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Local

Schools face heavy burden with proposed pension obligation shift

Christopher Heimerman – cheimerman@shawmedia.com
Vicky Tusken, director of secondary education curriculum for DeKalb School District 428, talks to the DeKalb Leadership Academy on Wednesday morning about changes to learning standards in the past several years. Tusken also discussed how financial strains make it a challenge for the district to take on new initiatives and partnerships – a struggle that might intensify if the state requires the district is pay part of its staff's pensions.
Christopher Heimerman – cheimerman@shawmedia.com Vicky Tusken, director of secondary education curriculum for DeKalb School District 428, talks to the DeKalb Leadership Academy on Wednesday morning about changes to learning standards in the past several years. Tusken also discussed how financial strains make it a challenge for the district to take on new initiatives and partnerships – a struggle that might intensify if the state requires the district is pay part of its staff's pensions.

DeKALB – Area school districts soon will receive a bump in state funding after Comptroller Susana Mendoza announced last week that $350 million in payments under the state’s new school funding formula have been sent out.

If proposed legislation to shift the pension burden from the state to those districts passes, however, additional funding might effectively already be spoken for.

DeKalb School District 428 came out as the big winner in funding formula reform, gaining close to
$2.9 million in new revenue. District 428 Superintendent Jamie Craven said the district is anticipating an estimated $2 million increase in funding under the new model, as it previously was unclear whether District 428 would qualify as a Tier 1 district, which would categorize it as one of the highest-need districts in the state.

“I hope that the state can continue to fully fund this model,” Craven said.

In his February budget address, Gov. Bruce Rauner introduced phasing in a plan for the state’s school districts to cover their Teachers’ Retirement System obligations without state assistance. The proposal is for districts to pay 25 percent the first year, then 50, 75 and 100 percent in the subsequent years.

Although this would add millions in expenditures to some districts, Rauner gave the assurance that schools and local governments will have tools to offset the costs, including increased education funding, the power to dissolve or consolidate units of local government and more flexibility in contracting, bidding and sharing services.

In fiscal 2017, the state paid more than $14.5 million toward
District 428’s TRS obligations. Should the phase-in proposal move forward without additional resources, all of DeKalb’s new funding won’t be enough to cover the first year of pension costs under Rauner’s plan.

Some school districts, however, won’t see a significant increase in funding under the new model.

Indian Creek School District 425’s fiscal 2017 budget included a $310,000 operating fund deficit, in addition to a $4 million capital project expense. The state made a $1.8 million contribution to the district’s TRS that year.

Under the new formula,
District 425 only would get about $1,000 more in new revenue.

Chad Willis, District 425 superintendent, said the plan would have a significant effect on the district, and deficit budgets would be likely in the near future. Assuming the state can come through with money it promises, there is potential to offset some of the costs but not all of them, Willis said.

Kaneland School District 302 is coming off a $4.5 million operating budget deficit and a nearly $21 million state contribution to its TRS in fiscal 2017. The district will receive $116,000 in new money from the funding formula.

Local revenue streams such as property taxes, which have been a more stable source of revenue for districts, also have a limited reach in the county, said Nicole Stuckert, Sycamore School District 427’s chief financial officer. She said several years ago there were talks about doing a half-percent increment pension phase-in over eight years, which the district had been budgeting for.

With most of the district’s money coming from local taxes, Stuckert said she doesn’t want to put any more of the district’s burden on taxpayers.

“We’re tax-capped in DeKalb County, so there’s only a certain amount you can ask for in a tax levy, so we’re kind of stretched with those dollars,” Stuckert said. “But I think [the state] is going in the right direction with the overhaul of the funding model.”

District 427 had a $1.9 million operating fund deficit in its fiscal 2017 budget but rebounded with a balanced 2018 budget. However, the state’s contribution to Sycamore’s TRS in 2017 was more than $10 million.

Based on audited figures from fiscal 2017, Genoa-Kingston School District 424’s pension contributions would grow in nearly $250,000 increments under Rauner’s phase-in plan.

“This would require serious, difficult conversations with board members and stakeholders on how we would deal with this increase,” District 424 Superintendent Brent O’Daniell said. “We are utilizing all of the local revenue we possibly can through our tax levy.”

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