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June 30, 2003

Hazel Crest district finances see turnaround

Hazel Crest schools are poised to open for fall classes and end the 2004 school year with no budgetary deficit. The financial news marks a turnaround for a district that was on the verge of bankruptcy, according to Illinois State Board of Education (ISBE) officials.

“The fact that Hazel Crest was not only able to finish this year, but also will now open next year, are major accomplishments for Hazel Crest,” said State Superintendent of Education Robert E. Schiller. “Just months ago, few of those involved in this challenge thought the district would be able to operate past the close of school this year. Instead, through the hard work and cooperation of the School Finance Authority (SFA) and others, the district will now be able to operate throughout the 2003-04 school year.”

The south suburban Cook County school district faced bankruptcy this past year with debts in the millions of dollars. Now the FY04 financial plan for Hazel Crest School District 152.5 indicates the district may, in fact, close the 2004 school year with available funds of $338,000.

The Hazel Crest School Finance Authority (SFA), appointed by Schiller in December, 2002, and the local school board crafted an FY04 budget totaling $10.8 million with a $338,000 cushion to cover unexpected revenue and expenditure changes. The budget was accepted by the Illinois State Board of Education at its June 17 meeting.

That action followed a several-month process of cost-cutting that immediately curbed spending and required cuts, including the closing of two buildings and reduction in staff. The steps were carried out without overcrowding classrooms or losing the ability to provide a good education for the children.

Hazel Crest’s financial situation reached a crisis stage last fall when the district, unable to pay bills or meet payroll, petitioned ISBE for a voluntary Financial Oversight Panel (FOP). The FOP then determined that the district met the criteria for an emergency assistance loan. However, after the FOP determined that the loan would not be enough to finish the year, it petitioned ISBE to go to the General Assembly for legislation to establish a School Finance Authority (SFA).

According to a State Superintendent’s report to the ISBE Board last November, Hazel Crest had accumulated more than $1.4 million in debts going back to May 2002. Additionally, financial lenders considered the 1100-student district to be too great a risk for loans.

The establishment of the FOP resulted in ISBE’s authorization of a $238,000 emergency grant. The district also received $1.5 million through a Member Initiative grant from the General Assembly. In addition, the oversight panel was able to borrow $1.7 million for the district through issuing Tax Anticipation Warrants. The General Assembly appropriated $4.5 million as a loan.

“Hazel Crest’s situation is still very serious,” said Schiller. “But it is a credit to the level of cooperation among ISBE, the school board, local leaders and lawmakers that much has been accomplished in the best interests of the district’s children. Had it been otherwise, we would be reading about an entirely different situation in Hazel Crest this week.”

ISBE will continue to work with the SFA to manage the district’s finances and to prepare a recommendation for the district’s future.

Illinois State Board of Education
100 North First Street
Springfield, IL 62777