The very mention of school finance to teachers, many school administrators, school board members, and other public school stakeholders usually conjures up images of jargon laden school district presentations, complicated reports, or graduate school textbooks, which seem designed to make anyone except school business officials feel confused and inadequate. For most people, school finance appears to be a quagmire of complex terms, formulas, and difficult to understand state and federal laws that are somehow inexplicably linked to both state and local politics.

To appreciate this point, consider this. Just show someone a copy of your most recent property tax bill and ask them to explain the state equalizer or the difference between assessed and equalized assessed valuation. You are likely to receive a blank stare. If you really want to confuse someone, just point to the drop in their local school district tax rate on their tax bill from last year and ask them to explain how the school portion of their property taxes increased. Too often school finance is presented just this way even to graduate students in Master of Arts programs in educational leadership. Given this traditional approach, is it any wonder that most educators find school finance very confusing?

Several years ago, a school board member in the school district where I was superintendent suggested an ingenious test to judge how clearly we were communicating with our stakeholders. We ultimately named it the 7-Eleven Test. It was simultaneously a complex yet simple way to judge whether we were effective communicators. The premise behind the 7-Eleven Test is this. No matter what educational program or issue you have, you should be able to walk down to your local 7-Eleven and explain it in such a way that anyone in the store can understand you.

One of the communication problems we often have as school administrators, especially in the area of school district finances, is that we have not emphasized the 7-Eleven Test enough. In fact, most of the time when we discuss school finance, we do so in such excessive educational jargon and excruciating detail that even many school administrators cannot comprehend it.

This book, Taking the Mystery Out of Illinois School Finance, is written with the 7-Eleven Test in mind. It is designed to explain the key principles of Illinois school finance in a way that graduate students, teachers, school board members, parents, building-level school administrators, and other interested citizens can grasp the essential content without getting bogged down in excessive financial detail. Only by understanding the basics of Illinois school finance, can school administrators, board members, and other constituents make informed decisions.

The general principle behind school finance is actually quite simple. In its most basic form, school finance is a two-sided equation with revenues on one side and expenditures on the other. If revenues meet or exceed expenses regularly, your school district is financially solvent. However, when expenses start to exceed revenues, particularly over multiple years, the school district is probably heading toward financial difficulty, sometimes even if it has a large cash reserve.

A good way to understand this basic principle is to relate school finances to personal finances. Let’s assume that you earn $50,000 per year. If your expenses are below $50,000 annually and expected to remain so for the foreseeable future, you are financially solvent. That is, you have more income than you need. However, if you begin to see that your expenses are growing faster than your salary and you have to dip into your savings to pay your monthly bills, you are now in deficit spending. Your personal finances, in this instance, parallel those of school districts. If school district revenues exceed expenditures year after year, the district is quite solvent. However, once their expenditures begin exceeding revenues on a regular basis, the district too has a deficit problem.

As an individual you have, of course, several realistic options to eliminate your personal deficit. First, you could cut your expenses. This approach, however, may mean that you cannot do some of the things to which you have become accustomed. You may have to go out to dinner less often, postpone a vacation, or keep your present car a few years longer. You could also look for a new position with a higher salary or consider supplementing your income by taking a part-time job. Some combination of these strategies may solve your personal deficit spending problem.

School districts, on the other hand, have a very similar problem but without many of the options available to you. Similar to your personal finances, when school district revenues fail to keep up with expenditures, school administrators and school boards must increase revenues and/or cut expenditures. They will need to use their cash reserves just as you might tap into your savings account to cover immediate shortfalls.

As you will see shortly, the most significant difference between individuals and school districts is that school districts have fewer options primarily on the revenue side to solve their financial problems than do individuals. Also, school boards must conduct their business in public view while subject, at times, to an uninformed and sometimes angry public and special interest groups. The political nature of school governance at the state and school board levels is a challenge which individuals do not typically face. Yet, once you understand the basic revenue/expenditure principle of state and local school district finances, much of the mystery of school finance will disappear.