Naperville Sun

Local taxpayers picking up costs of state mandates

Thursday, September 16, 2010

AURORA -- After months of delayed payments to local schools, the state of Illinois is catching up on payments to schools for fiscal year 2009-10. But just as last year's bills are getting resolved, Fox Valley school officials are being warned by the state that they may only receive one of four quarterly payments during this year.

What does this mean for area schools?

The current picture

West Aurora School District spokesman Mike Chapin said the state Board of Education hopes to make a final quarterly payment from fiscal year 2010, which ended on June 30, by Dec. 31. The West Aurora district is owed $3.5 million in state payments, while the East Aurora district is owed about $4 million.

But even as the state is catching up on its payments, state officials have communicated that districts may only receive one of four quarterly payments they are owed during the school year, said West Aurora's finance director, Christi Tyler. Tyler said she first heard to plan for the possibility of only one state payment during the year at a meeting with Illinois State Board of Education division administrator Deb Vespa.

"If that came true, (West) would end the year more than $9 million short," Chapin said.

And that would mean that next year could look worse for area schools, Tyler said. West Aurora would likely have to borrow money through tax anticipation warrants next year if state payments come in late or not at all.

At the East Aurora School District's budget meeting last week, Finance Director Jay Augustine said that the district's budget depends on state payments coming through.
"If the state changes anything dramatically, that will affect us dramatically," Augustine said.

This doesn't mean that the district will need to cut programs if the payments don't come in, Augustine said. But it does mean the board and administration will have to reassess the year's budget.

"All the arrows are pointed up, but (regarding the state) we don't have all the answers. We're still on a wait-and-see attitude with the state," Augustine said.

The East Aurora School Board will vote on a budget for the 2011 fiscal year at a meeting Monday.

ISBE spokesman Matt Vanover said that as far he's heard, the state will be making all of the quarterly mandated categorical payments.

"However, the state itself is running late on payments to districts," Vanover said. "The state is $800 million behind in bills that it owes local districts."

Alan Henry, a spokesman for the Illinois comptroller's office, said that all general state aid payments to districts were paid on time this year, but added that many other state bills remain unpaid.

"There are a lot more bills than money to pay for it," Henry said. "There are $3.6 billion in unpaid bills in our office."

He said that no one knows how many payments the state will make to local districts next year.

"You can only pay what you've got money to pay out. That's where we are," Henry said. "Nobody knows. Anyone who says they know isn't telling the truth."

The busing dilemma

To pass the state budget, Gov. Pat Quinn cut a majority of state funding for bus transportation in school districts, including a $700,000 reduction for West Aurora.

But because the state mandates busing students who live more than 1.5 miles from their school, the state is not really cutting spending, but shifting costs to local property taxpayers, Chapin said.

"The state is reducing its contribution, but the state legislators have not released local districts from the responsibility," Chapin said.

In the past, the state paid about 75 percent of the transportation cost to the district, and the district would pick up the remaining costs for sports and activity busing.

Busing is one of a few unfunded mandates, as local officials call them -- something the state requires the school district to do, has likely paid for in the past, but isn't chipping in most of the cost anymore.

David Holm, Indian Prairie School District assistant superintendent for business, said Indian Prairie will receive a $145,000 reimbursement from the state for busing.
In the past, the district received more than $1 million in transportation reimbursements. But Holm said the district doesn't plan to make many changes.

"We run a pretty lean program as it is. It just means we have less money for everything," Holm said.

Indian Prairie cut $21.4 million out of its budget last year, according to Holm.

West Aurora School Board member Angie Smith, who also is the finance manager for the Oswego School District, said it's a gloomy picture.

"My biggest problem with this is the philosophy that they are telling us that we must bus these kids, but that they aren't going to pay for it. It was the 11th hour that they told us this," she said, adding that payments are retroactive -- they pay for the bus service conducted last year. And, she noted, there is no way to retroactively reduce the cost of busing.

During the 2009-10 school year at West Aurora, it cost $5.5 million to bus 6,000 students, according to Tyler.

For 2009-10, the state was expected to reimburse West Aurora for $3.9 million in transportation costs, and local taxpayers paid for about $1.6 million. But because the state failed to pay $915,000 of the expected reimbursement during the last fiscal year, taxpayers actually picked up $2.5 million of the cost to bus, Chapin said.

During this fiscal year, taxpayers will most likely pick up $4.7 million of the cost to bus if the state only makes one payment to schools.

"At the end of the day, busing costs a certain amount, and they're just not fulfilling their promises," said Smith, who has three kids in the district.

Smith said that class sizes and other district goals suffer as a result of the cut in state reimbursements.

Domino effect

Local taxpayers will face an additional burden of paying off the interest if school districts are forced to borrow money.

Even after state payment comes in, the balance of the interest on loans will remain, Chapin said.

If the district has to take out loans, Smith said that it will likely cost West Aurora a few hundred thousand dollars in interest.

West Aurora receives about 60 percent of its funding from local property taxes, 30 percent from the state and 10 percent from the federal government.

Smith said the state being late on bills or not paying bills at all also causes major cash flow problems for the district. For a special education student who may need to be sent to special classes, the district has to pay on time for those services whether the state has paid or not. she said.

"The state says that they'll pay when they can, but we still have to pay our vendors, our payroll, everything. We can't say, 'Take it up with the state,'" she said.

Tyler said West Aurora issued a $12 million working cash bond to cover last year's delayed payments. (Augustine said the East Aurora district did not borrow money last year to pay off its bills.)

"I guess we'll let class sizes float up a bit or cut back somewhere. It ends up impacting local taxpayers -- it impacts the quality of what we can deliver (in schools)," Smith said.