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Tools:March/April, 2010Transfers, short-term borrowing offer optionsThe question for this issue is answered with information adapted from Essentials of Illinois School Finance, Fourth Edition, by James B. Fritts, and from other sources listed at the end of the article.Question: We are quickly approaching a financial crisis in our district because of slow state payments, defaults in property tax payments and home foreclosures. How can we meet our obligations?Answer: A district may be able to use existing monies, thereby avoiding the expenses of issuing and paying interest on debt.
Surpluses in some funds can be temporarily loaned or permanently transferred to other funds as specified by state law. Board of education approval is required for an interfund loan or transfer, and public notice and a public hearing are required for certain interfund transfers.Interfund loans may be made among the educational, operations and maintenance, and transportation funds. Loans may also be made from these funds to the life safety fund.
Money in the working cash fund may be loaned to other funds.Interfund loans are a solution to short-term balance problems in one or more funds. Money must be repaid to the loaning fund within three years, except working cash fund loans, which must be repaid upon the collection of anticipated taxes, unless tax anticipation warrants are outstanding.Transfers are usually made from the smaller to the larger funds, and therefore produce a limited, but 'longer-term' benefit to the receiving fund. Transfers require a resolution preceded by a legally noticed public hearing. Transfers are permissible among the educational, operations and maintenance and transportation funds, but after June 30, 2010, they will be limited to one-time non-recurring expenses.A working cash balance can be transferred into the education fund, but not to the operations and maintenance or transportation funds. The working cash fund may also be abated, although the parameters of such abatements are subject to legal interpretation. Consult the district's attorney before taking such action.In addition to the above provisions, the school board has general authority to transfer interest from the fund in which it was earned to the fund(s) most in need of it.
Transfers of working cash and debt service interest must meet specific provisions. In addition, transfers from the tort immunity fund are limited to certain 'financially distressed' districts.