Without Cuts, District 65 Faces 'Financial Or Academic Bankruptcy,' Risks State Takeover

EVANSTON, IL — Shortly before adopting a budget for the coming fiscal year that calls for spending $13.2 million more than it brings in, Evanston/Skokie School District 65 board members got a sobering warning from their financial consultant.

"I cannot stress enough the magnitude of the financial challenges facing this district. Status quo will lead the district into either financial or academic bankruptcy," Robert Grossi said.

"I've been appointed twice by the Illinois State Board of Education in my career to oversee school districts that have been taken over by the state due to fiscal insolvency. Unless decisions are made that are bold and immediate, it is my assessment that the district is heading in that direction," Grossi, a financial advisor for the district, told board members at their Sept. 16 meeting.

The budget for the 2025 fiscal year includes $177.38 million in revenue, a decline of $650,000, or 0.4 percent, compared to last year. Meanwhile, it calls for spending $190.5 million, which is an increase of $2.1 million, or 1.13 percent, above the 2024 unaudited budget. For the prior three years, spending had been rising at annual rate of more than 9 percent, according to a budget presentation.

The budget ends the fiscal year with enough money in the reserves to pay for just 72 days of operations. That marks the fewest days of cash on hand in more than a decade, well below the fund balance policy of at least 90 days — or the 180 days worth of cash reserves that state education officials require to give a district the highest financial rating.

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Grossi said the leadership of District 65 has put itself in a position where a delay in property tax revenue from Cook County could force the district into short-term borrowing just to meet its payroll. He said the district has already made operational cuts, but is still going to be about $10 million short of a balanced budget, as it has been in each of the prior years.

"Much more needs to be addressed beyond achieving balanced budgets to fully stabilize the district's financial condition," he said. "All decisions needed to balance district operations will be difficult and impactful, but not making the decisions will be worse."

Superintendent Angel Turner, who was hired on a permanent basis in March, told board members that her administration would look for operational efficiencies, assess the return on investment from district programs and services and provide recommendations in January.

"I want to provide the board today with a framework for our deficit reduction plan and I want to walk you through what the components of that framework will take into consideration as it relates to what we have to consider with this deficit reduction," Turner said.

Turner said she had expected to have the full 2024-25 school year to evaluate programs, but now the board should consider hiring another independent consultant (besides Grossi) to develop the plan.

"Now, since our financial advisor and our new CFO have really uncovered all the things, it has shrunk the timeline that my team and I have to do it, in addition to running this district very efficiently," she said. "And so in doing this process and leveraging this independent consultant it will be important for us to ensure that we are leveraging stakeholder engagement and outreach to inform the aspects of the plan and the development."

The plan to balance the District 65 budget will include an as-yet undetermined combination of staff reductions and school closures, along with figuring out a way to pay for future capital expenses and save money on both its special education and transportation programs.

Tamara Mitchell, the chief financial officer hired by the board in June, said the deficit reduction plan will include significant cuts to operational expenses when it is presented in January.

State law requires school boards to come up such plans when their budget includes operating funds with direct revenues below expenditures by more than a third.

"We are not in the situation where we have to complete that deficit reduction plan," Mitchell said. "We are really, really close to it though."

For the first year, the plan calls for spending cuts of $12.5 million — about $5 million from instruction, $6 million from support services, and the rest from payments to other districts and community services. (Mitchell described this as $15 million in spending cuts but that is not reflected in the summary of the plan.)

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After cutting operational spending from $173.3 million to $160.8 million in fiscal year 2025-26, the plan calls for an increase of about $5.8 million, which reflects the 3.5 percent annual growth that Mitchell said the district can achieve.

In the 2026-27 fiscal year, the district is projected to turn a $2.1 million surplus, but it will also need to spend $6 million in cash reserves to complete the Foster School construction, Mitchell said.

For the third year of projections, Mitchell said the district would run a surplus of about $1 million, leaving it with a fund balance that may or may not meet the minimum required by the board's policy — and one that is still $8 million below where it started the 2023-24 fiscal year.

"So we are seeing some fund balance stabilization, and that $35 million fund balance reserve will put us closer to that 90 day reserve balance," she said. "But I'm not sure it will put us right there at 90 days."

Earlier:

• 'Extreme Labor Challenges' Blamed As District 65 Ends Fiscal Year With $10 Million Deficit
• With Looming Deficits, District 65 To Close Only Bilingual School
• Devon Horton Defaults On District 65 Debt Payment Plan
• $4 Million Budget Shortfall Passed To Interim District 65 Superintendent