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For Immediate Release
March 25, 2004

Number of Schools on Financial Watch List Grows

(Springfield) – The State Board of Education Thursday approved the 2004 School District Financial Profiles that include a nearly 79 percent increase in the number of school districts on the state’s financial watch list.

“When we see more and more schools moving downward on the list – it is cause for great concern,” State Board Chairman Janet Steiner said. “While the data is just a snapshot – it does give communities a glimpse of how their districts fare financially statewide. For some school districts the profile may be used as an early sign that they need to put some improvements in place, and for others it affirms appropriate handling of a their finances.”

The Financial Watch List – those school districts facing the most severe financial problems – includes 156 of the state’s 893 school districts; another 140 districts are in the next category, the Financial Early Warning List.

The list is created by using five indicators of financial performance:

• Fund Balance to Revenue Ratio (FBRR)
• Expenditures to Revenues Ratio (EXRV)
• Days Cash on Hand (DCOH)
• Percent of Short-term Borrowing Available (STB)
• 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 2003 financial data represents the state’s decrease in its portion of education funding from 39-percent in FY 2002 to just 36-percent. The Financial Profile is based on the State Board’s analysis of school districts’ June 30, 2003 Annual Financial Reports.

The list is based on Fiscal Year 2003 financial data, and also represents a change in the way the designations are formulated. Without the formula change – the number of school districts in financial trouble would actually have been greater.

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.

The State Board of Education is recommending legislation to require that school districts on the Financial Watch List would be required to provide the information itemized above. The financial records of districts on the Financial Watch and Financial Early Warning Lists would also be 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 good news is we saw 544 districts that scored the same or actually improved – the bad news is that we 250 districts drop to a lower category, including a 79 percent increase in the number of schools on Financial Watch,” State Superintendent Robert Schiller said. “We also need to remember that this doesn’t represent the Legislature and the Governor’s significant increase in General State Aid funding this year.”

Results of the 2003 and 2004 Financial Profile

The full profile can be found at http://www.isbe.net/pdf/financial_profile.pdf.