The Authority To Transfer Money Between Operational Funds For Any Reason May Expire On June 30, 2016

By Alan Mullins and James Petrungaro

 May 20, 2016

Since 2003, the School Code (Section 17-2A) has permitted boards of education to transfer money between the Educational, Operations and Maintenance, and Transportation Funds for any reason provided that the board first conducts a hearing on the transfer and authorizes the transfer by resolution.  The authority to make transfers between those funds for any reason, however, is set to expire on June 30, 2016. Without an extension of the sun-setting provision, inter-fund transfers will be permitted only to meet a one-time, non- recurring expense in the other eligible fund.

House Bill 5529 would extend the current flexible transfer arrangement to June 30, 2019.  As of publication, the bill is set for third reading in the Senate.  We recommend that all business officials closely follow this bill. Although extensions have been authorized by the General Assembly in the past, given the climate in Springfield and thus the uncertainty of this bill passing before June 30, your District may be well- served to consider its inter-fund transfer needs before the current authority expires on of June 30, 2016.  Please take care to schedule enough time to publish the required statutory notice of the public hearing at least 7 days before the hearing and final board action.

REMINDER: Boards of education may also transfer interest earned on district money to the fund most in need of the interest income as determined by the board under Section 10-22.44 of the School Code. Boards of education may not transfer interest that has been earmarked or restricted by the boards, or earned on Illinois Municipal Retirement Fund money, Tort Immunity money, Fire Prevention, Safety, Energy Conservation and School Security Purposes money or Capital Improvements money.  Illinois State Board of Education rules require that boards of education adopt a resolution transferring the interest by June 30 of each year, otherwise the interest becomes part of the principal of the respective fund and can no longer be transferred as interest.  If your school board wants to transfer eligible interest income earned during the past fiscal year, it must do so by June 30th.

Tags:  Operations; Finance; Fund Transfer

 

THE BOARD OF EDUCATION MUST DESIGNATE OR TRANSFER INTEREST EARNED DURING THE PAST FISCAL YEAR

REMINDER: THE BOARD OF EDUCATION MUST DESIGNATE OR TRANSFER INTEREST EARNED DURING THE PAST FISCAL YEAR BY JUNE 30, 2015 OR LOSE THE ABILITY TO TRANSFER THAT INTEREST TO THE FUND MOST IN NEED

April 9, 2015

By:  Alan M. Mullins & James Petrungaro

Section 10-22.44 of the School Code provides in part that boards of education may transfer interest earned on district money to the fund most in need of the interest income as determined by the board of education.  This transfer authorization does not apply to any interest that has been earmarked or restricted by the board of education, or earned on Illinois Municipal Retirement Fund money, Tort Immunity money, Fire Prevention, Safety, Energy Conservation and School Security Purposes money or Capital Improvements money.

The Illinois State Board of Education rules provide that unless otherwise specified by board of education resolution adopted by June 30 of each year, the interest becomes part of the principal of the respective fund and can no longer be transferred as interest. For example, if the district’s Transportation Fund earned $10,000 in interest during the past fiscal year, the board may pass a resolution by June 30, 2015 to transfer that interest to the Education Fund, if determined to be the fund most in need. In the alternative, the board may pass a resolution specifying that the interest   is   to   remain   interest   and   not   become   part   of   the   Transportation   Fund’s principal. Otherwise, that interest becomes part of the principal of the Transportation Fund after June 30 and is subject to the requirements regarding the transfer of principal from the Transportation Fund and not the less restrictive requirements regarding the transfer of interest.

If your school board wants to transfer, or designate as interest, eligible interest income earned during the past fiscal year, it must do so by June 30. Otherwise, the interest becomes part of the fund principal. Any transfers or interest designations must be accomplished through a resolution.  Please contact Alan Mullins if you have any questions regarding interest transfers or interest designations or if you need assistance preparing a resolution.

