HB4789eng 100TH GENERAL ASSEMBLY

HB4789 Engrossed LRB100 18885 AXK 34129 b

AN ACT concerning education.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The School Code is amended by changing Sections 17-1.5 and 34-43.1 as follows:

(105 ILCS 5/17-1.5)

Sec. 17-1.5. Limitation of administrative costs.

(a) It is the purpose of this Section to establish limitations on the growth of administrative expenditures in order to maximize the proportion of school district resources available for the instructional program, building maintenance, and safety services for the students of each district.

(b) Definitions. For the purposes of this Section:

"Administrative expenditures" mean the annual expenditures of school districts properly attributable to expenditure functions defined by the rules of the State Board of Education as: 2320 (Executive Administration Services); 2330 (Special Area Administration Services); 2490 (Other Support Services - School Administration); 2510 (Direction of Business Support Services); 2570 (Internal Services); and 2610 (Direction of Central Support Services); provided, however, that "administrative expenditures" shall not include early retirement or other pension system obligations required by State law.

"Consumer price index" means the Consumer Price Index for All Urban Consumers for all items published by the Bureau of Labor Statistics of the United States Department of Labor.

"Expenditures per pupil" means the total administrative expenditures, general administration expenditures, or school administration expenditures divided by the average number of students reported to the State Board of Education as enrolled in the school district on October 1 and March 1, in the immediately preceding school year, as defined by "Average Student Enrollment" under Section 18-8.15 of this Code.

"General administration expenditures" means the sum of all annual expenditures of a school district that are attributable to expenditure functions that are defined by the rules of the State Board of Education as 2300 (Total Support Services - General Administration); however, "general administration expenditures" does not include early retirement or other pension system obligations required by State law.

"School administration expenditures" means the sum of all annual expenditures of a school district that are attributable to expenditure functions that are defined by the rules of the State Board of Education as 2400 (Total Support Services - School Administration); however, "school administration expenditures" does not include early retirement or other pension system obligations required by State law.

"School district" means all school districts having a population of less than 500,000.

(c) For the 1998-99 school year through the 2018-2019 school year and each school year thereafter, each school district shall undertake budgetary and expenditure control actions so that the increase in administrative expenditures for that school year over the prior school year does not exceed 5%. For 2019-2020 school year and each school year thereafter, each school district shall undertake budgetary and expenditure control actions so that the increase in each of the budgeted administrative expenditures per pupil, budgeted general administration expenditures per pupil, and budgeted school administration expenditures per pupil for that school year over the expenditures per pupil for the prior school year does not exceed the percentage increase, if any, in the consumer price index for the 12 months ending on December 31 prior to the budgetary year or 5%, whichever one is less. For purposes of this Section, for the 2018-2019 school year, the general administration expenditures per pupil shall be the lesser of the actual expenditures per pupil of the school district for the prior school year or the amount reported by the United States Census Bureau in its 2001 Annual Survey of School System Finances as the Illinois average per pupil for Support Services Expenditure - General Administration (Function 2300), increased by the percentage increase, if any, in the consumer price index for 2001 through 2018 compounded. For purposes of this Section, for the 2018-2019 school year, the school administration expenditures per pupil shall be the amount reported by the United States Census Bureau in its 2015 Annual Survey of School System Finances as the national average per pupil for Support Services Expenditure - School Administration (Function 2400), increased by the percentage increase, if any, in the consumer price index for 2016, 2017, and 2018 compounded. For the 2019-2020 school year and each subsequent school year, the State Board of Education shall publish on its Internet website the current year allowable percentage increase and a list of school districts that qualify to waive each of the applicable limitations under subsection (c-5) of this Section.

(c-5) School districts with administrative expenditures, general administration expenditures, or school administration expenditures per pupil in the 25th percentile and below for all districts of the same type, as defined by the State Board of Education, may waive the applicable limitation imposed under this Section for any year following a public hearing and with the affirmative vote of at least two-thirds of the members of the school board of the district. Any district waiving a the limitation shall notify the State Board within 45 days of such action.

(d) School districts shall file with the State Board of Education by November 15, 1998 and by each November 15th thereafter a one-page report that lists (i) the actual administrative expenditures, general administration expenditures, and school administration expenditures for the prior year from the district's audited Annual Financial Report, with the relevant average number of students reported to the State Board of Education, as set forth in the definition of "expenditures per pupil" under this Section, and (ii) the projected administrative expenditures, general administration expenditures, and school administration expenditures for the current year from the budget adopted by the school board pursuant to Section 17-1 of this Code, with the relevant average number of students reported to the State Board of Education, as set forth in the definition of "expenditures per pupil" under this Section, (iii) the administrative expenditures per pupil, general administration expenditures per pupil, and school administration expenditures per pupil for the prior year and the current year, and (iv) the percentage increase in current year per pupil expenditures over prior year per pupil expenditures.

