District 113A Facing Possibility of State Takeover, Financial Oversight Panel
State education officials informed Superintendent Tim Ricker on Tuesday that they would likely recommend a financial oversight panel for District 113A next month.
State officials are considering a recommendation to the Illinois State Board of Education next month that Lemont-Bromberek Combined School District 113A be put under a financial oversight panel, school district officials announced Tuesday.
District 113A Superintendent Tim Ricker told board members during a special meeting Tuesday night that he received the news that morning from ISBE Division Administrator for Business Services Deb Vespa.
According to Ricker, Vespa told him State Superintendent Christopher Koch and Chief Financial Officer Linda Riley Mitchell were likely going to submit a recommendation to the state board that District 113A be placed under an FOP. They are requesting that representatives from District 113A attend the next ISBE meeting, which is scheduled for Sept. 27 and 28 in Bloomington, IL.
"Obviously we were shocked by that," Ricker said. "We didn't have any indication [the FOP] was in the workings."
According to ISBE spokeswoman Mary Fergus, a FOP is appointed when a district is already certified in financial difficulty and is unable to sustain its state-approved financial plan. Only 11 districts, including District 113A, have been certified in financial difficulty in the last decade. Some have been able to avoid an oversight panel through expense reductions and/or tax increases, she said.
Citing his conversation with Vespa, Ricker said the state is concerned about the district's difficulty with cash flow and its reliance on tax anticipation warrants, a form of short-term borrowing. District 113A Board President Mike Aurelio and Board Member Al Malley said they also spoke to Vespa, who they said indicated three areas of concern: marketability of tax anticipation warrants, student achievement and the closing of fiscal year 2011.
District 113A Business Manager Barbara Germany, who also was on the Tuesday morning call with Vespa, confirmed the state's concerns.
Two Years Under the ISBE Financial Plan
The state board, which certified District 113A "in financial difficulty" in December 2009, has been monitoring the district's every move for the past two years, making sure all policies, proposals and decisions are in line with the district's submitted financial plan—a plan that requires the district to increase revenue and eliminate borrowing.
District 113A has relied on tax anticipation warrants since depleting its cash reserves in June 2009. In November, school officials learned the district had failed to identify any banks willing to purchase the TAWs.
Per the suggestion of financial advisers and attorneys, an intergovernmental agreement was reached with Lemont High School District 210 in January to issue $5.5 million in TAWs. The same type of agreement was reached in July, when $5 million in TAWs were issued.
Based on current financial projections, Ricker said District 113A is on track to build enough fund balances to eliminate borrowing by 2013.
“The district will have a positive outlook financially for the future and will have some planning decisions to make along the way,” he told Patch last month.
As part of the state-approved financial plan, the district made $3.57 million in cuts to its budget for fiscal year 2011, which included extracurriculars, the gifted program and $3.17 million in personnel.
In May, board members approved the closing of Central School for the 2011-12 school year, which will save approximately $356,747, according to district documents. With further reductions made in personnel and transportation expenditures, District 113A is expected to see a total reduction of $1.13 million in fiscal year 2012.
Administrators, Board Members Confused by Timing of Recommendation
Ricker's announcement Tuesday left board members surprised and confused.
Board Member Kevin Doherty said he found the timing "odd" considering the district is in "better financial shape that it's been in years." He also questioned the state's concern over student achievement, since District 113A recently learned that all four schools made Adequate Yearly Progress this year.
"Something's wrong here because it doesn't add up," Doherty said. "We're a year away from not borrowing more money. ... Student achievement is higher than it's ever been."
Ricker said he informed Vespa that the district made AYP in a previous conversation. The issue related to student achievement is that the district cannot make any more cuts "without decimating the education program," he said.
Aurelio said Vespa also discussed the state's concerns over the district's closing of fiscal year 2011—an issue that arose during a July board meeting and continued through this month. The state is also concerned about the district's inability to secure TAWs from financial institutions, Aurelio said.
On Aug. 16, District 113A adopted a modified accrual method of accounting to address a $329,568 negative cash balance in the Education Fund at the end of fiscal year 2011. The negative balance resulted in allegations of illegal fund transfers and "shoddy bookkeeping," and left the community questioning how the situation came to be in the first place.
Based on his conversation with Vespa, Malley said he thought two of the state's concerns were already resolved—the year-end balance and the issue of borrowing.
Ricker suggested that ISBE officials were possibly unfamiliar with the progress the district has been making, as well as the "strong relationship" they have with District 210 for securing TAWs.
Later in the meeting, the board approve an amended financial plan, which will be sent to Vespa for consideration. Ricker said he will learn more about the state's recommendation for an FOP by next Tuesday, when the board is scheduled to hold its monthly workshop meeting.
New FOP Law
On Aug. 16, Gov. Quinn signed into law Senate Bill 2149, which created the Financial Oversight Panel Law of the Illinois School Code effective immediately. The new legislation expands the oversight of the panels, which were previously utilized for "specific school districts that were facing dire financial consequences, needed specific attention from ISBE and met certain statutory criteria, according to the Illinois Association of School Boards.
The purpose of the panel, according to Illinois School Code, is "to promote sound financial management and to ensure the continued operation of the public schools."
A FOP consists of five members, who are appointed by the state superintendent. The panel serves for a minimum of three years and a maximum of 10 years.
Members are chosen "primarily on the basis of their experience and education in financial management," the law states. Two members must be residents of the school district the panel serves. Panel members may not be an employee or school board member in the district, and may not have a direct financial interest.
Powers of the FOP include making or canceling contracts, leasing or purchasing property, borrowing money. With ISBE approval, the panel may also levy a one-time-only tax not to exceed 75 percent of the amount expended by the district in the preceding year.
Late last year, Fergus said the powers of an oversight panel are limited to finances and that the panel has the authority to approve all expenditures.
"The school board is still intact and still makes decisions," she said. "A financial oversight panel is a partnership, and not a takeover, as some people like to say."
The Illinois State Board of Education is scheduled to discuss the future of District 113A during its Sept. 27 and 28 meeting in Bloomington, IL. The recommendation will likely be formulated a week before the meeting, leaving District 113A officials less than a month to address the issues with the state.
Ricker said he hopes to gather more information before the district's Sept. 6 workshop, and to schedule a meeting with state officials before Sept. 27.
"I'm going to do my damnedest to make sure that this meeting takes place, and to work to get our people in front of their people so we can find out what their concerns are and how deep their concerns are," he said. "[We'll work] to see how we can come together for a presentation that helps them understand that we've taken care of these issues."