District 113A Board Considers April Referendum Options, Possibility of State Takeover
Financial advisers for Lemont-Bromberek Combined School District 113A told the school board Monday that they would run out of money by July without an additional source of revenue.
The Board of Education for Lemont-Bromberek Combined School District 113A began discussing options for an April referendum question Monday night after financial advisers warned they would need additional revenue to meet their financial obligations in July.
According to representatives from PMA Financial, the repayment of the $5.5 million in tax anticipation warrants (TAWs) issued to Lemont High School District 210 will cause a negative balance in the District 113A education fund by June 30. Though money may be transferred from the operation and transportation funds, the amount will likely be insufficient to cover July accounts payable, advisers said.
District 113A has been using TAWs to pay its bills since depleting its cash reserves in June 2009. The district has not been able to pass a referendum in more than three decades, failing twice last year alone (the district posed a $6 million limiting rate increase in February and the issuance of $8 million in working cash bonds in November).
Since the district is currently on the Illinois State Board of Education's Financial Difficulty List, failure to raise revenue and meet its financial obligations would likely result in state intervention.
"If we are not successful in April in raising working cash to repay TAWs, we're going to have a month and we're not going to be able to pay our bills," said District 113A Board President Lisa Wright. "That is as black and white as it gets."
In order to prepare for the Jan. 18 deadline to approve a referendum proposal for the April 5 ballot, Wright asked each board member to share their thoughts on several different scenarios, which were prepared by District 113A Superintendent Tim Ricker, interim business manager Jay Tovian and PMA.
"What we put together is basically six options with two sets of questions to try to generate conversation [among board members]," Ricker said.
In making their assessments, Ricker asked board members to consider whether the board should put one or two questions on the ballot, and also what the financial priorities should be for the district.
The first proposal was for a $4.2 million limiting rate increase, which would restore all personnel cuts and academic programs within one to three years. The option would raise the tax rate approximately $0.305 per $100 of equalized assessed value, making the additional tax on a $300,000 home $290.24 in Cook County and $286.88 in DuPage County.
The board considered two other limiting rate options for $3 million and $2.43 million. The first would would increase the tax rate $0.218 per $100 of EAV, while the second would create an increase of $0.177 per $100 of EAV. Both options would also restore cuts over time, but would take longer than would the first option.
Ricker stressed that a smaller limiting rate increase would not address the issue in the state financial plan, which is to eliminate the need for borrowing. The second set of options, working cash bonds with or without debt restructuring, would eliminate the need for more TAWs, he said.
Wright asked each of the board members to share their thoughts on the options presented.
Board Member Sue Murphy said she was in favor of a limiting rate increase, as did Board Secretary Andy Taylor and Board Members John Wood and Karen Siston.
"As part of reform and part of bringing a balanced budget to the district, I would definitely like a referendum on the ballot," Murphy said. "I want permanent change. I want money to be used to restore academic programs."
Board Member Janet Hughes said she would not support putting a referendum on the ballot until the board was "open and honest" with Lemont voters. She questioned the board's financial practices, calling for a forensic audit and asking for an explanation of their inability to secure TAWs from a bank.
"We are in serious trouble if we cannot get a bank to buy our TAWs," she said. "We deserve to know what's going on."
Ricker and Tovian both offered explanations to Hughes, blaming the state's credit rating and banks' unwillingness to continue bailing out a district that cannot pass a referendum.
"The fact that two referendums have failed is a red flag for them," Ricker said. "The community's not going to support the district, why should they?"
Possibility of State Takeover
Board Vice President Kevin Doherty, who is also in favor of a limiting rate increase, turned the board's discussion to the oft-discussed possibility of state takeover.
"There is going to be a cash deficit in July, in which point we will not be able to pay bills," Doherty said. "However, I don't think we can wait until that point in time to take action."
Doherty asked Ricker what the consequences would be of a potential state takeover, and whether the board could begin working with ISBE to draft legislation for a School Finance Authority should a referendum fail to pass in April.
Districts with state financial oversight are either placed under a Financial Oversight Panel, which simply oversees district spending, or a School Finance Authority, which is a separate government agency that would exercise direct control over the district and would be able to levy a tax outside the tax cap in order to get the district to a sustainable level.
"There's a lack of ownership in the school system," Ricker said. "We've been told to avoid that like the plague."
"You've heard the phrase 'taxation without representation,' and that's exactly what [the SFA] is," Tovian added.
According to Don Weber, a representative for PMA, ISBE is keeping close eye on the day-to-day operations of District 113A, having most recently discussed the district during its meeting Dec. 16. Ricker said he would be in contact with Deb Vespa, ISBE division administrator for school business services, Tuesday, to update the state on the district's financial status.
Ricker will provide the board with a number of referendum options when it meets Tuesday, Jan. 18, at 7 p.m. in the Old Quarry Middle School LRC to vote on the final referendum proposal.