Former Hazel Crest school Supt. Jo Ann Roberts warned in 1997 that tiny District 152 1/2 was headed for financial disaster. The south suburban district got rid of Roberts, but it didn’t rid itself of the fast-flowing red ink.
Now, in one of the most spectacular fiscal flameouts in state history, Hazel Crest will need a multimillion-dollar state bailout just to keep meeting its payroll after Nov. 22 and may dissolve at the end of the year even if it gets the cash infusion.
In an era of increasing pressure on schools–from taxpayers, parents, reformers and lawmakers–Hazel Crest offers a look at what can happen to a district that ignores its long-term health in favor of short-term moves to appease constituents.
School officials blame the collapse on stagnant property values, inadequate state aid and a tax cap that prevents the district from unilaterally collecting more revenue–a familiar lament in some 700 school districts in Illinois that are running deficits this year.
Hazel Crest officials also acknowledge overspending in recent years in an effort to improve the abysmal test scores of the district’s 1,200 pupils, mostly poor minority children.
A Tribune review of nearly 20 years of records, along with interviews with former and current officials, also shows that the district helped dig itself into a hole with free spending, lax financial controls and instances of inept financial management.
Last week, Hazel Crest voters approved two referendums, one that more than doubles the school tax rate and another that allows the district to borrow more and increase yearly debt payments.
But the measures may have come too late. The tax rate increase won’t generate new revenue until fall 2003, and it will take at least 90 days before the district can borrow as a result of the debt referendum, said Robert G. Grossi, the financial administrator for a state panel assigned to oversee Hazel Crest’s finances.
In a letter to Illinois Supt. of Education Robert Schiller, the oversight panel wrote that the district has only enough cash to get through its Nov. 22 payroll. After that, it will be “forced to close its doors” unless state lawmakers appropriate up to $4 million before the Dec. 6 payroll. Lawmakers will consider the bailout when they convene later this month.
That uncertainty has taken a toll on the community.
Every day, after hearing talk of financial trouble at Woodland School in Hazel Crest, Brandi Potts, 7, comes home with the same question: “Mommy, where am I going to go to school next year?”
Her mother, Audra Nelson, said she doesn’t know how to answer. The question in her mind, she said , is: “Where did all the money go?”
To find the answers, one must go back more than a decade.
Independent audit reports over the years show the district overspending its budget as far back as 1986–when there were no tax caps and property values were still rising.
The pattern accelerated in the 1990s. When the district converted Frost School to a middle school, cost overruns added 50 percent to the price of the renovation, which was budgeted for $2 million, said former school board member Willie Webb.
School board members and administrators often did not know how bad things were getting. And when they did hear warnings, they often chose not to listen.
More Top Picks Best Jar Openers For Arthritis
Board members “looked at me like I was stupid,” said Roberts, who was forced out of Hazel Crest in 1997 and now is a principal in Chicago.
Roberts ended up in litigation with the district, but she is hardly the only administrator who ended up at odds with the board. Hazel Crest has gone through nine superintendents in the last nine years. Former superintendents describe a board that meddled incessantly in day-to-day operations and didn’t listen to their advice.
`Call it micromanaging’
“You call it micromanaging,” said Alex Boyd Jr., who served in Hazel Crest in the early 1990s and is now the superintendent in West Harvey-Dixmoor District 147.
Several business officers have passed through the district as well–at least four in the last five years. Financial record-keeping has been so sloppy at times that even routine paperwork for government grants didn’t get done, former and current school officials acknowledge, causing delays in funds or loss of government dollars.
But the district continued to look good on paper, showing healthy reserves. In reality, school officials often borrowed money to replenish those accounts, financial records show, creating a kind of shell game of debt.
In 1997, for example, the district borrowed $3.73 million, in part to refinance and pay off old bonds with high interest rates and to replenish a general fund for teacher salaries that was in deficit.
Based on budget projections, then-Supt. Roberts knew the bonds were a short-term solution. To stay afloat, she warned the board, the district would have to ask voters for a tax increase by 2000. At the time, the tax rate for education programs had been the same for 14 years, about $1.61 per $100 of assessed property value.
Board members didn’t take the advice.
“There were more pressing issues at the time,” said Donna M. Gayden, then a board member and now the district’s finance officer.
A chief priority was getting test scores up, she recalled. There was also the sense that the community wouldn’t be behind a tax increase, she said, and community support is crucial to the success of a tax referendum.
In retrospect, Gayden said, “[Roberts] was right.”
Current board member Gertrude Rucker moved to Hazel Crest in 1959, sent her children through the District 152 1/2 schools and was elected to the board in 1993.
“No thought was given to a tax-increase referendum until recent years,” she said. “The high school district put referendums on the ballot, but we didn’t, and we ended up with a crisis. We did a lot of borrowing just to keep afloat.”
The pressure built in 2000, when teachers went on strike for the second time in 12 years. They stayed out for a month and returned with a contract that gave them a 17 percent raise over three years, plus increased benefits.
The district also has hired 22 new teachers in the last two years, a 40 percent increase in faculty, according to Verniece Lindsay, director of instruction, curriculum and grants.
Supt. Harry Reynolds, who took over in 2001, acknowledges that the district has poured money into the system over the last two years to improve instruction, despite budget deficits. Though test scores rose slightly from 2001 to 2002, more than 60 percent of Hazel Crest’s pupils still can’t pass state tests in reading, writing, math, science and social studies.
Under Reynolds’ leadership, the district has spent at least $500,000 to launch a new curriculum in reading and math. It added music, arts, physical education and other teachers and lowered class sizes by expanding classroom space.
The district leases 31 portable classroom for $360,000 a year. It also spent $900,000 to prepare the site for the portables.
“What previous administrators did was cut programs to balance the budget,” Reynolds said. “There were areas where we weren’t teaching up to standards: reading, math, social studies, science. When I started here I couldn’t find a current map to hang on the wall.”
Those investments, it turns out, could end up benefiting a different school district.
If Hazel Crest collapses, its students would have to be absorbed by other districts. How that would work is not clear yet, though other districts could use the same school buildings to educate children.
Only a handful of Illinois school districts have ever been dissolved, most recently Mt. Morris in Ogle County, which began the process in 1993. East St. Louis and Lake County’s Round Lake District 116 are currently under state supervision, but both have continued to operate.
Bailout a tough sell
Despite the gravity of the situation in Hazel Crest, the $4 million bailout proposal will be a tough sell with the legislature, which has its own financial problems to worry about.
Also, state officials are keeping a wary eye on growing trouble in other districts. Officials estimate that 8 of every 10 school districts are running deficits, and though they are not at a crisis point now, they could be down the line.
“Once you open the floodgates, then what happens?” said Ron Gidwitz, chairman of the Illinois State Board of Education.
Gidwitz said a long-term state bailout of Hazel Crest appears even more unlikely.
More Top Picks Best Power Reclining Sofas For Seniors
“My hope is that we can get them through this year, and then during the course of the next couple of months come up with a plan that is rational and that improves . . . the educational experience of the children.”
Hazel Crest school board member Gertrude Rucker expresses little hope: “We’ve been to Springfield several times to see the legislature,” she said. “In Springfield, they say, `Glad you came.’ Then they show you the door and say, `Goodbye.'”