District 113A: Improved Credit Outlook Reflects Two Years of Difficult Decisions, Fiscal Responsibility

After two years of budget cuts and short-term borrowing, officials in  say the district is finally moving in the right direction.

Last month, Standard & Poor's Rating Services announced that  due to "significantly improved cash flow and financial position."

The district retained its BBB rating, which means "adequate capacity to meet financial commitments, but more subject to adverse economic conditions," according to the S&P website.

"The revised outlook reflects our view of the district's significantly improved cash flow and financial position due to the implementation of major expenditure reductions and a new management team," Standard & Poor credit analyst Caroline West said in a statement.

The announcement came just 15 months after District 113A's credit rating was reduced from A- to BBB. At the time, West attributed the rating to the district's "vulnerable financial position," which she said was caused by a reliance on short-term borrowing and the failure to pass a working cash bond referendum.

District 113A Superintendent Susan Birkenmaier said the improved outlook was based on major expenditure reductions and a new administrative team.

"Based upon many cost-saving initiatives over the last two years, the district has been able to stabilize what was an unfavorable financial position in 2009," Birkenmaier said.

District 113A was certified "in financial difficulty" by the Illinois State Board of Education in December 2009. They were required to submit a financial plan to balance their budget, reduce expenditures, build fund balances and eliminate borrowing.

As part of the financial plan, the district made $3.57 million in cuts to its budget for fiscal year 2011, which included extracurriculars, the gifted program and $3.17 million in personnel. Another $1.13 million was cut for fiscal year 2012 through the closing of Central School, the elimination of 14.5 staff positions and a reduction in transportation services.

Other cost savings measures included a pay freeze for all staff members, benefit reductions and deferred maintenance on district equipment.

The dramatic budget reductions resulted in a quick improvement in cash flow, according to district officials. At the close of the 2011-12 fiscal year, operating fund balances totaled $2.5 million—a significant increase from negative $1.1 million the year before.

According to Birkenmaier, the district expects operating funds to total $5 million by 2013.

District 113A Board President Dave Molitor, who called the improved outlook "welcome and wonderful news," said he is "very pleased" with the financial progress made since 2009.

"There were many difficult decisions made over the past few years to get to the financial aspect we are at today," he said. "The most difficult part of following any financial plan—in particular, when you are rebuilding funds—is to not spend excess while trying to build reserves. Maintaining those reserves moving forward will be key in ensuring the district's future success."

Despite the strides in expenditure control, revenue collection remains a concern for District 113A, Birkenmaier said.

Last month, Cook County property tax were mailed on time for the first time in more than three decades. Since payments were due Aug. 1, District 113A has already received about $200,000.

With revenue continuing to trickle in, District 113A will not have to borrow the $1 million that was projected in the financial plan to cover payroll and other expenditures, Birkenmaier said.

"As a result, (we will) see future savings by eliminating borrowing costs," she said.

According to Birkenmaier, state funding is the bigger concern.

By next year, general state aid is expected to be reduced by 15 percent, and the state will likely run two payments behind on other payments, she said. 

District 113A has begun working on a strategic plan that will deal with both fiscal challenges and academic achievement.

“Managing revenues and expenditures in a climate of uncertainty requires diligence and foresight," Birkenmaier said. "We continue to monitor revenues, especially the impact of state payments; continue to look for additional savings potential; and will develop a strategic plan to stay focused on student achievement while balancing fiscal responsibility."

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