If a school district that is ineligible to waive a the limitation imposed by subsection (c) of this Section by board action exceeds that the limitation solely because of circumstances beyond the control of the district and the district has exhausted all available and reasonable remedies to comply with the applicable limitation, the district may request a waiver pursuant to Section 2-3.25g of this Code. The waiver application shall specify the amount, nature, and reason for the relief requested, as well as all remedies the district has exhausted to comply with the limitation. Any emergency relief so requested shall apply only to the specific school year for which the request is made. The State Board of Education shall analyze all such waivers submitted and shall recommend that the General Assembly disapprove any such waiver requested that is not due solely to circumstances beyond the control of the district and for which the district has not exhausted all available and reasonable remedies to comply with the limitation. The State Superintendent shall have no authority to impose any sanctions pursuant to this Section for any expenditures for which a waiver has been requested until such waiver has been reviewed by the General Assembly. Except for a new district formed under Article 11E of this Code, any district that has current year expenditures per pupil but no prior year expenditures per pupil for a limitation must request a waiver under Section 2-3.25g of this Code.

If the report and information required under this subsection (d) are not provided by the school district in a timely manner, or are subsequently determined by the State Superintendent of Education to be incomplete or inaccurate, the State Superintendent shall notify the district in writing of reporting deficiencies. The school district shall, within 60 days of the notice, address the reporting deficiencies identified.

(e) If the State Superintendent determines that a school district has failed to comply with the administrative expenditure, the general administration expenditure, or the school administration expenditure limitation imposed in subsection (c) of this Section, the State Superintendent shall notify the district of the violation and direct the district to undertake corrective action to bring the district's budget into compliance with the applicable administrative expenditure limitation. The district shall, within 60 days of the notice, provide adequate assurance to the State Superintendent that appropriate corrective actions have been or will be taken. If the district fails to provide adequate assurance or fails to undertake the necessary corrective actions, the State Superintendent may impose progressive sanctions against the district that may culminate in withholding all subsequent payments of general State aid due the district under Section 18-8.05 of this Code or evidence-based funding due the district under Section 18-8.15 of this Code until the assurance is provided or the corrective actions taken.

(f) The State Superintendent shall publish a list each year of the school districts that violate any the limitation imposed by subsection (c) of this Section and a list of the districts that waive a the limitation by board action as provided in subsection (c-5) (c) of this Section.

(g) For any school district that violates a limitation imposed by subsection (c) of this Section for a minimum of 2 out of 3 years, the State Superintendent of Education may withhold payments of evidence-based funding due to the school district under Section 18-8.15 of this Code in an amount equal to the amount the school district exceeded the limitation imposed.

(Source: P.A. 100-465, eff. 8-31-17.)

(105 ILCS 5/34-43.1) (from Ch. 122, par. 34-43.1)

Sec. 34-43.1. In this Section, "consumer price index", "expenditures per pupil", "general administration expenditures", and "school administration expenditures" have the meanings given to those terms under Section 17-1.5 of this Code.

(A) Limitation of noninstructional costs. It is the purpose of this Section to establish for the Board of Education and the general superintendent of schools requirements and standards which maximize the proportion of school district resources in direct support of educational, program, and building maintenance and safety services for the pupils of the district, and which correspondingly minimize the amount and proportion of such resources associated with centralized administration, administrative support services, and other noninstructional services.

For the 1989-90 school year and for all subsequent school years, the Board of Education shall undertake budgetary and expenditure control actions which limit the administrative expenditures of the Board of Education to levels, as provided for in this Section, which represent an average of the administrative expenses of all school districts in this State not subject to Article 34.

For the 2019-2020 school year and for all subsequent school years, the Board of Education shall also undertake budgetary and expenditure control actions so that the increase in each of the general administration expenditures per pupil and school administration expenditures per pupil for that school year over the immediately preceding school year expenditures per pupil does not exceed the percentage increase, if any, in the consumer price index for the 12 months ending on December 31 prior to the budgetary year or 5%, whichever one is less.

