Our Backwards Budgeting Process

Tuesday night I spoke at the Truth in Taxation hearing at the School Board meeting. The hearing was required for the Decatur Public School District because this year the proposed real estate tax levy would increase the property tax extension by more than 5% over the previous years. I was a little nervous at the podium, so I wasn’t very eloquent or very persuasive. Also, I was thrown off by some of the discussion surrounding the TIF zone, and the fact that this might be the first year the city will be able to tax a large section of the property at its fair and current valuation. Honestly, that TIF red herring worked on me, and I think it’s worked on nearly everyone – I hope, at least, until now. When I heard these words about the TIF money, “if we don’t try and capture it, you’ll be leaving $700,000ish on the table forever,” I frantically crossed out several of the things I had planned to say, because… well… how can you argue with that? But with this forum, I get a reprieve. Because it turns out you can argue against that logic, and you should.

I’m going to jump to the end of my argument first for those people that don’t read to the end (TL;DR), and then I’ll circle back to the TIF. The way our school district decides what they should ask for each year for our real estate tax levy is to see how much money is available and then ask for as much of that money as they possibly can without raising too many eyebrows. It’s a fine line, but they always end up asking for more than last year, because – WHO WOULDN’T? And the school board lets the district administration get away with this every year because - that’s the way the process has always worked. But here’s what I want everyone to think about and make sure we change: wouldn’t it make more sense for the school board to ask the district Superintendent to submit a budget that everyone – the administration and the board - can live with, and then work from there to determine how much of a tax levy we need to ask for so expenditures can be met. Wouldn’t it make more sense to start with what you need, and then work out your levy amount? WE DO NOT DO THAT!

The Illinois State Board of Education Foundational Principles of Effective Governance for school boards says:

"As its primary task, the board continually defines, articulates, and re-defines district ends to answer the recurring question — who gets what benefits for how much?"

That’s number one in the Principles document – how much. The very first thing that a school board should do. And what’s the best way to do it: to get a high-level budget and then decide what can be picked off to reduce the amount to a level where the community does not have to absorb increased tax rates every year. Our board has abrogated that responsibility back to the district administrators because that’s the way it’s always been done.

You might say it isn’t fair, or budgeting is too hard. Come on. Those of you that have worked in small or large businesses know how hard it is to come up with a budget when sales are variable, and costs are variable, and payroll keeps going up – but you do it every year. Most of the time the bank requires a budget; your investors require a budget; and you need a budget to make sound business decisions! If you’ve looked through the school district budget, I’m here to tell you that it’s not that complicated. The payroll is large, but at a rate that we can predict, and teacher salaries are based on contracts which simplifies things substantially, and maintenance costs can be estimated based on historical data. Everything is predictable. Unlike other businesses, fashion doesn’t change in district 61, a new scientific study doesn’t come out that’s going to hurt your high fructose corn syrup sales, or a war in the middle east isn’t going to affect your exports to the region. Let’s get real. Show me a budget, let me cut out some line items (the after-school program, for example – which must be on the chopping block now that COVID money is running out), and then we will end up with a tax levy that’s based on sound business facts and decisions.

To circle back. First, there's a critical point everyone should understand when discussing school district finances, before we hit you with why we don’t need to continually ask for as much money as possible every year. In Illinois (and as you can see, Decatur is no exception) we already spend a lot, and I mean A LOT, on public education.

I’m not going to go into all the research now – anybody familiar with randomized controlled experiments in education knows that (from the most cited study on money in education):

"a wide range of analyses indicate that overall resource policies have not led to discernible improvements in student performance." - Hoover Institution’s Eric Hanushek 2003 Analysis on Education Funding.

I feel like I need to get that out there so people don’t think “you don’t care about education.” I do care. But I also don’t want our city to start (or continue?) a downward spiral of decreased population leads to increased taxation, leads to decreased population, leads to increased taxation, etc. I care a lot about that.

So back to the TIF smoke screen, and without getting too far into the weeds of how all that TIF stuff works: the valuation of the TIF property will now increase to the level where it should be. This year, next year, the year after, etc. There really is no urgency to “capture” that money this year if we don’t need the extra money this year. Don’t ask for a higher tax levy valuation just because the money is there – TIF or no TIF. School board – this is on you! Raise the total tax levy if that’s what the budget requires, or for heaven’s sake, lower it if you can. The fact that there’s a TIF ending and that some city property is going to be valued correctly for the first time in 20 years doesn’t matter a hill of beans with how the process should work. The board needs to know how much money you need to run the district in either situation. Nothing else matters. Nothing. Nothing. Nothing.

Have I made my point clear? For those of you running for the Board, it’s a frustrating job. You’ll spend so much time on employee and student discipline (and that also needs to change as soon as possible) that you might forget about the number one item listed in your Foundational Principles of Effective Governance – How Much. Let’s have our next Board take back this responsibility and create a budget-first process that we can all live with to prevent our community from spiraling down and out of control.