Miss-Guided promises

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Team 81 has no idea what is best for the performance, health, and safety of a school district. All they are concerned with is pandering to the tax paying voter with the promise of returning money that would put the education of every child in School District 81 at risk. Team 81’s promises would also put the tax payers of School District 81 at risk do to the increase in problems the School District would face do to its lack funds available.

Team 81 Opposes Any Further Tax Increases and Advocates the Return of $9,000,000 in surplus funds to the Schiller Park School District 81 Taxpayer

The above quote was taken from another local blog that has re-emerged recently speaking for Team 81, and those same candidates have made the promise of Tax relief in their own recent mailer.

This means Team 81 Does not want to have a Safe, Stable, environment were education can thrive, and prosper. Team 81 does not support a school system with the least possible tax burden on its stakeholders.

Building and maintaining an adequate fund Balance is a prudent fiscal policy with increasingly critical benefits for any governmental body. These include the ability of the body to:

  • Stabilize year over year educational performance
  • Minimize educational service disruptions
  • Maintain cash on hand to counter unanticipated cash flow shortfalls
  • Address emergency situations, particularly those that threaten health and life safety
  • Fund educational growth and change opportunities
  • Enhance credit rating strength and increase access to debt markets at lower interest costs
  • Increase long-term fiscal performance
  • Allow the government body to manage unforeseen expenditure demands and revenue shortfalls
  • Highest possible Financial Profile from ISBE

The Government Finance Officers Association recommends a minimum fund balance of two months of either revenues or expenditures. It should be stressed that this is a minimum recommendation only and other local factors must be considered, including the timing and dependability of significant revenue sources (i.e. state, federal and county tax distribution and program funding).

ISBE gives only those districts with three months (25%) fund balance to expenditures its highest Financial Profile sub score. This is a minimum expectation to be qualified to receive a high score and does not take into consideration particular elements of local funding or educational/operational planning.

ISBE also requires any district budgeting a deficit to have three times the deficit in fund balance to avoid filing a deficit reduction plan.

Fund Balances are an overly simplistic and inconsistent lens through which to measure a district’s financial strength. To be useful, a measure should mean the same thing from district to district and year to year. Fund balances are neither, as they are determined by a variety of accounting practices. Cash flow across districts varies due to the timing of liabilities, such as how summer payroll practices are implemented and due to how tax receipts are received and budgeted. The accounting of “early taxes” across school districts varies depending on the accounting practice used and the county resided in, and can have a very big impact on how fund balances are determined at the end of any given fiscal year. Cash on hand does not equate to fund balance in a full accrual accounting methodology.

Fund Balances are affected by when a county distributes taxes. Counties do not distribute taxes at the same times; therefore fund balances are not comparable from district to district. Should a county be late in distributing taxes, a district’s fund balance can be much less than expected, should a county distribute taxes early a district’s fund balance can appear inflated and distort cash flow reality.

Some counties do not distribute taxes at the same time from year to year; therefore fund balance comparisons year to year are inconsistent. Not only can fund balance and cash flow be affected by inconsistent tax distribution, a district may find themselves in a position of having to issue tax anticipation warrants to meet obligations should their fund balances decline based on a requirement to use fund balance in lieu of state contributions.

Other timing factors, such as receipt of State payments or disbursement schedules, make fund balance comparisons inconsistent from district to district and year to year. Late reimbursements for districts on an accrual or modified accrual basis are impacted differently than districts that use a cash based accounting method. Fund balance calculations can be misleading in such situations.

Fund balances can be temporarily affected by a district’s need to meet its obligations, such as by using interfund loans, abolishment of the Working Cash Fund, or by issuing Tax Anticipation Warrants or Working Cash Bonds. Such legitimate actions cause further inconsistency.

Fund balances are affected by the method of accounting (i.e. cash, accrual, or modified accrual) for funds on a given date each year.

Through Local Board of Education control, an appropriate level of Fund Balance is determined based on multi-year analysis of the district’s finances and with an expectation of consistent funding by the State. A change as described circumvents a Board of Education’s planning process and at the very least deserves both full public hearing and sufficient forewarning to allow a local Board time to review and adjust its determination.

Using Fund Balance to justify lower State payments to school districts decreases anticipated Fund Balance. Lower Fund Balance decreases interest income earnings and may cost the district more by having to break investments before maturity to meet obligations. Lesser Fund Balance may increase the need to issue more debt, thus increasing the amount of interest paid on that debt. This downward spiral has no impact on the State, but certainly impacts taxpayers and the local district.

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