It's All Over - an OVERWHELMING VICTORY!!!

Impact to the District: If the Referendum Passes and the District Doesn't Drastically Cut Expenses, it will have dangerously low levels of cash by FY2024 and will be BANKRUPT by FY2027

 

We know this is a lot of information, it is a complex topic and the supporters of the referendum are deceiving voters badly by mis-representing financial information.  If you want the full truth then read all the content below.  If you just want the high-level information it's these three points:

  1. The District's June 30 Fund Balance is not the cash reserve, the District DOES NOT HAVE $30MM+ in reserve.  The reserve is contained in the FUND BALANCE, but the FUND BALANCE is not the reserve
  2. If this referendum goes forward, the District would lose $1,200,000+ each and every year in revenue
  3. That $1,200,00 per year revenue loss coupled with no cuts in programs or services would drive Lisle 202 into a cash crisis by 2024 and drive Lisle 202 into Bankruptcy by 2027

 

Want to know more about Lisle 202’s financial situation?  See the helpful school finance background topics below:

 

Background Topic #1: Fund Balances, how they change over the year and how they are different than reserves

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  • School districts manage their finances with the use of something called a Fund Balance.  This reflects the amount of money the district has at any given time and is the money the district utilizes to fund day-to-day operations
  • What is really unique about school districts is that the majority of their revenue comes from property taxes and they only "get paid" twice a year,  in June and September.  Therefore they need to carefully manage the finances so that they don't run out of money throughout the year
  • To help protect against uncertainties of getting paid twice a year and paying expenses all year long a school district will keep a financial cash reserve.
  • This cash reserve is very similar to a household maintaining 6 months of living expenses for emergencies.  Best practices for School Districts are to maintain anywhere between 90 and 180 days of expenses in reserve (3-6 months)
  • It is important to never confuse fund balances with reserves they ARE NOT the same thing.  Fund balances contain the reserve, but the Fund Balance is not the District's reserve

Background Topic #2: What impacts the Reserve and What is a Capital Transfer

The reserve does one main thing: Just like a savings account in one of our households, it stores money for emergencies or other critical projects.  Board policy is to maintain between 3 and 6 months of expenses within the reserve.

The reserve can increase or decrease in one of two ways:

  1. Net income - Each year the district will either make money (revenues are greater than expenses) or lose money (expenses are greater than revenues) and that annual net income (or loss) will directly impact the reserve.  Board is committed to maintain a balanced budget each year
  2. Capital Transfers - When the School District authorizes repairs to the school buildings or property it is called a capital project and those costs are managed as a one time event consistent with being a project.  These might be a project to repair the roof, repave a parking lot, replace a boiler, etc.  Money for these projects are typically planned for and saved within the reserve and then are paid for with a transfer out of the reserve.

Over the past few years, many of the larger capital transfers were for the construction of the new school.  Going forward, capital transfers will occur for necessary capital repairs.  These repairs are for the high school and junior high that were identified and estimated by a licensed architect.  These repairs cover things like: wear and tear, roof repair, parking lots, plumbing/electrical, etc.  In essence, critical things required to keep the building open, safe and operating and not any type of discretionary enhancement.  The architect has estimated approximately $7,000,000 in necessary repairs for the next few years.  Please see the following link for details: FacilityNeeds

Now with the help of that background, let's look at Lisle 202's financials if the Referendum passes and the District does not cut services or expenses.  We've provide two views:

  • A simplified view that starts and ends with reserves
  • A more comprehensive view that includes fund balances, reserves, revenue and expenses
  • For reference the following link is the official 5 year projection from Lisle 202 Official Lisle 202 Projection (2/12) .  Our financial projections below have extended the timelines into FY2027

View #1: District Financials with a Simplified View that Starts and Ends with Reserves

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Notes:

  • Financials for FY2019 to FY2023 from Lisle 202 Estimates
  • Financials for FY2024 to FY2027 are C4LK estimates assuming Revenue and Expenses continue to grow at 2020 to 2023 growth rates
  • The Lines titled "FINANCIAL RESERVE" is just that, a reflection of the District's Financial Reserve at the beginning or the end of the year
  • The NET INCOME line is simply Revenues for that year minus Expenses for that year
  • NECESSARY CAPITAL REPAIRS are repairs to the high school and junior high that were identified and estimated by a licensed architect.  Please see the following link for details: FacilityNeeds

View #2: District Financials with a Comprehensive View Including End of Year Fund Balances and Reserves

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Notes:

  • Financials for FY2019 to FY2023 from Lisle 202 Estimates
  • Financials for FY2024 to FY2027 are C4LK estimates assuming Revenue and Expenses continue to grow at 2020 to 2023 growth rates
  • Years FY2024 to FY2027 Early Tax Receipts assumed to be 41% of Net Revenues
  • The Line titled "END OF YEAR (June 30) FUND BALANCE" is NOT A RESERVE, that number contains the true reserve plus "Early Tax Receipts".  The county pays the district twice a year, in JUNE and SEPTEMBER.  The JUNE payment is recorded in the current year statements but is required to cover NEXT year's expenses
  • The true reserve (line titled "FINANCIAL RESERVE: ($)") is calculated by taking the "END OF YEAR (June 30) FUND BALANCE" and subtracting the "EARLY TAX RECEIPTS".  In the month of May the fund balance and the cash reserve are roughly equal
  • FINANCIAL RESERVE: (Days) is calculated by taking FINANCIAL RESERVE: ($) and dividing by the average daily expenses for the district.  Average daily expenses for the district is calculated by taking "EXPENSES" and dividing by 365
  • NECESSARY CAPITAL REPAIRS are repairs to the high school and junior high that were identified and estimated by a licensed architect.  Please see the following link for details: FacilityNeeds
  • The line IMPACT FROM THE REFERENDUM includes direct impact from the referendum language (~$1.2MM) plus loss in Interest Income from a shrinking cash reserve.  For simplicity the loss in interest income is only modeled through FY2023