For purposes of this Section, for the 2018-2019 school year, the general administration expenditures per pupil shall be the amount reported by the United States Census Bureau in its 2001 Annual Survey of School System Finances as the average of the Support Services Expenditure - General Administration (Function 2300) per pupil for the district, increased by the percentage increase, if any, in the consumer price index for the years 2001 through 2018 compounded. The school administration expenditures per pupil shall be the amount reported by the United States Census Bureau in its 2015 Annual Survey of School System Finances as the average of the Support Services Expenditure - School Administration (Function 2400) per pupil for the 10 largest school districts in the United States, increased by the percentage increase, if any, in the consumer price index for 2016, 2017, and 2018 compounded.

On or before May 1, 2019 and annually thereafter, the State Superintendent of Education shall certify to the Board of Education the allowable percentage increase applicable to the following year general administration expenditures per pupil and school administration expenditures per pupil.

(B) Certification of expenses by the State Superintendent of Education. The State Superintendent of Education shall annually certify, on or before May 1, to the Board of Education and the School Finance Authority, for the applicable school year, the following information:

(1) the annual expenditures of all school districts of the State not subject to Article 34 properly attributable to expenditure functions defined by the rules and regulations of the State Board of Education as: 2210 (Improvement of Instructional Services); 2300 (Support Services - General Administration) excluding, however, 2320 (Executive Administrative Services); 2490 (Other Support Services - School Administration); 2500 (Support Services - Business); 2600 (Support Services - Central);

(2) the total annual expenditures of all school districts not subject to Article 34 attributable to the Education Fund, the Operations, Building and Maintenance Fund, the Transportation Fund and the Illinois Municipal Retirement Fund of the several districts, as defined by the rules and regulations of the State Board of Education; and

(3) a ratio, to be called the statewide average of administrative expenditures, derived by dividing the expenditures certified pursuant to paragraph (B)(1) by the expenditures certified pursuant to paragraph (B)(2).

For purposes of the annual certification of expenditures and ratios required by this Section, the "applicable year" of certification shall initially be the 1986-87 school year and, in sequent years, each succeeding school year.

The State Superintendent of Education shall consult with the Board of Education to ascertain whether particular expenditure items allocable to the administrative functions enumerated in paragraph (B)(1) are appropriately or necessarily higher in the applicable school district than in the rest of the State due to noncomparable factors. The State Superintendent shall also review the relevant cost proportions in other large urban school districts. The State Superintendent shall also review the expenditure categories in paragraph (B)(1) to ascertain whether they contain school-level expenses. If he or she finds that adjustments to the formula are appropriate or necessary to establish a more fair and comparable standard for administrative cost for the Board of Education or to exclude school-level expenses, the State Superintendent shall recommend to the School Finance Authority rules and regulations adjusting particular subcategories in this paragraph subsection (B) or adjusting certain costs in determining the budget and expenditure items properly attributable to the functions or otherwise adjust the formula.

(C) Administrative expenditure limitations. The annual budget of the Board of Education, as adopted and implemented, and the related annual expenditures for the school year, shall reflect a limitation on administrative outlays as required by the following provisions, taking into account any adjustments established by the State Superintendent of Education: (1) the budget and expenditures of the Board of Education for the 1989-90 school year shall reflect a ratio of administrative expenditures to total expenditures equal to or less than the statewide average of administrative expenditures for the 1986-87 school year as certified by the State Superintendent of Education pursuant to paragraph (B)(3); (2) for the 1990-91 school year and for all subsequent school years, the budget and expenditures of the Board of Education shall reflect a ratio of administrative expenditures to total expenditures equal to or less than the statewide average of administrative expenditures certified by the State Superintendent of Education for the applicable year pursuant to paragraph (B)(3); (2.5) for the 2019-2020 school year and for all subsequent school years, the budget and expenditures of the Board of Education shall reflect an annual increase in each of the general administration expenditures per pupil and school administration expenditures per pupil over the immediately preceding school year expenditures per pupil equal to or less than the percentage increase, if any, in the consumer price index for the 12 months ending on the previous December 31 or 5%, whichever one is less, as certified by the State Superintendent of Education under paragraph (A) of this Section; (3) if for any school year the budget of the Board of Education reflects a ratio of administrative expenditures to total expenditures which exceeds the applicable statewide average, the Board of Education shall reduce expenditure items allocable to the administrative functions enumerated in paragraph (B)(1) such that the Board of Education's ratio of administrative expenditures to total expenditures is equal to or less than the applicable statewide average ratio; and (4) beginning with the 2019-2020 school year, if for any school year the budget of the Board of Education reflects an annual increase in either general administration expenditures per pupil or school administration expenditures per pupil greater than the percentage increase, if any, in the consumer price index for the 12 months ending on the previous December 31 or 5%, whichever one is less, as certified by the State Superintendent of Education for the applicable school year under paragraph (A) of this Section, the Board of Education shall reduce expenditure items allocable to general administration expenditures or school administration expenditures to ensure the expenditures per pupil are equal to or less than the allowable increase amount.

