District 65 Business Manager Resigns

And some financial discussion of the fifth ward school funding model

Today I learned that District 65 Business Manager, Kathy Zalewski resigned from District 65. I reached out to the District who confirmed the news.

I can confirm that Kathy Zalewski has resigned from her position as the Business Manager/CSBO at Evanston/Skokie School District 65. We will certainly miss her; she has been invaluable to our District 65 Business Team for the last 23 years. We wish her the best of luck in all of her future endeavors.

As someone who reads all the Board Meeting minutes and especially the schedules of investments and cash balances, I have come to appreciate Kathy’s consistent and accurate work. It’s not clear to me who will be taking on her role - the District remains without a CFO, a position that has been vacant since Mr. Obafemi left last summer.

Fifth Ward School

First, just to be clear - I am in favor of the fifth ward school. I am critical here because I feel strongly that it is important to actually build and complete the project.

So, while we’re on the subject of finances, I want to briefly share some data I’m trying to work through. The big question to me right now is, does District 65 have enough money (cold hard cash) on-hand to actually build the fifth ward school? To get a good sense of cost, you can view the memo from the January 22, 2024 board meeting.

So, all-in the Board voted to approve an $48.4 million budget for the new school. This budget is technically broken into two different parts - construction costs ($42.1 million) and non-construction costs ($6.3 million). You can view the resolution that the Board voted on or just the page with the full breakdowns.

My understanding is that the District is only permitted to use the lease certificate funds for construction.¹ Using other funds would require a referendum, however they can use other funds for the stuff inside the building. That means they need at least $42,097,914 to build, which includes a $4m contingency budget. According to the February 2024 summary of investments, the District has $44,221,014 in the lease certificate set of accounts.² I’ve started making a spreadsheet to track this account over time, it’s a work in progress.

So if I’m reading this right, they do have enough funds and even a small buffer for contingencies. However, the downside risk seems very bad. If during construction, there is an overage that pushes the budget past what they have in this set of accounts (an overage of 15% or more) - they could be in a situation with a partially completed school and then have to find more funds for construction. If the District cannot use general reserves to do this (which I believe is the case) then they could end up in a situation where they need to have a referendum for more construction funds or make even more sacrifices to the building mid-stream. Both of those options seem catastrophically bad.

This is the downside to using lease certificates for such a large project - you don’t have the flexibility that you would have with a referendum. This is the largest lease certificate I could find in Illinois for school construction. I still argue it was a bad idea to use this funding model and they should’ve just held a referendum in 2021.

This brings up the next issue, it’s going to cost $6.3 million to put stuff inside the school. Where is that money coming from if all the lease certificate goes towards construction? In February 2024’s summary of investments, the District had $32,770,746 in general reserves, which is about 21% of the Districts operating expenditures ($153 million). So it seems they’re already pretty close or past the limit of the Board’s own policy for fund balances (4:22).

4:22 Fund Balance

The Superintendent or designee shall maintain fund balances adequate to ensure the District's ability to maintain levels of service and pay its obligations in a prompt manner in spite of unforeseen events or  unexpected expenses. The School District seeks to establish, over time, a fund balance of 25% of the annual expenditures in the operating funds. The finance committee will meet by December 31st of each year to review the status of this fund balance goal. The date of measurement shall be June 30 of each fiscal year, and the measurement shall be consistent with what reported in the District's Annual Financial Report filed with the Illinois State Board of Education.

So they could take from this fund, which would reduce it to $26 million or do something else altogether, such as borrow from this fund and then pay back with sales from Bessie Rhodes property. It’s not clear how much revenue that sale would even bring in. With that said, even if they didn’t close Bessie Rhodes, they technically still have enough general reserves.

I asked the District for clarification on the reserves but haven’t heard back yet. However, on May 7th at 6pm there will be an open house at Fleetwood Jourdain, complete with a committee to name to school.³ I’ll probably be there, so say hello if you see me.

1. We can debate this but the IL School Code is pretty clear about construction requiring a referendum. Illinois law 105 ILCS 5/10-22.36 lays out pretty stark guidelines for a referendum requirement on new construction.

2. I believe I am reading this correctly but please comment if I am reading this wrong. I don’t have a ton of guidance available to me on how to read these investment documents, so if something is amiss, let me know in the comments or email me.

3. I think that naming this school before they are 80% done is a huge mistake and especially disrespectful if budgets go sideways and it turns into an even bigger mess.