DuPage County Clerk Will No Longer Limit The Extension For The Transportation Fund

December 4, 2012

By: Alan Mullins

The DuPage County Clerk has historically had a practice of limiting the tax rate limit for school district transportation funds at 0.2%. When one of our DuPage County clients attempted to increase its transportation levy, the DuPage County Clerk replied that it would not extend the levy beyond the 0.2% limit.

Scariano, Himes and Petrarca challenged the Clerk and cited the Property Tax Extension Limitation Law section and School Code sections that must be considered when determining whether the transportation fund has a tax rate limit. We took the position that the transportation fund tax rate is to be unlimited.

Recently, the DuPage County Clerk changed its practice and agreed that the transportation fund levy is to be unlimited.  As a result, the County Clerk will now extend the levy beyond 0.2% for the transportation fund. If your District needs assistance with issuing its tax levies, do not hesitate to contact us for assistance.

REMINDER: THE BOARD OF EDUCATION MUST TRANSFER INTEREST EARNED DURING THE PAST FISCAL YEAR BY JUNE 30, 2012 OR LOSE THE ABILITY TO TRANSFER THAT INTEREST

 May 18, 2012

By: Alan M. Mullins

Section 10-22.44 of the School Code provides in part that boards of education may transfer interest earned on district money to the fund most in need of the interest income as determined by the boards of education.  This transfer authorization does not apply to any interest that has been earmarked or restricted by the board of education, or earned on Illinois Municipal Retirement Fund money, Tort Immunity money, or Fire Prevention, Safety, Energy Conservation and School Security Purposes money.

The Illinois State Board of Education implementing rules provide that unless the board of education adopts a resolution transferring interest by June 30 of each year, the interest becomes part of the principal of the respective fund and can no longer be treated as interest.  For example, if the district’s Transportation Fund earned $10,000 in interest during the past fiscal year, the board may pass a resolution by June 30, 2012 to transfer that interest to the Education Fund, the fund determined to be the most in need.   Otherwise, that interest becomes part of the principal of the Transportation Fund and after June 30 is subject to the requirements regarding the transfer of principal from the Transportation Fund and not the requirements regarding the transfer of interest.

If your school board wants to transfer eligible interest income earned during the past fiscal year, it must do so by June 30.  Otherwise, the district loses the authority to transfer any interest.  Any transfers must be accomplished through a resolution. Please contact Alan Mullins in our Chicago office if you have any questions regarding interest transfers or if you need assistance preparing a resolution.

 

 

Recent Amendments to the School Code Provide School Districts Flexibility in Transferring Money Between Funds

September 7, 2010

By: Alan M. Mullins

The Governor recently signed two bills into law that provide school districts with more flexibility in transferring money between funds.  In the past, the School Code did not specifically provide that school districts could abate (partially abolish) their working cash funds and permanently transfer money to other funds, but school districts often did so.  In 2009, the Illinois Appellate Court ruled that school districts could abate their working cash funds, but could only permanently transfer the money to their education funds.  That ruling left many school districts open to tax rate objections for permanently transferring working cash fund money to funds other than their education funds.

In order to provide school districts more flexibility in transferring money between funds, the first bill, now Public Act 96-1277, amends the School Code to add Section 20-10.  That section specifically provides that school districts can abate their working cash funds and permanently transfer the money to any fund that is most in need of the money.  School districts can make such transfers if following the abatement, the working cash fund balance (including taxes levied for working cash fund purposes and not yet collected and amounts temporarily transferred from the fund and not yet reimbursed) equals at least .05% of the then current equalized assessed value of the taxable property in the district.

Further, in response to the pending tax rate objections that could have potentially cost school districts millions of dollars, the new legislation (Public Act 96-1277) also authorizes any working cash fund abatement made prior to July 26, 2010, provided the transfer satisfies the criteria set forth in Section 20-10 of the School Code discussed above.

The second piece of legislation (Public Act 96-1201), amends Section 17-2A of the School Code to extend the time period for school districts to make interfund transfers, subject to certain requirements, between the education, operations and maintenance and transportation funds from June 30, 2010 to June 30, 2013.

