Feom Scott Coffey:
Dear Members of the Board of Education,
I am writing because I believe the District is approaching a point where the financial decisions made over the next several months will have consequences for D46 for many years.
Over the past several months, I have spent considerable time reviewing
- District budgets,
- levy information,
- the 2021 and 2023 bond Official Statements,
- the District’s recent financial materials, and t
- he FY2027 tentative budget.
My analysis led me to author the April 3, 2026 article on McHenryCountyBlog.com outlining the District’s significant property tax abatement issue.
Fortunately, the District was able to work with the County to correct the $943,000 error in the current levy.
For context, I have a finance background, am a CPA, have experience in both the corporate world and having run my own business for almost 30 years.
More relevant is the 10 years I spent on the Cary D-26 Board of Education from 2009-2019.
During this period, our district also
- experienced severe financial pressures,
- potential state takeover, and
- dramatic adjustments to our education programs and staffing levels.
My purpose is not to criticize the Board or administration, but to raise what I believe are urgent financial issues and to suggest a comprehensive framework that I hope the Board will consider.
The FY2027 budget appears to show a much more serious problem than simply a budget deficit
The FY2027 tentative budget dated August 3, 2026 projects direct deficits of approximately:
- $888,000 in the Educational Fund
- $585,000 in Operations & Maintenance
- $1.658 million in Debt Service
That is approximately $3.13 million of deficit across these three critical funds before considering the other funds and interfund transfers.
The budget also shows the District relying on approximately $835,000 of transfers into O&M and approximately $1.661 million of transfers into Debt Service to make the budget work.
Even after those transfers, the projected June 30, 2027 O&M ending balance is only $2,726, while the Educational Fund falls from a beginning balance of approximately $4.36 million to approximately $985,000.
In other words, I do not believe this should be viewed simply as a one-year accounting deficit.
It appears to be a structural operating problem combined with a serious liquidity problem.
I am also concerned that, as of this writing, I have not seen this tentative budget receive the kind of public Board review and discussion that I believe its seriousness warrants.
The budget document itself is dated August 3, 2026.
I understand that other Illinois school districts have already had budget discussions and made their tentative budgets publicly available on their websites.
Given the magnitude of the numbers in D46’s budget, I believe the Board should publicly review the complete budget and its cash-flow implications as soon as possible.
Under 105 ILCS 5/17-1, your budget must be adopted by September 30.
While the tentative budget was on the August 17 agenda, the Board did not undertake a substantive review or discussion of the budget at that meeting.
Your first discussion is scheduled for the September 21 Board meeting.
Given that the tentative budget shows approximately $5.5 million of aggregate direct fund-level deficits before interfund transfers and other sources and uses, I would recommend convening a review meeting to discuss these financial issues prior to having to vote on approving the budget only nine days prior to the statutory deadline.
The District may face a cash crisis before the next major property-tax collection
The District’s dependence on property taxes makes the timing particularly important.
D46’s 2025 levy was approximately $14.727 million, of which approximately $14.702 million was subject to PTELL.
The Educational and O&M levies alone totaled approximately $11.94 million.
The FY2027 budget begins with approximately $4.36 million in Educational Fund cash, a negative O&M balance of approximately $241,000, and approximately $998,000 in Working Cash.
Because a substantial portion of the next property-tax levy will not be collected until June 2027, I am concerned that the District may exhaust its available operating liquidity before that June collection arrives.
I believe the Board should immediately require management to prepare a month-by-month 13-month cash-flow forecast through June 2027, showing exactly when cash is expected to fall below prudent operating levels.
Illinois law does provide a mechanism for a school district with insufficient cash to issue tax-anticipation warrants against taxes already levied, generally up to 85% of the applicable taxes.
But relying on Tax Anticipation Warrants (TAWs) should be viewed as a liquidity bridge, not a solution to D46’s underlying financial problem.
