I am leaving my reply in two posts, as it is quite long...
When school districts reach the insolvency stage, their school boards may ask ISBE to certify them in financial distress (105ILCS 5/1A-8). When school boards make this request, they are aware that they are relinquishing a significant portion of their decision-making authority for expenditures.
The lowest level of state intervention is financial oversight. The school district voluntarily requests that ISBE designate a Financial Oversight Panel (FOP) composed of three board members appointed by the state superintendent of schools. The FOP’s primary purpose is to exercise financial control of the district by taking such actions as approving expenditures and the annual budget. The goal of the FOP is to help the district return to solvency. If, however, the FOP determines that additional oversight is necessary, the panel may petition the ISBE to establish a School Finance Authority (SFA).
The SFA is a five member board appointed by the state superintendent of schools must include two school district residents and three non-residents usually with school finance backgrounds who serve two to three years terms. The initial term of the SFA extends from three to a maximum of 10 years.
Please go on to next...

Here is tThe SFA may choose a different management model as deemed necessary. For example, the SFA may decide to maintain the current administrative staff or employ a separate CEO. In any event, once the SFA is in place, a two board governance structure emerges. The SFA is purposely designed to operate independent of the school board and voting public.
Since this legislation was initially approved, seven school districts have functioned under Financial Oversight. Two school districts were ultimately dissolved and annexed to neighboring school districts and five remain under state control, the longest being eight years. Had District 210 not intervened, the District 113a tax payers / residents would lose control over how and possibly where their children are educated and the ability to do anything about it.
he rest...

I have to give this more thought but initially, it seems like we are loaning money to ourselves. One district to another but all tax payers money. The key question then is what happens when district 113 can not repay the loan...either this time or in the future because we can assume this loaning from one to another will occur again. When you are short of money you can borrow but somewhere along the line you need an infusion of dollars or you continue to borrow intil no one will extend you credit. It might look like one district, that can operate within budget and get public support, is becoming a front for the other which is not in the publics favour. I am anxious to see more comment and get better educated on this process and how it might play out.

Sharing info from attending the 113A Board meeting last night...
Financial advisors told the 113A board at last night's meeting that our district will most likely need to issue TAWs again to pay our bills for July/August, and that they believe finding a lender will be as hard as it was this last time due to our financial instability. When Board Member Hughes asked why financial institutions will not issue 113A TAWs, Ricker and the ISBE-appointed treasurer said Harris bank cited several reasons, including the state of Illinois' poor loan repayment record - which reflects on all public entities in IL - and the past 2 failed referenda. Harris bank apparently said that if the community is unwilling to fund the schools, why should they? I believe other banks were approached before 210 stepped in, and none were willing to issues us TAWs due to our curent financial standing.

The conclusion that seemed to be reached at the Board meeting was that an April 2011 referendum is necessary to infuse the district with cash, or a state takeover is likely.

It is my understanding that the legislation that was drafted by the state was to go right to a state financial authority (SFA) - the more severe of the 2 options available. That legislation was ready to be acted on right before D210 stepped in to bail out 113A. I do not know if that is what may still be on the table, but I would guess it would be if we fail to pass a referendum or secure TAWs to pay bills come July.

Questions, if anyone knows:
If this round of tax anticipation warrants is repaid, why wouldn't 210 repeat the process as it makes money for them, especially if their due diligence for this round found everything in order? On that point, given the refusal of 6 banks to buy the warrants, why did 210 believe this was an acceptable risk?
If the state were to assign the district to a FOP or a school financial authority, what happens to the district's debts, including any outstanding TAWS? Is it similar to bankruptcy?
Can the district expect any relief from the imminent income tax increase? Has a delegation from the Board met with Radagno and Durkin? The state itself is constitutionally allowed to borrow against future anticipated tax receipts, so to pay its overdue bills it will probably start borrowing as soon as the tax increase passes. This income tax increase -- proposed first as a 75% increase and then "lowered" to 66% -- is being hyped as "for the schools," so perhaps there is some immediate relief to be had.
Would a state-imposed tax hike be greater than a self-imposed increase, sort of a greater-of-two-evils scenario?

Banks have a different criteria for denying the request for SD113a TAWs. SD210 is motivated by what is right for the community.
TAWs are short term loans similar in concept to a payday loan. You agree to pay the money back when you get your next paycheck or in the schools case, tax payment. So in theory this could go on for a while, given SD113a never defaults causing SD210 problems.
No an SFA is not bankruptcy. But they can get emergancy funding from the state. The TAW issue for SD113a is not long term debt, it is working cash. The district does not have sufficient money to make from paycheck to paycheck.
All districts in IL are owed money by the state. Yes, the income tax hike will eventually help some. It may give SD113a the ability to stop the TAWs. It will not help to rehire staff, reduce class size or bring back activities.

Thank you Gary, Mary and others for all of the information provided on this comment board. You have answered many questions that I have had regarding what exactly it means to be taken over by the state. If an April referendum does not pass, I do not see how a state takeover could be avoided. Another unanswered question I have about a state takeover is 'What can we expect the goals to be of the SFA?' Would they solely be interested in getting the books from being in the red to being in black? Or would they also truly have the best interest of the kids in mind and reduce class sizes and bring back gifted programs and extra curricular activities, etc? Is the SFA strictly money-driven or are they making a REAL difference at the schools that they have stepped in to try and 'save'. Would the teachers jobs be safe? Despite all of the turmoil at our district, we have some really phenomenal teachers who are doing their job as best they can under the conditions.

Patti,

Again, I'm a little long, so this is in two parts. The statute includes the following language:

The purposes of the SFA shall be to exercise financial control over the district and to furnish financial assistance so the district meets its obligations to its creditors and the holders of its debt.

The SFA may prepare and file with the State Superintendent a proposal for emergency financial assistance for the school district and for its operations budget. The payment of a State emergency financial assistance grant or loan shall be subject to appropriation by the General Assembly. All loan payments made from the School District Emergency Financial Assistance Fund to a School Finance Authority shall be required to be repaid not later than the date the School Finance Authority ceases to exist, with simple interest over the term of the loan. Repayment shall be incorporated into the annual budget of the district. The SFA shall provide for a separate tax levy for emergency financial assistance repayment purposes. This tax levy shall not be subject to referendum approval.

The SFA shall have the power to negotiate collective bargaining agreements with the district's employees in lieu of and on behalf of the district. Upon concluding bargaining, the district shall execute the agreements negotiated by the SFA, and the district shall be bound by and shall administer the agreements in all respects as if the agreements had been negotiated by the district itself.

So, there is no language that directs the SFA to be more than a five member board that has 100% control over every aspect of the school finances; including a mandated tax increase without public approval.

There is also no direct mention of kids in the legislation with the possible exception “the educational development of all persons to the limits of their capacities” and “to promote sound financial management and to ensure the continued operation of the public schools.”