Challenging Property Assessments To Increase School Funds

April 19, 2010

By Alan M. Mullins

All taxing bodies have the right to appeal the assessed values assigned to properties within their boundaries, whether by initiating appeals or by intervening in the property owners’ appeals.  The Illinois Appellate Court recently held that a school district’s right to appeal a perceived under-valuation of a property is no less important than the property owner’s right to appeal a perceived over-valuation.

In Minooka Community High School District No. 111 v. Illinois Property Tax Appeal Board, the City of Aux Sable owned a natural gas extraction facility.  It appealed the 2004 assessed value of its property to the Property Tax Appeal Board (“PTAB”).  Once Aux Sable filed its appeal, the local school districts were precluded from initiating their own appeal of Aux Sable’s assessed value because PTAB will accept only one appeal for any property for a particular tax year.  PTAB requires other parties who wish to file related appeals to intervene in the pending appeal, which the local school districts did.

After the school districts filed their joint intervention, Aux Sable decided that it would rather accept the assessed value given its property than face the school districts’ appraisal evidence at a hearing, and thus filed a motion to voluntarily dismiss its appeal.   The school districts objected because they wanted their under-valuation claim heard. PTAB granted the motion to dismiss and the school districts appealed that decision to the Appellate Court.  In a victory for intervening school districts, the Appellate Court held that PTAB lacked the authority to dismiss an appeal over the school districts’ objections.  In essence, the Court held that even though the property owner abandoned its over- valuation claim, the school districts could continue to pursue their under-valuation claim.

In times of teacher layoffs and slim budgets, school boards cannot afford to ignore the undervaluation of properties within their districts. Yet we observe that by and large, our clients are under utilizing the property tax appeals process, thereby potentially leaving money on the table. If you are interested in challenging the undervaluation of properties within your District, either through intervention in an appeal or filing your own challenge, please contact Alan M. Mullins at 312-565-3100, ext. 236 or amullins@edlawyer.com.

School Districts Can Get Additional State Aid Due To Reductions In Their Total Assessed Values

April 16, 2010

By: Alan M. Mullins

One factor in calculating state aid for school districts is the total assessed values of property in the district. Generally, lower assessed property values results in more state aid.  Total assessed values are routinely reduced by Property Tax Appeal Board (PTAB) dispositions and certificates of error* after state aid has been awarded.  Except for Cook County, the State Board of Education automatically receives information regarding PTAB dispositions and recalculates state aid based on those dispositions.  However, ISBE does not receive information regarding reduced assessed values due to certificates of error, and it also does not receive information regarding PTAB dispositions for property in Cook County.  The result is that a school district can lose out on an increase in general state aid.

We are available to collect the information regarding certificates of error and to submit applications to the State Board of Education for recalculation of state aid for the 2001 thru 2007 fiscal years.  You may be aware of people who perform this service for a percentage of the additional state aid gained from the recalculation.  Scariano, Himes and Petrarca performs this service for clients at our regular hourly rate resulting in substantial savings to our clients.  If you would like assistance in applying for a recalculation of state aid, please contact Alan M. Mullins in our Chicago Office at 312-565-3100, ext. 236 or amullins@edlawyer.com no later than May 1, 2010 so that we can submit a timely application.

* A certificate of error is issued after property assessments have been certified for a particular year and the assessor discovers a mistake in the assessment of a property that will reduce the assessed value by less than $100,000 or discovers that the property did not receive an exemption for which it was due.

RACE TO THE TOP

December 10, 2009

School districts should be aware that the Illinois State Board of Education (“ISBE”) is applying to the federal government for “Race to the Top” (“RT3”) funds.  RT3 is a federally funded program offering competitive grant money for which states can apply.  In order for a state to receive the grant money, school district involvement is required.  ISBE will seek $400 million in grant funds.  Participating school districts are entitled to directly receive a portion of the grant funds awarded to Illinois, if, in fact, Illinois receives an award. It is unknown at this time how the grant money will be divided among the participating school districts.

