Governor signs Bill Amending PTELL and School Code on Several School Finance Provisions

On Monday Governor Pritzker signed into law Public Act 102-0895 (Senate Bill 1975) creating Section 18-190.7 of the Property Tax Code, which modifies how certain school districts and other units of local government can approve a levy below the maximum permitted by law and then recapture any amount below the permitted maximum in later years. The new law also mandates annual disclosure of cash balances and extends the time period for certain interfund transfers. 

New Section 18-190.7, entitled ‘Alternative aggregate extension base for certain taxing districts; recapture’ addresses a long-standing concern among tax capped entities with not levying to the full extent permitted by law and then losing out on the growth of the tax base over time for the amount not extended that could have been included in the extension.  PTELL already permits a taxing district to base its current year extension on the highest of the past three years which has provided some flexibility for a taxing district to levy below the permitted maximum, and then look back to a prior year as a base for its current extension.  However, the three-year look back does not address the revenue foregone by under-levying that will compound over time.  This new authority, which begins with levy year 2022, will allow school districts earning the ISBE designation of recognition or review, as well as park districts, library districts, and community colleges, to recapture the difference between the maximum permitted levy and the actual levy amount in subsequent years without losing out on the levy authority in perpetuity.

Separately, P.A. 102-0895 creates a new provision in the School Code, Section 17-1.3 entitled ‘Disclosure of cash balance’ mandating the annual disclosure of the school district’s cash reserve balance of ‘all funds held by the district related to its operational levy and, if applicable, any obligations secured by those funds’.  The disclosure must be part of the public hearing associated with the budget and levy adoption process.

Finally, the new law amends Section 17-2A of the School Code permitting certain interfund transfers by and between the educational fund, the operations and maintenance fund, and the transportation fund.  Historically this section has been amended every two years extending the authority for these transfers. The law extends the final date for these transfers from June 30, 2024 to June 30, 2026.

Boards of Education and school business officials will need to be aware of these changes and incorporate the new levy flexibility into your planning and levy adoption process.  Please contact the authors of this alert or any Franczek P.C. attorney with any questions.