If the District reaches the point where it needs TAWs simply to fund normal operations through the spring, that would be a warning that the underlying balance sheet needs to be recapitalized.
I believe D46 needs to address two different problems with two different tools
In my view, the Board should be considering two separate referendum questions for the April 6, 2027 Consolidated Election.
The first would address the balance sheet/liquidity problem through a Working Cash bond referendum.
The second would address the structural operating deficit through an appropriate increase in the District’s property-tax extension capacity.
I do not believe either referendum, by itself, would adequately solve both problems.
1. Working Cash bond referendum — approximately $3–8 million
D46’s current Working Cash Fund is only approximately $998,000.
The FY2027 budget projects the D46 total fund balance across all funds to finish the year at only approximately $2.9 million.
Illinois law specifically authorizes a Working Cash Fund so that a school district has sufficient money in its treasury to meet expenditures, and Section 20-2 permits bonds to be issued to create, recreate, or increase that fund.
The statute currently permits a substantial amount of Working Cash bonding capacity, subject to its statutory formula.
I would ask the Board and its financial advisers to model a $3–8 million Working Cash bond issue, not because D46 necessarily needs that entire amount, but because the District needs to determine what level of working capital is required to restore a prudent balance sheet and provide sufficient liquidity through the annual property-tax cycle.
The purpose should be to recapitalize the balance sheet, not to disguise or perpetuate a structural operating deficit.
The bond should also be structured thoughtfully.
In particular, the Board should ask its bond counsel and municipal adviser to determine whether the proposed bonds can be issued on a tax-exempt basis and, if not, quantify the additional interest cost associated with taxable financing.
I would also strongly consider making any new Working Cash bonds callable, with an appropriate optional-redemption provision.
If the District eventually receives a substantial new revenue stream—for example, from the potential Monarch BESS development [battery farm]—it would be important to have the ability to retire some or all of this debt rather than carrying a long-term financing cost that is no longer necessary.
2. A referendum to increase the District’s recurring tax-extension capacity
The second problem is that D46 simply does not appear to have enough recurring annual revenue to support its current level of educational operations while also carrying approximately $1.65 million of annual debt service.
The 2023 bond Official Statement is particularly revealing.
It states that the 2021 and 2023 bonds are payable from pledged revenues consisting of Operations & Maintenance Fund revenues and General State Aid/EBF, and it projected approximately $2.192 million of annual pledged revenue against approximately $1.65 million of annual debt service.
The bond documents also state that the District pledged these revenues and covenanted to provide, collect and apply them to the bond obligations.
That arrangement may have been financially workable when the bonds were issued, but the current budget indicates that the District’s operating position has deteriorated materially.
The 2025 tax computation also shows that D46’s O&M Fund was extended at only approximately 0.206%, versus a statutory maximum rate shown on the county report of 0.55%.
The Board therefore needs to determine precisely whether the problem is:
- insufficient statutory O&M rate authority,
- insufficient PTELL extension capacity,
- insufficient overall recurring revenue,
- or some combination of the three.
I believe the District should have its bond counsel and tax counsel determine the precise referendum structure required to generate the additional recurring revenue necessary to stabilize operations.
Based on the financial modeling I have reviewed, I believe the Board should be evaluating a referendum capable of providing at least approximately 10% additional annual property-tax extension capacity, rather than assuming that a modest one-year increase will solve the problem.
The exact ballot language and statutory mechanism should, of course, be determined by the District’s attorneys and election counsel.
The timing is now critical
The next regular opportunity is the April 6, 2027 Consolidated Election.
For a board-initiated public question, the governing body’s resolution generally must be adopted by January 19, 2027, with certification of the question by January 28.
That means the Board has only a few months to determine the District’s actual cash requirements, operating deficit, debt-service burden, appropriate Working Cash capitalization, and the tax referendum structure.
I do not believe D46 can afford to wait until January to begin this analysis.