For purposes of this Section, the ratio of administrative expenditures to the total expenditures of the Board of Education, as applied to the budget of the Board of Education, shall mean: the budgeted expenditure items of the Board of Education properly attributable to the expenditure functions identified in paragraph (B)(1) divided by the total budgeted expenditures of the Board of Education properly attributable to the Board of Education funds corresponding to those funds identified in paragraph (B)(2), exclusive of any monies budgeted for payment to the Public School Teachers' Pension and Retirement System, attributable to payments due from the General Funds of the State of Illinois.

The annual expenditure of the Board of Education for 2320 (Executive Administrative Services) for the 1989-90 school year shall be no greater than the 2320 expenditure for the 1988-89 school year. The annual expenditure of the Board of Education for 2320 for the 1990-91 school year and each subsequent school year shall be no greater than the 2320 expenditure for the immediately preceding school year or the 1988-89 school year, whichever is less. This annual expenditure limitation may be adjusted in each year in an amount not to exceed any change effective during the applicable school year in salary to be paid under the collective bargaining agreement with instructional personnel to which the Board is a party and in benefit costs either required by law or such collective bargaining agreement.

(D) Cost control measures. In undertaking actions to control or reduce expenditure items necessitated by the administrative expenditure, general administration expenditure, and school administration expenditure limitations of this Section, the Board of Education shall give priority consideration to reductions or cost controls with the least effect upon direct services to students or instructional services for pupils, and upon the safety and well-being of pupils, and, as applicable, with the particular costs or functions to which the Board of Education is higher than the statewide average.

For purposes of assuring that the cost control priorities of this paragraph subsection (D) are met, the State Superintendent of Education shall, with the assistance of the Board of Education, review the cost allocation practices of the Board of Education, and the State Superintendent of Education shall thereafter recommend to the School Finance Authority rules and regulations which define administrative, general administration, and school administration areas which most impact upon the direct and instructional needs of students and upon the safety and well-being of the pupils of the district. No position closed shall be reopened using State or federal categorical funds.

(E) Report of Audited Information. For the 1988-89 school year and for all subsequent school years, the Board of Education shall file with the State Board of Education the Annual Financial Report and its audit, as required by the rules of the State Board of Education. Such reports shall be filed no later than February 15 following the end of the school year of the Board of Education, beginning with the report to be filed no later than February 15, 1990 for the 1988-89 school year.

As part of the required Annual Financial Report, the Board of Education shall provide a detailed accounting of the central level, district, bureau and department costs and personnel included within expenditure functions included in paragraphs (A) and paragraph (B)(1) of this Section. The nature and detail of the reporting required for these functions shall be prescribed by the State Board of Education in rules and regulations. A copy of this detailed accounting shall also be provided annually to the School Finance Authority and the public. This report shall contain a reconciliation to the Board of Education's board of education's adopted budget for that fiscal year, specifically delineating administrative functions.

If the information required under this Section is not provided by the Board of Education in a timely manner, or is initially or subsequently determined by the State Superintendent of Education to be incomplete or inaccurate, the State Superintendent shall, in writing, notify the Board of Education of reporting deficiencies. The Board of Education shall, within 60 days of such notice, address the reporting deficiencies identified. If the State Superintendent of Education does not receive satisfactory response to these reporting deficiencies within 60 days, the next payment of general State aid or evidence-based funding due the Board of Education under Section 18-8 or Section 18-8.15 of this Code , as applicable, and all subsequent payments, shall be withheld by the State Superintendent of Education until the enumerated deficiencies have been addressed.

