The Riverside Elementary School District 96 board is poised to transfer millions of dollars from its transportation fund to the education fund, which pays for day-to-day operating expenses, amid fears that an amendment to the Illinois constitution may pass on Nov. 8, preventing the practice in the future.
School board members are expected to act on Nov. 2, which is the date of their next regularly scheduled committee of the whole meeting. According to District 96’s interim director of finance and operations, David Sellers, the transfer will involve money moving from the transportation fund to the education fund. Part of the money being transferred is likely to include a loan to the transportation fund from the working cash fund.
It was unclear at press time just how much money would be involved in the transfer. According to District 96’s approved budget, there was a balance of roughly $1.6 million in the transportation fund when the fiscal year started on July 1. The district expected to collect about $2.8 million this year in that fund based on last year’s tax levy extension. There was about $3.8 million in the working cash fund on July 1.
“There’s going to be multiple busloads of superintendents and school board members going to Springfield if this constitutional amendment passes,” Sellers said. “What this does is it creates an unsustainable scenario.”
The Illinois Transportation Taxes and Fees Lockbox Amendment, if passed, would sequester taxes collected for transportation purposes and forbid that money from ever being used for any other purpose.
The language of the proposed amendment, while clearly aimed at making sure tax money for transportation infrastructure projects is made available for those purposes, is very broad and includes a prohibition against redirecting any tax money related to the “use of vehicles.”
School districts have the ability to levy taxes in four different funds: education, operations and maintenance, transportation and working cash. All of those funds are subject to tax caps – with the exception of transportation.
Each year, school districts submit a tax levy extension which allows them to increase the total tax levy by the level of the consumer price index (CPI) or 5 percent, whichever is less, plus the value of new construction.
Since 2010, the CPI has been so low that District 96, said Sellers, saw its property tax receipts increase by an average of just 1.28 percent per year.
And since 2008, said Sellers, the total equalized assessed value (EAV) of property within District 96 has fallen 36 percent, from $690 million to $443 million. As EAV has fallen, tax rates have risen to allow District 96 to levy funds at a consistent level.
But there are maximum tax rates for capped funds, like education, and as tax rates have increased, they have hit their ceilings in District 96, said Sellers.
“When tax cap legislation was written in 1992, no one envisioned an EAV for school districts going down or being severely reduced like it has since 2008,” Sellers said.
In the District 96 budget for 2016-17, the education fund has a predicted shortfall of a little more than $1 million. The school board was planning to use excess transportation funds, whose levy has been increased to offset the tax cap in the education fund, to cover that gap.
District 96 has made transfers from its transportation fund to its education fund in each of the past two years. In 2014-15, the school board transferred about $1.5 million, according to that year’s financial audit. In 2015-16, at least $1 million was transferred. On both occasions, the school board made the transfers in June at the end of the fiscal year.
With that practice now in jeopardy, the school board is moving that action to before Election Day.
“This constitutional amendment has stepped right in the middle of complex financial practices that school districts rely on and are cutting it off,” Sellers said. “Our action on Nov. 2 is going to buy us some time, if the constitutional amendment passes, to work at fixing the unforeseen consequences.”
Education lobbyists are already working in Springfield to alert legislators to the potential issues for school districts. ED-Red, which lobbies Springfield on education policy and financial issues on behalf of about 90 Illinois school districts, including District 96, said it is already working with the law firm responsible for drafting the amendment’s enabling legislation to see how education might be spared.
Caryn Valadez, executive director of ED-Red, said that while her organization doesn’t have a formal position on the amendment, she said she couldn’t understand why transportation projects would be protected above other issues via a constitutional amendment.
“This is profoundly bad policy, to prioritize by constitutional mandate,” Valadez said.
