The Examiner U-46 News Feed
Annual audit report for U-46 presented to board
By Seth Hancock
The Board of Education in School District U-46 was presented with the Fiscal Year 2015 Annual Financial Report from its independent auditors on Monday, Nov. 2, and the district’s debt is a point of concern for at least one board member.
John George and Jessica West presented the report along with members of the U-46 financial team, and board member Phil Costello said “there’s a lot of good information” within the report and commended the efforts.
However, Costello feels U-46’s long-term obligations are an issue of worry.
“My take away is the debt,” Costello said. “The debt is going to be a very big concern as we go forward in the next years.”
The district’s principal debt service requirements on bonds, paid for by property taxes, are $319.6 million. Including interest, the total debt service to be paid by 2035 will be $565.9 million with over $42 million in repayment year-to-year through 2020.
The report did recognize improvements made by the U-46 staff in its accounting practices, something Costello was grateful for.
“To hear the accolades they gave our staff in terms of improvement in the accounting and finances… it’s very important in what we do here and they’ve done a great job,” Costello said.
George noted one of the recent changes implemented by the district from the Government Accounting Standards Board Section 68 concerning pension obligations under the Teachers Retirement System (TRS) and Illinois Municipal Retirement Fund (IMRF).
The change means “the district had to recognize, as a liability, a net-pension liability related to TRS obligations and IMRF obligations,” George said.
The pension obligations rose from $73 million to $80 million last year, about $49 million under TRS and $31 million under IMRF.
Board member Sue Kerr asked: “The need to recognize pension liability is something the state is requiring from each school district now, is that correct?”
George affirmed that and Kerr added: “So that’s not something we just decided to do.”
District’s across the state are seeing “a significant impact on their financial statements” because of that George said, but Costello feels that it is proper to include that.
“That point, it’s not window dressing, it will come due,” Costello said. “So in addition to our debt, the pension and some of the other personnel plans, they put on the balance sheet for a very good reason. At some point in the future we will have to pay our retired employees so it’s a very important part.”
U-46 CEO Tony Sanders said to “keep in mind we are the largest TRS employer in the state of Illinois” as Chicago Public Schools uses its own system.
Costello clarified after the meeting that “I was wrong about U-46’s direct liability” under TRS. Employers do not pay a proportionate share with the state on TRS like they do on IMRF.
However, Costello said recognizing that on the books is still the right thing to do in order to give a better picture of the district’s finances.
“The district’s booked liability is now more accurate than before,” Costello said. “The previously un-booked liability will ultimately be on the backs of the taxpayers regardless of how the TRS benefits get funded.”
U-46 directly negotiates the contracts with its employees, including benefits, which create those liabilities, and school districts could end up paying the price the state is currently paying. U-46 officials have frequently stated that Springfield could potentially shift those burdens onto the local government entities.
That shift could happen soon considering the state of insolvency Illinois is currently facing. The Mercatus Center at George Mason University released a report this past summer showing Illinois ranking dead last among the 50 states for fiscal health as liabilities exceed total assets, with unfunded pension liabilities being a primary cause.
The need to recognize the state’s “in-kind contribution” for TRS on its books touched a nerve with the district last year in September when Sanders claimed in his weekly message to staff that there was “misinformation that you may have read in the Bartlett Examiner.”
That claim of “misinformation” was based on a story that stated accurately that the district budget’s revenue and expenditure lines both increased by over $100 million since 2007. That story pertained to the board’s vote to deny a charter school proposal, not a budget story, as then board member Amy Kerber claimed there were many innovations from U-46 through a tough financial climate as a reason to deny school choice to parents.
Sanders admitted the budget did reflect such increases in that message but “in reality, our expenditures have increased by $54.5 million” since 2007 excluding the TRS contribution from the state.