School districts are not required to participate in the RT3 program, but may choose to do so.  In order to be a “participating” school district, a school district must agree to implement the State educational goals and objectives as set forth in a Memorandum of Understanding (“MOU”), drafted by ISBE and attached to the RT3 application. The educational goals and objectives must implement a systemic approach to each of the educational reform areas specified in the American Reinvestment and Recovery Act (the “stimulus act”). Those reform areas are:

1.   Making progress toward rigorous college- and career- ready standards and high-quality assessments that are valid and reliable for all students, including English language learners and students with disabilities;

2.   Establishing pre-K – to - college and career data systems that track progress and foster continuous improvement;

3.   Making improvements in teacher effectiveness and in the equitable distribution of qualified teachers for all students, particularly students who are most in need; and

4.   Providing intensive support and effective interventions for the lowest-performing schools.

If a school district chooses to comply with the requirements of the MOU, it may be entitled to receive RT3 grant money directly from the federal government, and is also entitled to receive grant money from ISBE.

If a school district is unable to comply with the requirements of the MOU, it may become an “involved” school district, whereby it agrees to assist the state in statewide reform implementations, and through such cooperation, may be entitled to receive funding.

ISBE is finalizing its proposed goals and is working to complete the MOU that it intends to submit with its application for RT3 funds. The MOU was to be released for review this week.  You may find it on ISBE’s website when it is released.

Scariano, Himes and Petrarca, Chtd., recommends that all of its school district clients review the MOU to determine whether they are able to comply with the requirements and can work toward the goals therein.  If so, it may be of benefit to the school district and to the State’s overall application to sign the MOU.  School districts only have a short time to decide whether they will participate in RT3; the application is due to the U.S. Department of Education on January 19, 2010. Thus, ISBE asks that all school districts that wish to participate sign the MOU and return it to ISBE on or before January 11, 2010.

Please do not hesitate to contact Scariano, Himes and Petrarca, Chtd., with any additional questions about RT3.

Don’t forget to check out our new website!  www.edlawyer.com

Cook County Debt Disclosure Ordinance

 November 3, 2009

In September 2009, the Cook County Board approved the Taxing District Debt Disclosure Ordinance.  This ordinance requires each and every taxing district in Cook County, including all school districts, to provide its most recent audited financial statement to the Office of the Cook County Treasurer.  The statement must be provided in electronic format on or before the last Tuesday in December (December 29, 2009).  The statement should include the disclosure of the following:  (i) current debt; (ii) current liabilities; (iii) long term debt; (iv) long term liabilities; (v) sum total of all debts and liabilities from the audited financial statements; (vi) sum total of gross tax levy for the most recent tax year; and (vii) gross operating budget revenue for the most recent fiscal year.  The statements will be stored by the Cook County Treasurer and a website will be created to allow electronic access to the statements by taxpayers and other interested parties.

Like much of the legislation enacted this year, the ordinance was passed with the goal of enhancing governmental transparency and taxpayer access to governmental information, here, the financial information of taxing districts.  While this report may seem like excessive disclosure, please bear in mind that the majority of the information requested is currently published on school district websites.  The current requirement that all contracts over $25,000 be posted on a school district’s website provides the public with information regarding current school district debt and liabilities. Furthermore, the publication of a school district’s Annual Statement of Affairs reveals information about long term debts and liabilities, taxes and the school district’s operating budget.

Regardless of the already pronounced taxpayer accessibility to information regarding school district finances, school districts must comply with the ordinance.  It is insufficient under the ordinance for a school district to refer to its website in lieu of publication.  It is also insufficient to turn over a school district’s Annual Financial Report despite its inclusion of the sought after information.  The Cook County Treasurer’s office has stated that the phrase “audited financial statements” is interpreted to mean the most recent audited financial statement and a separate statement of the taxing district’s sum total of all debts and liabilities, and the most recent year’s gross tax levy and gross operating budget revenue.

Please do not hesitate to contact your attorney at Scariano, Himes and Petrarca, Chtd. to discuss your compliance with this ordinance.  We look forward to assisting you.