DPS61 Debt - We're #1!
Sorry... more bad news. (Or, when are we going to write something positive?)
Edit from Mike…. This post is misleading. The amount of debt service DPS had in the year mentioned is warped by the refinance of a bond. See my next post for a futher explanation.
I started digging into our DPS district finances to try and answer the question: why does DPS pay over $19,000 per student per year of education when other districts in the state pay less than $12,000? Our closest district, Mt. Zion, according to financial documents reported by each district to the state of Illinois, pays $10,324 per student. Decatur pays $19,367. What you’ll read below is not part of that issue where I dig into that complicated quagmire. However, I can’t let this issue slip by, or even be a part of the “expenses per student per year” article, because this is equally important, and if I put the two issues together, it would probably mask one of them. So, here we go… Let’s talk about school district debt.
I. The Data
Below is a partial list of the 161 K-12 school districts in Illinois with over 1,000 students, ranked by the amount of debt per student each district has accumulated. (For brevity, I included the first 20 in the list, then included close districts that might be of interest.) Bad numbers are piling up for DPS. Over the last year, we’ve seen our district mentioned in the Wall Street Journal because of bad test scores, and I had an article a few months ago regarding our extremely bad violence numbers, and now this – DPS61 is far and away the worst (the very, very, worst!) district in Illinois when it comes to the amount of debt we’ve taken on. I considered not writing this article because the debt is not the “fault” of the current administration or even the current school board – so you might ask, what good does it do to complain? (Read on for my answers.) But let’s start by looking at, and explaining the debt numbers…
Not only is our per-student debt over 40% higher than the next closest (bad, very bad) district, but we are also running at a 47% debt-to-operating budget ratio. Of the 161 large districts, 41 have a debt-to-operating-budget ratio worse than the 10% ratio recommended by several experts, including the National Center for Education Statistics (NCES), the American Federation of Teachers (AFT), and the National School Boards Association (NSBA). The NCES recommends that school districts keep their debt levels below 10% of their annual operating budget. The AFT recommends that school districts keep their debt levels below 8% of their annual operating budget. The NSBA recommends that school districts keep their debt levels below 6% of their annual operating budget. And our ratio is 47%! Our own auditor last year gave us the worst possible rating for our debt ratio.
The annual requirements to amortize all of our outstanding debt as of June 30, 2022, including interest payments of $63,864,400 are as follows:
Put another way, when a kindergartner enters our district, over a thousand dollars a year (and probably more like $1,500 as our enrollment declines) will be spent to service our district debt. So as revenue comes in from local, state, and federal tax dollars, we will probably spend around $17,000 of that money for each student to pay down our debt during their years in school. Is there any better way can think of to spend $17,000 for each child?
II. Why should we care?
Or, put another way – why am I bothering to write about this when we can’t do anything about it? Several reasons:
You have to know where you are to understand where you need to go, and we simply cannot take on any more debt. The Superintendent and the school board must understand our horrible situation.
We must start now planning for a future with declining enrollment because these numbers are only going to get worse. More and more of our revenue per student is going to be spent on servicing our debt until 2042 (when it gets a little better for a few years).
And this is the big one!!! Has anyone – our Superintendent, a school board member, our district CFO, etc. gone to the state and asked for forgiveness? Beg, plead, grovel. We need to take our CARES money and use it to pay down our absurdly high debt. Make the (completely true) claim that the debt was not created by the current administration, the current school board, or (for heaven’s sake) the children of the district, and we will scrap our plans to build another mostly unneeded new school if the state will let us take that money and apply it to our debt! Duane and I tried to make a case for this almost a year ago and it fell on deaf ears. But then I wasn’t aware of our enormous debt burden and didn’t understand the urgency of this request. Dr. Clark needs to set up meetings now and explore this option.
III. Objections
I see two objections to this article and making an issue of our extremely high debt:
1. At the same time that we took on a large portion of this debt (our BOLD Plan) we also passed a 1% increase in local sales taxes to pay for that debt. The problems with this argument are:
Let’s call this the state lottery funds education argument. While the 1% sales tax increase slightly improved our local revenue, that money is in no way specifically designated to pay for new buildings, etc. The money is (of course) mixed with all the other money that comes in. And when you have money, you spend it – it’s just what you do. From 2007 to 2019, Illinois led the nation in education spending growth (see the chart below), and DPS61 was definitely a part of that trend. The extra money from the sales tax increase doesn’t help pay down our debt any more than our state lottery increases the amount of money school districts get for education funding.
The increase in local funding we get from the sales tax increase still leaves us in 125th place in local funding (out of 161). DPS61 receives $5,830 per student in funding from local sources. Or another way to think about it, we receive 36% of our funding from local sources (138th place). These are not big numbers – the tax increase doesn’t even come close to servicing this amount of debt. Slightly increasing our local income was not an excuse to put us far and away the very worst school district in the state (and possibly the nation!!!) in debt service per pupil!
2. We would not have those shiny new buildings if we hadn’t levied those bonds! Response: are you kidding me? (This is where I get incredulous.) We spent over $70 million on our two high schools and we only need one. After numerous very expensive improvements to the old Thomas Jefferson, Johns Hill, etc., what do we have to show for it? Other districts across the state (and the nation) get by on far, far less. Why did we feel the need to strap a burden on DPS children for the next 25 years to build things that haven’t helped with any type of success metric you could track – metrics including learning, attracting teachers, student enrollment, (and the list could go on.)
IV. Summary
Our debt of $71 million is not like the national debt where you can say, “Oh, maybe this won’t ever really matter.” This money is an obligation that we must repay. In 2030 when we are a district of 5,000 students (don’t laugh, we might be lucky to have this many kids left) this debt obligation just might be untenable. It would be impossible to run a district when you need to make cuts to the largest portion of the budget, school building salaries, to pay for past debt. We better start planning and try to do something about it now!
Next up… $19,367 vs $10,324.