Sunset Provision Limits Broad School District Authority to Make Interfund Transfers

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Sunset Provision Limits Broad School District Authority to Make Interfund Transfers

Jul 7, 2021

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Section 17-2A of the School Code authorizes boards of education in school districts outside Chicago to permanently transfer money between the Educational Fund, Operations and Maintenance (O&M) Fund and the Transportation Fund.  It also permits transfers from the Tort Immunity fund to the O&M fund. Such transfers may be completed upon approval by board resolution after a public hearing, which must be preceded by notice of the hearing and the intended transfer, posted, and published at least 7 and no more than 30 days before the hearing.

For many years, thanks to a 2003 amendment, Section 17-2A temporarily permitted unrestricted transfers between a school district’s principal operating funds. The amendment waived the statutory requirement that these transfers be for one-time expenses. Since enactment, each time the amended provision has reached its expiration, the expiration, or “sunset,” date has been extended. However, the most recent extension period expired without further amendment on June 30, 2021.  Therefore, all future transfers under Section 17-2A must now be for “one-time, non-recurring expenses.”

With the provisions of Section 17-2A going back to authorizing interfund transfers for only one-time, non-recurring expenses, school districts for the first time in nearly two decades may only transfer between these funds when the transfer is for a specified purpose.  Despite this limitation, Section 17-2A provides a fairly minimal threshold for school districts to surpass.  Although recurring expenses like teacher salaries or annual payments on contracts cannot be funded through 17-2A transfers, schools can still finance non-fixed expenses like capital projects, the purchase of goods and emergency expenditures by identifying these “one-time, non-recurring expenses” after properly following the statutory procedural notice, hearing and resolution requirements.

Please contact your Robbins Schwartz attorney if you have any questions regarding this change or the requirements for interfund transfers.