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Unit 5 approves deficit budget with trailing $12.5M structural deficit

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NORMAL — A decade of underfunding from the state made more impact on McLean County Unit 5 finances than the coronavirus pandemic, district officials said Wednesday.

The school board voted Wednesday to adopt a 2021-22 budget that shows an estimated $18.5 million deficit on a total budget of $212 million for all funds.

The budget shows a slight surplus in the education fund, but that "can be a little bit deceiving because of that underlying structural deficit," Unit 5’s chief financial officer Marty Hickman said.

The district is operating on a $12.5 million structural deficit in the education fund, which existed before the pandemic and will be covered by working cash bonds that were sold last fiscal year.

In a historical look at how the district reached this point, Hickman said local and state revenue are the top revenue sources, and revenue from local property taxes “has not grown over the last few years,” averaging about 1% growth each year.

Before the recession in 2008, the community had more growth and new construction with assessed values going up 7%, but “2010 was the first year where we were right around that 1% of growth,” he said. State budget issues helped to create “a perfect storm in a lot of ways for us.”

“One percent doesn’t keep up with expenses, even with low inflation,” Hickman told The Pantagraph, noting the district’s expenses have grown on average 2% each year for the last decade.

Before the vote was taken, board member Barry Hitchins said the finance committee is requesting Superintendent Kristen Weikle and her administration to find options for reducing expenses that will be presented to the board and voted upon. The finance committee had met Friday to discuss the 2021-22 budget.

“Please keep in mind that education is a service-based industry, so when we talk about options for reducing expenses, we are reducing services,” he said.

Additionally, Hitchins said the board needs the community to work “to find enhancements to our revenue streams. Only through the management of the expenses and improved revenue streams can we resolve our structural deficit.”

According to the state’s evidence-based funding model, Unit 5 should be receiving $157.5 million to fund its programs adequately, but the district receives about $35.8 million less, leaving a funding gap, Hickman said.

In the 2021-22 budget, 57.8% is expected from local property taxes, which is the largest source, and 20.1% is from state funding. The state balance includes an increase of $400,000 from last year, but Hickman said per the evidence-based funding model, more should be coming from the state.

From 2010 to 2020, the district should have received an additional $19 million from the state for the education and transportation funds, but “that’s money that’s owed to the district from the state that the district will never receive,” Hickman said before the meeting.

“The state recognizes they need to add more funding from their side, and they’re doing that, it’s just we wish it could be a little faster,” he said.

Unfunded mandates from the state also affect district finances, across the state, not just in Central Illinois, and add further burden on an already strained budget, Hickman said. “You have to find a way to cover that expense, and they’ve taken it out of the district’s control."

Inflation and supply chain issues were part of COVID’s impact on this budget, though Elementary and Secondary School Emergency Relief (ESSER) funds are expected to cover some expenses related to the pandemic, district officials have said.

Federal COVID relief funding may affect the final budget approved at the end of the fiscal year in June 2022 because the money is distributed on a reimbursement model rather than a direct grant.

Falls is the season for homecoming at area high schools.

Contact Kelsey Watznauer at (309) 820-3254. Follow her on Twitter: @kwatznauer.


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