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District 205 budget review report raises red flags, attorney calls CFO to carpet
Posted By Brandon Reid On March 9, 2011 @ 7:00 am In News | 2 Comments
By Jim Hagerty
As the Rockford Board of Education moves forward with its massive $45 million cost-cutting plan, some of what District 205 officials say is a $50 million fiscal 2012 deficit is under fire.
According to Chicago-based accounting firm Baker Tilly, the budget shortfall of $50 million projected by the Rockford Public School District is “in the ballpark.” However, some of Baker Tilly’s report to the district calls officials, led by District 205 Chief Financial Officer Cedric Lewis, to the carpet.
The budget review investigated three areas at the request of the Rockford Education Association (REA).
Lewis claims the shortfall represents the 2011 budget, originally reported as $41 million, and an approximately $10 million hole caused by reductions in state aid and benefit expenditures.
Baker Tilly examined the following three areas of the budget: revenue generated by general state aid, corporate replacement tax revenue and expenses relating to employee benefits.
John Rossi, an accountant with Baker Tilly, noted that Lewis projected the district would receive $65,847,261 in general state aid next year. However, according to Rossi, that entitlement could be closer to $78 million.
District 205 claims it is slated to receive an estimated $14,053,846 in corporate personal property tax replacement revenue next year. After Baker Tilly’s review, the firm said those revenues, because of a fiscal three-year average, would be close to $21,500,000. That leaves an additional revenue of $7,446,154
In addressing the district’s benefit expenditure estimates of $80,939,000, Baker Tilly noted the administration could save between $3 million and about $4.8 million next year.
Those figures, according to the Baker Tilly report, represent revenues of $22,498,893 the district did not account for.
Rockford attorney Dan McGrail, who has been leading an official charge to challenge the validity of the deficit, agrees.
Speaking to the Board of Education and a packed Ellis Arts Academy Auditorium Tuesday, March 1, McGrail said if Baker Tilly could find more than $22 million on short notice, it could uncover more if other areas of the budget were reviewed.
“If we found $22 million in one week,” McGrail said, “I think the community deserves to look at the whole picture.”
Meantime, Lewis stands by his projections. Lewis said he did not account for what appears to be a more than $22 million accounting error, based on the amount currently owed to the district in categorical state aid.
As of this report, District 205 was awaiting payment of $28 million from the state to cover costs of required categorical programs such as special education and transportation for fiscal 2011.
The chances of the state increasing general state aid revenues, Lewis said, are slim.
“This isn’t an accounting error,” Lewis said. “This is based on (the) assumption of the governor’s budget at the time the budget was prepared. Today, we learned the governor is again proposing additional cuts. The governor’s budget is likely not to pass. How can they afford to give us more money, when they are not giving us the money we are due right now?”
Whether Lewis is correct in that assumption, McGrail said, isn’t the argument. That argument lies on page three of the Baker Tilly report.
According to the Baker Tilly findings, no official projections for 2012 were made as of Feb. 25. The $50 million budget deficit was derived using figures from last year.
“We discussed the fiscal year 2012 forecast with Mr. Cedric Lewis, Chief Financial Officer of District 205,” the report reads. “Mr. Lewis indicated there is no detail(ed) forecast for fiscal year 2012. However, Mr. Lewis indicated that without any other changes, fiscal year 2012’s deficit would logically exceed that of fiscal year 2011 merely because of ‘step and lane’ increases for teacher payroll and increase in health insurance costs.”
Lewis’ statement to Baker Tilly seems to contradict what the firm reported is likely to be a reduction in benefit expenditures.
“You have to remember,” McGrail said, “teacher benefits in fiscal 2011 cost $3 million less than last year. They don’t want anyone to know that.”
The Baker Tilly report also notes that District 205, in December 2010, decreased the 2011 shortfall estimate from just more than $41 million to approximately $26.2 million. Working off that figure and the more than $22 million the firm seemingly uncovered, another deficit figure emerges—one significantly less than the union or the district has broached.
“You take that $26 million and project the other numbers, and you are down to $4 million,” McGrail said. “And remember, Cedric Lewis didn’t even do budget projections for 2012. That’s what is staggering here. Here we are closing schools, and there’s nothing to base it on.”
From the March 9-15, 2011, issue
Article printed from The Rock River Times: http://rockrivertimes.com
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