1. The Financing of Illinois K-12 Education 1998-2007 Dr. Michael Jacoby Executive Director, Illinois ASBO Chair, Illinois Education Roundtable

2. Topics, Documents Revenue/Expenditure Data  2008 AFR  Rev and Exp Summary Data 1998-2008  Rev and Exp Graphs 1998-2008 Historical Review of Funding Reform Proposals  Legislative Research Unit Report

3. Annual Financial Report How Data is Collected: (See 2007 AFR)  Illinois Program Accounting Manual (IPAM)  Revenue (by Fund [9] and Source): Local: Taxes CPPRT Tuition Fees Interest Earnings Food Service Pupil Activities Other State: GSA Special Ed Vocational Bilingual Transportation Other Federal: Unrestricted Restricted Title V Food Service Title I Title IV Special Ed Vocational

4. Annual Financial Report  Expense (by Fund [9], Function & Object): Fund: Operating Funds: - Education - Operation & Maintenance - Transportation - IMRF Bond & Interest Site & Construction Working Cash Rent (Tort in 2009) Life Safety Function: Instruction Support Services Community Services Non-Programmed Charges Debt Service Object: Salary Benefits Purchased Services Capital Outlay Other Objects Transfers Tuition

5. ADA = Average Daily Attendance

6. Operating Fund Data – 10 Year Summary Source = ISBE Analysis of AFR Data 1998 - 2007

7. Revenue and Expense Growth 1998-2007

8. Inflation Adjusted Inflation measured by the Consumer Price Index indicates that $1.00 in 1998 is equivalent in purchasing power to $1.27 in 2007. Inflation Adjusted  Revenue Increase 1998 to 2007 = 22.4%  Expense Increase 1998 to 2007 = 18.5% Policy Implication  CPI is not a reliable inflation index for education.  “ECI is a more accurate measurement of the inflationary spending pressures that school districts face” (EFAB 2005)

9. Operating Fund Revenue Per ADA

11. Local vs State Revenue – Operating Funds (2 Axis)

12. Operating Fund Expenditures Per ADA by Function

13. Operating Fund Expenditure Per ADA

14. Operating Fund Expenditures Per ADA by Object

15. Operating Fund Expenditure Per ADA

17. Expense Per ADA – Change from 1998 by Function Function$ Inc from 1998 % Inc from 1998 Instruction1,79644% Support Services1,38748% Community Services1120% Non Programmed Charges 8537% Debt Services34240% Denotes potential policy implication or budget trend

18. Local Budget Trends An increase in Debt Services within the Operating Funds suggests an increased reliance upon Tax or GSA Anticipation Warrants, or non-referendum debt (i.e. performance contracts). Both principal and interest for these types of borrowing must be paid directly from the fund that receives the revenue. Total Warrants/Notes issued or outstanding FY 2007 = $268M Total principal/interest paid from Operating Funds in FY 2007 = $90.2M An increase from 1998 of $63.6M

19. Expense Per ADA – Change from 1998 by Function Object$ Inc from 1998 % Inc from 1998 Salary1,85841% Benefits55989% Purchase Services52065% Supplies19036% Capital Outlay-48-13% Other Objects3467% Transfers-23-69% Tuition14060% Denotes potential policy implication or budget trend

20. Local Budget Trends Employee benefit increases over 10 years have had a significant impact on school budgets. This is primarily associated with health insurance premiums. Total expense from Operating Funds in FY 2007 = $2.2B An increase from 1998 of $1.05B

21. Benefit Cost Per ADA % Change from 1998 Fiscal Yr$ Inc from 1998 % Inc from 1998 19999615.3% 20007812.4% 200115524.8% 200223637.6% 200329547.0% 200443469.1% 200544971.5% 200651782.4% 200755989.1% Total Cost Inc = $1.052 Billion

22. Local Budget Trends Purchased Service increase suggests more external contracting by schools for various functions  Custodial Services + $211M or 76% over 1998  Transportation Services + $224M or 82% over 1998 Capital Outlay decrease suggests schools purchased less equipment or equipment at lower costs.  Education Fund down $74M or 25% decline over 1998  Instruction down $30M or 21% decline over 1998

23. Local Budget Trends Transfers decrease is difficult to discern and AFR data is not sufficient to make an evaluation. IPAM Definition: “This object category does not represent a purchase; rather, it shows that funds have been transferred in some manner. Included here are transactions for moving money from one fund to another and for transmitting flow-through funds to another LEA.”

24. Local Budget Trends Tuition increase is summarized below:  Regular program increase suggests more districts paying tuition to other districts for programming.  Sp Ed increase is within expectations when compared with total expense increase 1998 to 2007  Increase in CC tuition suggests more dual credit programs. FunctionPer ADA $ Inc from 1998 Per ADA % Inc from 1998 Regular13150% Special Ed7049% Vocational215% Community College.05108%

25. What About Special Ed? Special Education Cost Study (PA 95-0555)  2007 Study Findings Expense = $3.2B Revenue (specific sources)  Local $802M (25%)  State$1,132M (35%)  Federal $384M (12%) Unsupported by specific sources  $900M (28%)  Policy Implication Increased State Funding or More Local Tax Authority?

26. What About Special Ed? 1998 to 2007 per ADA (select *Function #s) The PA 95-0555 Expense methodology is preferred, however comparable 1998 data is not currently available.

27. Local Budget Trend Special Education expenses per ADA from 1998 to 2007 increased 64% compared to the total Education Fund increase of 45%. Speech and Hearing expenses represented the largest increase at 134%. As a % of the total Education Fund Budget, Special Ed increased from 16% in 1998 to 18% in 2007.  This 2% proportional increase = $334M

28. Illinois Funding Proposals Handout  Historical Review of Selected Education Funding and Reform Proposals - Illinois Legislative Research Unit December 20, 2006