If the state of Illinois, which currently funds most public school teacher pensions, shifts that cost burden to local school districts, which has been proposed in the past and floated as a possible solution to the state’s pension liability, District 200 could be on the hook for $500 million in pension debt.
That was the most glaring take-away by D200 board member Tom Cofsky during the board’s review, at a Jan. 14 Committee of the Whole meeting, of its FY 2020 financial audit and a separate Comprehensive Annual Financial Report prepared by the Chicago accounting firm Baker Tilly.
The annual reports are rather routine documents that give school district officials insight into things like historical financial trends and the status of their internal financial practices.
Joseph Lightcap, a partner at Baker Tilly, said during the meeting that the reports showed numerous signs of financial health.
The district’s statement of net assets, which is the balance of its assets against its liabilities, increased by about $856,000 in 2020, Nightcap said. He explained that the increase was mainly due to the district’s capital improvements and additions over the year that have outpaced depreciation.
The district also experienced increased revenues over expenditures, mainly due to the unanticipated closure caused by the pandemic, Lightcap explained.
“Revenues were in excess of budget in the general fund by about $4.7 million and expenditures were under budget by around $3.5 million,” he said.
The district’s fund balance was down by about $2.4 million — from $108.2 million in 2019 to $105.9 million in 2020 — largely due to the board’s decision to draw down funds to pay for capital projects and planned reductions in the general fund.
Cofsky praised the fact that Baker Tilly’s analysis showed, from 2011 to 2020, the D200 school board has only increased the levy by about 1.4 percent per year. Cofksy said the district has successfully reined in its penchant for taxing residents since “the infamous referendum” of 2002 that led to a significant tax hike and resulted in the district’s more than $100 million fund balance.
“As a comparative, when you look at the lion’s share of the decade since the infamous referendum,” Cofsky said, “from 2003 to 2010, the levy was up 6.2 percent per year. So, we’ve … definitely [been] hitting the brakes after what was some exhaustive levy increases of earlier years.”
But Cofksy said he was “alarmed” by the potential pension liability that D200 could have if the state decides to shift the cost burden. According to the report, D200 could be on the hook for around $400 million for its teacher pensions alone if the state shifts the cost burden.
“And that number is up from, if you look at 2015, when it was a little more than $200 million,” Cofsky said. “So it’s doubled and then some in the last five years. Am I misreading something here? That equates to $650,000 per person covered on the teacher side.”
Cofsky said that, after factoring in other pension-related liabilities, the district could owe “half a billion dollars of pension liability. That is eye-opening.”
“No, I don’t think you’re misreading the numbers,” Lightcap responded. “It’s definitely what is out there for the potential liability should the state look to shift the costs. It wouldn’t be due all in one year, but it would be something you’d have to work to spend down.”
The D200 school board is expected to accept Baker Tilly’s financial reports at a regular meeting on Jan. 28.