NEWS

Final Financial Watch List Released as Work Continues on New Analysis System

As staff work proceeds on developing an improved system for analyzing and reporting the financial health of schools, the State Board of Education today released the 2002 Financial Watch List.  

"The current financial analysis, which has been in place since 1988, is based on a single ratio comparing fund balances to revenues," said State Superintendent of Education Respicio F. Vazquez.  "This is a valuable indicator but it gives only a partial picture of the complexities of school district finances and understates the financial difficulties faced by schools."

Vazquez pointed out that a significant number of Illinois school districts have operating deficits.  That number increased in the 2000-2001 school year, yet even districts with three consecutive years of operating deficits (now more than 160 of the state's 894 districts) would not show up on the watch list under the current system unless reserves were depleted.  The amount of debt held by a district also is not used as a factor for placement on the Financial Watch List. 

"These facts dramatically illustrate the need for a more comprehensive analysis to alert policymakers and the public to pressing financial problems," Vazquez said.  "Further analyses will also help us to spot growing problems and to direct our technical resources to helping districts before financial problems become critical."  

The State Board is developing a Financial Profile for Illinois School Districts using a number of indicators that will give a public picture of each school district's financial health. In addition to the ratio of fund balances to revenues measure that is now used, State board staff is also considering these additional factors:  operating deficits; revenue and spending patterns; long term and short term debt; beginning and ending balances, and amount of reserves.  

State Board staff will be piloting the Financial Profile over the next year to determine which factors should be included and to identify the best way of to present the information in order to provide the public a clear and accurate picture of school finances.  

The current criteria place districts on the Watch List when one or more of the following occur:

1. The district's ratio of end-of-year fund balances to revenues is negative;
2. It has issued teachers' orders or funding bonds to retire teachers' orders in three of the last five years;
3. It has issued second-year tax anticipation warrants or notes; or
4. It has not submitted the Illinois School District Annual Financial Report to the Illinois State Board of Education in time to be included in the Financial Assurance and Accountability System (FAAS) ratio calculation.  

Staff will provide technical assistance in a variety of financial management areas including budget development and operational efficiencies, such as joining cooperative programs, or competitive bidding for service contracts (transportation and nutrition programs, etc.)  They will also assist school districts in identifying state and federal grant opportunities.                              

The 2002 Financial Watch List includes 11 school districts, an increase of two from 2001.  Three districts were removed from the 2001 list while five have been added for 2002.

In addition to the Financial Watch List, two districts-Livingston CCSD 4 in Madison County and Spring Lake CCSD 606 in Tazewell County-- have been certified as "In Financial Difficulty" and continue to be monitored by State Board staff.  These districts must develop multi-year financial plans that propose solutions to their fiscal problems.  The State Board must approve the plan.

East St. Louis School District 189 (St. Clair Co.) and Round Lake Area Schools  - District 116 (Lake Co.) required Financial Oversight because of the severity of their fiscal problems.  A three-member external panel, appointed by the State Superintendent, must approve all financial activity for such districts.  

2002 ISBE
FINANCIAL ASSURANCE AND ACCOUNTABILITY SYSTEM