Johnsburg District 12 emerges from big drop in state funding after borrowing $53M over 11 years

If Johnsburg School District 12 nowadays went through the same $3.7 million cut in state funding it saw early last decade, it could mean the elimination of about 68 entry-level staffers, Superintendent Dan Johnson said.

The district didn’t make those drastic cuts back in 2010. It instead found another way to handle the problem.

For more than a decade, from March 2010 until last year, it used a financial tool known as tax anticipation warrants, which are shorter-term loans.

Each year during the period, District 12 issued between $1 million and $7 million in these taxpayer-backed loans, for a total of $53.43 million, Johnson said. The district paid almost $250,000 in interest on those loans, records supplied by Johnson show.

The money went to fill in millions of dollars in lowered funding from the state.

In 2008, District 12 took in $4.8 million in general state aid. By 2014, those revenues were down to just more than $1 million.

The state started distributing less to Johnsburg’s schools because its student enrollment was decreasing as the district’s property values were rising, Johnson said.

“As a result, District 12 began issuing tax anticipation warrants in May 2010,” Johnson said, which “allowed for the continuation of programs that would have otherwise been cut.”

He said the financial instruments “also allowed the district to adjust staffing through attrition and make other incremental budgetary adjustments, rather than through draconian measures.”

But last year was the final one it needed to lean on borrowing to manage its cash flow, and this month, the district expects to move back into the Illinois State Board of Education’s best category for its designations of school systems’ finances.

As the district’s financial situation improved, it implemented its long-term plans, which included the addition of various curriculum materials; expansion of technology hardware and software for its staff and students; updating buses; and tackling various maintenance projects for our facilities, Johnson said.

Johnsburg schools are far from alone in having worked to reach that category, called “Recognition,” over the past decade.

More than 100 school districts since 2010 have risen into “Recognition” from either of the less desirable ISBE designations, called, from least problematic to most, “Review,” “Early Warning” and “Watch,” state records show.

In 2010, just 578 school districts of the 869 in the state that year were in the “Recognition” category, according to ISBE data. Last year, that number was 728 out of 851.

Cash on hand is one of five elements that ISBE uses to grade a school district’s financial profile, Illinois Association of School Business Officials Executive Director and CEO Michael Jacoby said. The highest score a district can get is when it has at least 25% of its operating budget on hand. His organization recommends having even more – at least 50% because of the dependence so many districts have on property taxes.

“But in the end, tax anticipation warrants are about cash flow,” Jacoby said.

The change from the general state aid model of contributing to local school districts to the evidence-based funding plan signed into law in 2017 has helped many districts emerge from more distressful financial situations, Jacoby said.

The evidence-based funding was geared toward sending more resources to school communities that had fewer assets to begin with, and Johnsburg received almost $3.3 million from the state this year, triple what it saw in 2014 but still more than $1 million less than it received in 2010 before falling enrollment and increasing property value led to drop off in state funding.

“With the change in funding from general state aid to evidence-based funding, many of the school districts that were struggling with cash flow have been able to create better reserves and avoid having to borrow and pay interest to make ends meet,” Jacoby said.

District 12 has passed a balanced budget each year since 2017, and closed each year since then with a surplus, allowing it to increase fund balances across its operating accounts, Johnson said.

When Tom Oeffling, the current District 12 school board president, was sworn in to his school board seat nine years ago, he was told by district staff that it could take as many as 25 years to recover to a more comfortable financial situation where tax anticipation warrants were no longer needed.

“I am proud of where we are,” he said. “Everyone on the board has only known us having to borrow money to pay the bills every year. And we were really fortunate and blessed that all the people involved were willing to help us get to this point. Our educators understood, our transportation department, even our administrators. People were willing to make sacrifices for the good of the district.”