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.