McHenry County school districts ponder cutoff of state funding without Illinois budget deal

Some of McHenry County’s school districts say that school will open as scheduled in the fall, even if they lose funding because state lawmakers can’t agree on a budget.

But the picture won’t be pretty for their budgets, which would get uglier the longer the impasse lasts.

Although Illinois has gone two fiscal years without a state budget, the General Assembly and Gov. Bruce Rauner have made sure to approve funding for K-12 education. However, the state is two weeks away from entering a third year without a budget when fiscal 2018 begins July 1 – Illinois schools operate on a July 1 to June 30 fiscal year.

And although Rauner has called lawmakers into special session starting Wednesday to try to get some kind of budget deal nailed down, there is no guarantee that a funding package for schools will be approved.

Although it would be devastating for many downstate school districts if per-pupil general state aid and categorical reimbursements stopped flowing, the damage wouldn’t be immediately obvious in McHenry County because districts would be able to dip into reserve funds to make up shortfalls, several superintendents said.

But that's not a desirable solution for any length of time, Huntley School District 158 Superintendent John Burkey said. The K-12 district oversees five elementary schools, two middle schools and Huntley High School. State funding accounts for about 20 percent of the district's budget.

“The reserves are there for when we have problems we have to deal with,” Burkey said. “I would be very concerned about draining our reserves just to operate without a state budget.”

Illinois has operated without a state budget since July 2015. Rauner vetoed a 2016 state budget that was about $4 billion out of whack, citing the requirement in the Illinois Constitution, ignored by Democratic and Republican predecessors alike, that the state budget be balanced.

Since then, Rauner has been at a budget loggerheads with the Democratic-controlled House and Senate, and House Speaker Michael Madigan in particular. Rauner won’t agree to increasing income taxes or expanding the state sales tax unless the increases are accompanied by meaningful pro-taxpayer and pro-business reforms.

Democratic lawmakers have considered some of his larger reforms as hurtful to the working and middle classes, or consider reforms a separate matter from the budget altogether.

Despite the feud, lawmakers have kept state money flowing to schools. In 2015, Rauner did not veto the education portion of the budget. The day before the July 1, 2016, start of this current fiscal year, lawmakers approved a six-month stopgap budget that funded K-12 education for the entire 12 months.

McHenry High School District 156, which oversees McHenry East and West high schools, is expecting $5 million from the state in fiscal 2018 – $3.4 million in general state aid and $1.4 million in categoricals, which reimburse for expenses such as transportation and special education, Superintendent Ryan McTague said.

State funding accounts for 16 percent of the district’s budget – like other county school districts, local property taxes make up the majority.

“Obviously, if we didn’t receive any of that [state funding], that would be a pretty massive hole,” McTague said.

The fact that Illinois has funded education throughout the impasse does not mean that districts have been made whole, or even within a timely manner. Schools are among the vendors who are in the state’s $15 billion backlog of unpaid bills. District 156 still is waiting on payment for three of its four categoricals this school year – the most recent categorical payment it received was for the 2016 school year, McTague said.

Although McTague said he believes the district could make it the whole year, other districts statewide do not.

Tony Sanders, CEO of Elgin School District 46, the state’s second-largest district behind Chicago Public Schools, warned in late April that the district might not be able to open in August without a state budget. Illinois at the time owed the district more than $25 million in categorical payments.

Another factor that could affect funding if and when a budget is approved is Senate Bill 1, which seeks to revamp the per-pupil spending formula, which many education supporters have called the most inequitable in the nation.

Although it has passed the House and Senate, Democrats have put a hold on sending it to Rauner, who has said he will veto it in its current form because it amounts to a "bailout" of CPS at the expense of the rest of the state. Lawmakers either could talk about making changes to it or see whether they can marshal the votes to override a veto.

The current impasse is the longest that any state has gone without a budget since at least the Great Depression.

Although universities and social service agencies caring for the disadvantaged have been devastated by the lack of payment, about 90 percent of state payments, such as employee salaries and local government share of tax revenues, have been going out because of existing statute and court decrees that mandate the payments.