Monday, April 18, 2016

Financial difficulties hit schools due to state’s woes

Watch List school districts are widely scattered.
The Illinois State Board of Education (ISBE) has released its annual financial profile of the state’s public schools, showing that, despite a slight improvement from last year, 15 more school districts are facing financial headaches than just five years ago.

Thirty-two school districts are on the state’s Financial Watch list of the most fiscally troubled schools, and 61 are on the Early Warning list.

While fewer than 100 of the state’s 857 school districts are shown to be in trouble, the overwhelming majority are no longer in a secure position. Many have been taking out loans and tapping into cash reserves to keep their schools operating, according to a state finance blog, Reboot Illinois.

“A big problem has been a failure on the part of the state government to pay anywhere near its fair share to schools,” according to IASB Deputy Executive Director Ben Schwarm.

A recent report from a nonpartisan national research institute called the Center on Budget and Policy Priorities showed that, after adjusting for inflation, Illinois is providing 3.5 percent less in general state aid per student this year than before the Great Recession in 2008.

The latest financial profile from ISBE shows that 568 districts, or 66 percent of the state’s public school districts earned Financial Recognition, which means they are doing a very good job of managing their finances despite the state’s diminished level of school funding. That compares to 70 percent achieving the same “Financial Recognition” status five years ago.

The latest financial profile is based on data from Fiscal Year 2015, which ended June 30, 2015. The data take into account the impact of state payment delays and reductions in support for mandated categorical payments such as for pupil transportation, special education, and other expenditures. The school code was amended effective August 2009 to specifically ensure that districts are not designated as being in financial difficulty solely due to delayed state payments.

The state profile is a “point in time” picture, meaning that it is likely the financial condition of school districts has changed in the nearly eight months since the end of the last fiscal year. Illinois’ backlog of unpaid bills has been rising, for example, and is estimated to reach about $10 billion at the end of the current fiscal year. That roughly equals the backlog at the height of the Great Recession, and represents 31 percent of estimated FY2016 General Funds revenues.

The Financial Profile is created by using five indicators of financial performance:

1.    Fund balance to revenue ratio
2.    Expenditure to revenue ratio
3.    Days cash on hand
4.    Percentage of remaining short-term borrowing ability
5.    Percentage of remaining long-term borrowing ability

The newly released 2016 Financial Profile for all districts in Illinois can be found online here.