FOR IMMEDIATE RELEASE
March 19, 2003
Financial Profile shows school districts face significant
financial problems
The new state Financial Profile for Illinois school
districts, released today by the State Board of Education,
shows that about one-third are facing significant financial
problems.
The Financial Watch List – those school districts
facing the most severe financial problems – includes
100 of the state’s 893 school districts; another
183 districts are in the next most severe category, the
Financial Early Warning List. The 2001 Financial Watch
List contained only 11 school districts, and the greatly
increased numbers for 2002 are in part the result of the
State Board’s new methodology for identifying districts
in difficulty. The 2001 and previous years’ lists
were generated using a single financial indicator –
fund balance to revenue ratio. The 2002 list provides
a more accurate snapshot of the financial status of school
districts by using five indicators of financial performance.
If the 2002 indicators had been used in 2001, 79 districts
would have been on the Watch List and 134 on the Early
Warning List.
In addition to the Fund Balance to Revenue Ratio (FBRR)
that was used previously, the new Financial Profile uses
the Expenditures to Revenues Ratio (EXRV), Days Cash on
Hand (DCOH), Percent of Short-term Borrowing Available
(STB) and Percent of Long-term Debt Remaining (LTD). Each
of the five indicators earns a numerical score based on
where the district fits in that category. The first two
indicators are weighted at 35% of the overall score and
the remaining three indicators account for 10% of the
overall score. Added together the five weighted scores
yield a Total Financial Profile Score on a four-point
scale that places districts in one of four categories:
Financial Recognition, Financial Review, Financial Early
Warning and Financial Watch.
“The 2002 analysis shows that almost 74% of our
school districts were operating with deficits last year,
and we expect that to be over 80% by the end of this school
year,” Board Chairman Ronald J. Gidwitz said. “Students
are being shortchanged by the inadequacies of our funding
system for schools.”
“It is widely understood that many school districts
are facing severe financial problems, with costs rising
much faster than local or state revenues,” said
State Superintendent of Education Robert E. Schiller.
“This new profile system gives a more accurate picture
of school district finances throughout the state, and
it clearly shows that financial problems are increasing
rapidly. This profile is based on June 30, 2002 data.
Current year financial difficulties should also be considered,”
he said.
The Financial Profile is based on the State Board’s
analysis of school districts’ June 30, 2002 Annual
Financial Reports. In addition to the 100 school districts
on the Financial Watch List, 183 districts are on the
Financial Early Warning List, 276 on the Financial Review
List and 334 on the Financial Recognition List.
School districts on the Financial Recognition list will
get a commendatory certificate from the State Board. The
State Board recommends that districts on the Financial
Review list develop a 3-year projection of operating costs,
establish a Finance Committee of the school board, develop
a staffing plan and personnel inventory, and develop a
3-year Equalized Assessed Valuation projection and tax
levy analysis. In addition to those recommendations, districts
on Financial Early Warning will be requested to provide
the State Board with a cash-flow analysis of the current
fiscal year, a balanced budget for the next fiscal year
on an ISBE template, enrollment projections for the next
three years, detailed analysis of short- and long-term
debt, and, if appropriate, a school district reorganization
and incentive study.
School Districts on the Financial Watch List would be
required to do all the things itemized above that are
recommended for or requested from those on the Review
or Warning lists. The financial records of districts on
the Financial Watch and Financial Early Warning Lists
would also re reviewed by State Board staff to determine
if the districts are eligible for Certification as “In
Financial Difficulty” or if eligible for Emergency
Grant Funds with a Financial Oversight Panel.
The State Board has created Financial Oversight Panels
for two financially strapped school districts since December:
Livingston in Madison County and Cairo in Alexander County.
In addition, the legislature authorized a School Finance
Authority for Hazel Crest school district in December
to enable the district to continue to operate for the
remainder of the school year. Hazel Crest was insolvent
in December but under the previous criterion was not eligible
for placement on the previous Financial Watch List based
on the June 30, 2001 Annual Financial Report.
The 2002 Financial Watch and Financial Early Warning
Lists—Please NOTE comments of district superintendents
regarding the district’s status—are accessible
at the following web site: http://www.isbe.net/pdf/FY02Score320.pdf
|
