Range of D86 Tax Levy Options Explored

The District 86 Board of Education’s finance committee met Tuesday morning to learn about several different tax levy options for this year, including a decreased levy compared to last year, a flat levy, and a maximum extension.

A maximum levy extension, not including money collected on new construction in the district, would extend the total amount of property-tax dollars District 86 collects by 1.7 percent (the 2012 Consumer Price Index) over the levy approved last year, according to Michael Frances of PMA Securities, Inc., the district’s financial advisor.

With that 1.7 percent levy extension for Fiscal Year 2015, which begins next July, the district’s fund balance at the end of the 2014-15 school year would be about $23.5 million. That balance does not include tax revenue that arrives in June but is meant for the following fiscal year.

PMA projects that District 86's year-end fund balance would rise to $43.7 million by the end of FY 2019 if the district continued to collect max levies based on the previous year’s CPI.

Any levy can only be extended based on the prior year's levy. So any money not collected one year affects the amount that can be collected each year to come. 

With that in mind, PMA’s projections additionally estimate that:

• A 1 percent levy increase for FY 2015 would leave the district with $23.2 million at the end of that fiscal year, and if followed by continuous max levies, with $41.2 million at the end of FY 2019.
• A flat levy for FY 2015 would leave the district with $22.8 million at the end of that fiscal year, and if followed by continuous max levies, with $37.6 million at the end of FY 2019.
• A 1 percent levy decrease for FY 2015 would leave the district with $22.4 million at the end of that fiscal year, and if followed by continuous max levies, with about $34 million at the end of FY 2019.

How do those numbers stack up against District 86’s expenditures?

PMA estimates that expenditures will rise from $83.5 million accounted for in the current FY 2014 budget to $84.3 million in FY 2015 and eventually to $88.5 million in FY 2019.

Frances said that when the Illinois State Board of Elections evaluates district’s year-end fund balances, it gives its top score to those who have a year-end balance equal to 25 percent of revenue, which is in most cases about equal to expenditures.

District 86 levying to the max in FY 2015 and each of the following years would result in the district having a fund balance at the end of FY 2015 that would equal 27.9 percent of expenditures that year and a fund balance at the end of FY 2019 that would equal 49.4 percent of expenditures.

Additionally:

• A 1 percent levy increase in FY 2015 and max levies in each of the following years would result in year-end fund balances equal to 27.5 percent of expenditures in FY 2015 and 46.6 percent of expenditures in FY 2019.
• A flat levy in FY 2015 and max levies in each of the following years would result in year-end fund balances equal to 27.1 percent of expenditures in FY 2015 and 42.5 percent of expenditures in FY 2019.
• A 1 percent levy decrease in FY 2015 and max levies in each of the following years would result in year-end fund balances equal to 26.6 percent of expenditures in FY 2015 and 38.4 percent of expenditures in FY 2019.

In all of the scenarios presented Tuesday by PMA, the ending fund balance rises each year between FY 2015 and FY 2019, an indicator of consistent revenue-over-expenditure surpluses. Obviously, the size of those surpluses varies with each scenario.

PMA’s projections are based on a number of assumptions, including those about the number of retirees expected in the coming years, the cost of their post-retirement benefits, and the salaries of their replacements.

The projections also assume there will be “no legislative changes in school funding formulas” from the state government.

Frances said the funding formula is being reviewed by state lawmakers who are expected to propose some changes to the state board of elections in February. PMA’s models don't anticipate any major changes to school districts' role in the funding formula, but Frances said activity in Springfield is “something to watch,” especially for a relatively wealthy district like District 86.

“If there’s going to be a change in the formula you’re a more likely district to be affected … to the negative,” Frances said.

Tuesday's presentation was in front of the board's finance committee. Present at the meeting were Victor Casini and Ed Corcoran. Corcoran said the full board will likely discuss the levy at its Nov. 18 and Dec. 16 board meetings.

The FY 2015 levy needs to be approved by the end of 2013.

What type of levy would you like to see the District 86 board approve this winter? Tell us in the comments!

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