Sunset Provision Set to Expire, May Limit Broad School District Authority to Make Interfund Transfers

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Sunset Provision Set to Expire, May Limit Broad School District Authority to Make Interfund Transfers

Jun 5, 2024

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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 and the Operations and Maintenance (O&M) Fund, as well as the Transportation Fund as long as funds levied for transportation purposes are used for transportation-related expenses. 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 less restricted transfers between these principal operating funds. The amendment waived the statutory requirement that these transfers be for one-time, non-recurring 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 is set to expire on June 30, 2024. Absent another extension, all future transfers under Section 17-2A must then 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 may be limited to only transferring 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 be aware of this potential limitation as you conduct summer business, and we will monitor and advise of any subsequent extension. Please contact your Robbins Schwartz attorney if you have any questions regarding this change or the requirements for interfund transfers.