members are financial illiterates and your post proved it. Isn't it amazing how D97, with a much smaller surplus, can manage its finances without turning to Revenue Bonds? Also, intentionally, the expenses of schools is spread out over 12 months. I understand that there might be some construction expenses over the summer, but the MAIN expenses are payroll related and spread thru the year.

Tom from River Forest  

Posted: December 19th, 2012 9:49 AM

I have been watching the issue of Dist. 200's obscene fund balances for a while now and what puzzles me is why the board always looks to the revenue side of the equation when arguing about the need to hold these balances. This is just another instance. Can the board explain why its health care costs increase by 10% a year? How about passing some of that increase to employees. How many other employers currently feel obliged to always pay more? Not mine certainly and yet my taxes go up.

6 figure teacher  

Posted: December 19th, 2012 9:38 AM

Terry, How do you feel about PE teachers who coach making $130K?

Greg from RF  

Posted: December 19th, 2012 9:09 AM

OK Terry I like math...you said you want to keep a fund balance of 9 months of expenditures. According to your FY 2013 budget you will spend $70 M yet take in in $75M, a surplus! On page 10 you actually show the fund growing. So by your 9 month standards you should have $54M on hand...you have $112M. Please explain if you can.

Want to stay in Oak Park  

Posted: December 19th, 2012 8:15 AM

Terry, our continually rising property taxes are causing hardship for residents of Oak Park and River Forest. D200 takes the largest bite out of the tax bill. Residents of this community have always supported the schools. When you NEED money, you ask for money. You should not be sitting on money you DON'T NEED right now. Increasing the levy means residents will have to cut their household budgets to pay the tax bill, so you can sit on the money in case you need it in a few years? Not fair

Frightened taxpayer  

Posted: December 19th, 2012 7:25 AM

District 200 board president, you are not seeing the forest for the trees. The economy is bad. Many homeowners have lost income and are experiencing financial distress. Cost of medical care, food and gas has jumped. Job prospects are not good for many. As an Oak Park homeowner, I am trapped in a nightmare. Please do not raise our taxes anymore.

Nick from Oak park  

Posted: December 18th, 2012 10:27 PM

Humbug Terry! Thanks for the nice holiday present - a tax increase I don't need and the taxpayers of Oak Park and River Forest don't need. My present to you is to defeat you and your fellow board members at election time.

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