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.

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.