I also believe ISBE should be brought into the discussion now
I would strongly encourage the Board to contact the Illinois State Board of Education’s School Business Services/financial oversight personnel and ask ISBE to review D46’s financial condition and proposed recovery plan.
Deb Vespa has historically been an ISBE School Business Services/financial oversight administrator involved with Illinois districts facing serious financial problems and financial oversight issues.
I would suggest contacting her, or confirming with ISBE who currently holds the appropriate role, and asking for an independent assessment of D46’s financial position, including its
- liquidity,
- debt obligations,
- fund balances, and
- proposed recovery plan.
I am not suggesting that the District should wait for the State to intervene.
Quite the opposite.
The purpose would be to engage ISBE before the District reaches a point where the State must become involved.
Illinois law provides for Financial Oversight Panels and other extraordinary state financial interventions for districts experiencing severe financial distress.
That process can result in substantial loss of local financial control.
Failure to act creates significant risk
I believe the Board should be very candid with the community about the alternatives.
If neither referendum passes, D46 will still have the same approximately $1.65 million annual debt-service obligation, the same underlying operating expenses, and the same structural revenue problem.
A Working Cash bond alone would not solve the recurring operating deficit.
A tax referendum alone would not necessarily solve the immediate liquidity and balance-sheet problem.
Therefore, I believe the District needs a comprehensive rescue plan, not a single financial transaction.
That plan should combine:
A Working Cash recapitalization sufficient to restore a prudent liquidity reserve;
A recurring revenue increase sufficient to support the District’s ongoing educational program and debt-service obligations;
Specific expenditure reductions and efficiency measures;
A detailed monthly cash-flow plan through June 2027;
A strategy for rebuilding fund balances; and
Direct early engagement with ISBE so that the State understands the District’s financial condition and recovery plan before an emergency develops.
Finally, there is another factor that should be considered in the long-term structure
The potential Monarch BESS project could eventually create a significant new source of property-tax revenue for D46. I do not believe the District can responsibly include hypothetical future BESS revenue in today’s budget or use it as a substitute for solving today’s financial problem.
However, if the project is ultimately approved, built, assessed, and begins generating substantial recurring D46 revenue—potentially in the $1–2+ million annual range—that revenue could materially change the District’s financial position.
For that reason, I believe any new Working Cash debt should be structured with sufficient optional redemption flexibility, and the Board should develop a policy now for how it would use substantial future incremental revenues.
For example, the District could eventually use such revenues to:
- rebuild its depleted fund balances;
- repay Working Cash debt early;
- strengthen its debt-service coverage;
- and, once the District is financially stable, reduce the extraordinary tax burden that may have been necessary during the current crisis.
That would allow the Board to make the case to taxpayers that an emergency tax increase is being used to stabilize the District, rather than becoming an open-ended permanent increase regardless of what happens to the District’s financial condition.
I respectfully ask the Board to act now
I am not asking the Board to adopt any particular financial plan without the appropriate legal and financial analysis.
I am asking that the Board recognize the urgency of the situation shown by its own tentative budget and immediately undertake the analysis necessary to answer several basic questions:
When does D46 actually run out of operating liquidity under the FY2027 budget?
How much Working Cash capitalization is required to prevent that from happening?
What annual recurring revenue increase is required to eliminate the structural deficit after debt service?
What referendum structure can legally produce that revenue?
What expenditure reductions are achievable in parallel?
What is the District’s contingency plan if either referendum fails?
And what actions should be taken now to ensure that ISBE understands the District’s financial condition and recovery strategy?
The April 2027 election provides a limited window to address both the balance-sheet and operating problems before they become a much more serious crisis.
I believe the Board owes the community a transparent, numbers-driven financial rescue plan well before those January referendum deadlines arrive.
If you have any questions, I would be happy to provide any assistance that I can.
Thank you for your consideration.
Sincerely,
Scott Coffey
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The District 46 Superintendent got in touch with Coffey writing that the Board just added a special meeting for August 31 to discuss financial issues rather than waiting until September 21.
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See also
