Johnsburg School District 12 to be on 'financial watch'

JOHNSBURG – The superintendent of Johnsburg School District 12 said recent notification about being on “financial watch” status – a state designation indicating financial decline – is a result of the long-term borrowing necessary for an ongoing building project.

District 12 is one of six districts that received a letter from the Illinois State Board of Education regarding its financial watch status. The other five districts are in Cook, LaSalle, Grundy, Madison and Will counties.

Laine Evans, ISBE spokeswoman, said placement on financial watch status is based on fiscal 2015 data. Assuming state board approval, District 12 will immediately go into financial watch until March 2017.

One of four financial designations, watch status is the lowest and means the district will be closely monitored and must offer various information such as financial projections, budgeting and personnel inventories. It also means there will be a review to determine whether a financial oversight panel is necessary.

Districts are judged based on five metrics: fund balance to revenue ratio, expenses to revenue ratio, days cash on hand, percent of short-term borrowing ability, and percent of long-term debt margin remaining.

Superintendent Dan Johnson, who said the long-term debt piece is what spurred the designation, wasn’t surprised to receive ISBE’s letter.

“In order to do this modernizing of buildings, we had to borrow long-term debt,” Johnson said. “That hurt our ratings score with the state.”

By a margin of 24 votes, the district passed a $41 million referendum in March 2014 for the ongoing facilities project. Johnson said the district sold those bonds this year.

The project is turning the junior high into a third- through eighth-grade school while the high school is getting an additional 35,000 square feet of space. As of Thursday, Johnson said it was about 30 percent complete.

District 12 has taken measures in recent years to try to prepare for predicted financial stress, Johnson said. A reduction in certified and support staff members was made a couple years ago, in addition to a reduction in the technology and building budgets, he said.

Johnson said the watch status is frustrating because, while the project has incurred debt, the long-term benefits will help the district become more efficient.

“We’re going to have energy efficient buildings – so reducing our expenditures for energy and gas – and we won’t have to spend huge dollars on building and maintenance,” he said.

The other three financial categories are recognition, the highest category of financial strength; review, which is the next highest and means the districts will be monitored for potential downward trends; and warning, which elicits close monitoring and a review to determine whether a financial oversight panel is necessary.

District 12 was estimated to be on financial watch status for the past two annual financial reports; warning status in 2012 and 2013; and on review status in 2011. The last time it received a recognition status was in the 2004 report, according to ISBE data.

The most recent reports from
2015 show all the other McHenry County school districts, including Algonquin-based Community Unit School District 300, are estimated to be in financial recognition status in 2016.

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