A new financial forecast projects significantly lower deficit spending for Riverside-Brookfield High School over the next five years than a previous forecast had predicted.
The new forecast was prepared by the same financial advisor, Forecast 5 Analytics, a spinoff of PMA Financial. The new forecast still projects operating deficits over each of the next five years, but at no time during that period will the cash reserves of RBHS District 208 fall below the board policy of having reserves of at least 33 percent of annual operating expenditures.
The new projections were presented at the Jan. 23 meeting of the District 208 Board of Education.
At the meeting, Superintendent Kevin Skinkis said a referendum to increase the district’s educational fund tax rate would not be necessary until at least 2024 or 2025.
By that time, the seven-year working cash bonds issued by the district in 2017 will be paid off, while bonds issued in 2006 and 2007 to fund a major renovation and expansion of the school begin to be paid off. That would lessen the impact of any increase in the education fund rate approved by a future referendum.
“If the board of education was to consider going out for a referendum to increase the education fund tax rate, I would recommend doing it in conjunction with the bonds being paid off (2023-26) so the community would experience no increase or possibly a decrease in their property taxes,” Skinkis said in an email to the Landmark.
The new forecast projects a large deficit of $751,069 this year, but that is because the district transferred $425,000 from its working cash fund to its capital projects fund to help pay for projects such as roof replacement and a new parking lot.
The new forecast projects the district to have operating deficits averaging about $405,000 annually through 2022, followed by a $21,000 projected deficit in 2023.
Cash reserves are projected to decline to $9.7 million from the just over $12 million the district had at in reserve at the beginning of the 2017-18 fiscal year.
But even at the end of the 2022-23 fiscal year, the district’s reserves are projected to amount to nearly 36 percent of operating expenditures. District policy calls for reserves to be at last 33 percent of annual operating expenditures.
The decrease in the district’s fund balance could help increase state aid to RBHS because the new state funding formula penalizes districts that have very high cash reserves.
“The district has done a good job building a fund balance over the previous five years that can be used to offset those operating deficits,” Skinkis said in his email.
The previous forecast, prepared in November 2016, had projected much higher deficits, culminating a projected operating deficit of slightly more than $2.5 million in 2022.
The new forecast is much rosier because assumptions were tweaked to take into account new conditions and the specific circumstances of RBHS.
Perhaps the biggest change was factoring in the expected retirement of 10 highly paid teachers by 2023. Those teachers will be replaced by more junior teachers, making much less money.
“Retirements are playing a big key to these assumptions,” said school board President Garry Gryczan.
The forecast assumes that staff salaries will increase at a rate of 3 percent a year, but that overall salary expenditures will increase by less than that due to retirements.
The number of teachers at RBHS is projected to be essentially flat over the next five years.
“This could change if we get an enrollment spike in 2023,” Skinkis said.
The new forecast also projects a slightly higher rate of property tax collection, 99 percent, than did the previous forecast, which assumed a 98.5 percent tax collection rate.
This change adds nearly $100,000 in annual projected revenues and is based on the district’s past experience. The new forecast also raises the projection of the annual increases of the Consumer Price Index to 2 percent from the 1.5 percent previously assumed.
That change also results in an increase of about $100,000 in annual projected revenue. The CPI governs how much the district’s annual tax levy can be extended in the absence of a referendum.
The new forecast also assumes a slightly lower rate of increase in the cost of health insurance for the district, projecting an annual 6.5-percent increase instead of the 7-percent increase the previous forecast assumed.