Utilizing the Annual Financial Report, the State Superintendent of Education shall certify on or before May 1 to the Board of Education School Finance Authority the Board of Education's ratio of administrative expenditures to total expenditures for the 1988-89 school year and for each succeeding school year and the Board of Education's general administration expenditures and school administration expenditures for the 2019-2020 school year and for each subsequent school year. Such certification shall indicate the extent to which the administrative expenditure ratio, general administration expenditures, and school administration expenditures of the Board of Education conformed to the limitations required in paragraph subsection (C) of this Section, taking into account any adjustments of the administrative expenditure limitations which may have been recommended by the State Superintendent of Education to the School Finance Authority. In deriving the administrative expenditure ratio of the Chicago Board of Education, the State Superintendent of Education shall utilize the definition of this ratio prescribed in paragraph subsection (C) of this Section, except that the actual expenditures of the Board of Education shall be substituted for budgeted expenditure items. In deriving the general administration expenditures per pupil and school administration expenditures per pupil of the Board of Education, the State Superintendent of Education shall utilize the percentage increase under paragraph (C) of this Section, except that the actual expenditures per pupil of the Board of Education shall be substituted for budgeted expenditures per pupil.

(F) Approval and adjustments to administrative expenditure limitations. The School Finance Authority organized under Article 34A shall monitor the Board of Education's adherence to the requirements of this Section. As part of its responsibility the School Finance Authority shall determine whether the Board of Education's budget for the next school year, and the expenditures for a prior school year, comply with the limitation of administrative expenditures, general administration expenditures, and school administration expenditures required by this Section. The Board of Education and the State Board of Education shall provide such information as is required by the School Finance Authority in order for the Authority to determine compliance with the provisions of this Section. If the Authority determines that the budget proposed by the Board of Education does not meet the cost control requirements of this Section, the Board of Education shall undertake budgetary reductions, consistent with the requirements of this Section, to bring the proposed budget into compliance with such cost control limitations.

If, in formulating cost control and cost reduction alternatives, the Board of Education believes that meeting the cost control requirements of this Section related to the budget for the ensuing year would impair the education, safety, or well-being of the pupils of the school district, the Board of Education may request that the School Finance Authority make adjustments to the limitations required by this Section. The Board of Education shall specify the amount, nature, and reasons for the relief required and shall also identify cost reductions which can be made in expenditure functions not enumerated in paragraphs (A) and paragraph (B)(1) of this Section, which would serve the purposes of this Section.

The School Finance Authority shall consult with the State Superintendent of Education concerning the reasonableness from an educational administration perspective of the adjustments sought by the Board of Education. The School Finance Authority shall provide an opportunity for the public to comment upon the reasonableness of the Board's request. If, after such consultation, the School Finance Authority determines that all or a portion of the adjustments sought by the Board of Education are reasonably appropriate or necessary, the Authority may grant such relief from the provisions of this Section which the Authority deems appropriate. Adjustments so granted apply only to the specific school year for which the request was made.

In the event that the School Finance Authority determines that the Board of Education has failed to achieve the required administrative, general administration, and school administration expenditure limitations for a prior school year, or if the Authority determines that the Board of Education has not met the requirements of this paragraph subsection (F), the Authority shall make recommendations to the Board of Education concerning appropriate corrective actions. If the Board of Education fails to provide adequate assurance to the Authority that appropriate corrective actions have been or will be taken, the Authority may, within 60 days thereafter, require the board to adjust its current budget to correct for the prior year's shortage or may recommend to the members of the General Assembly and the Governor such sanctions or remedial actions as will serve to deter any further such failures on the part of the Board of Education.

To assist the Authority in its monitoring responsibilities, the Board of Education shall provide such reports and information as are from time to time required by the Authority.

(G) Independent reviews of administrative expenditures. The School Finance Authority may direct independent reviews of the administrative and administrative support expenditures and services and other non-instructional expenditure functions of the Board of Education. The Board of Education shall afford full cooperation to the School Finance Authority in such review activity. The purpose of such reviews shall be to verify specific targets for improved operating efficiencies of the Board of Education, to identify other areas of potential efficiencies, and to assure full and proper compliance by the Board of Education with all requirements of this Section.

In the conduct of reviews under this paragraph (G) subsection, the Authority may request the assistance and consultation of the State Superintendent of Education with regard to questions of efficiency and effectiveness in educational administration.

(H) Reports to Governor and General Assembly. On or before May 1, 1991 and no less frequently than yearly thereafter, the School Finance Authority shall provide to the Governor, the State Board of Education, and the members of the General Assembly an annual report, as outlined in Section 34A-606, which includes the following information: (1) documenting the compliance or non-compliance of the Board of Education with the requirements of this Section; (2) summarizing the costs, findings, and recommendations of any reviews directed by the School Finance Authority, and the response to such recommendations made by the Board of Education; and (3) recommending sanctions or legislation necessary to fulfill the intent of this Section.

(Source: P.A. 100-465, eff. 8-31-17.)