Hawthorn Elementary District 73 officials are considering a $500,000 payment to help diminish a hefty debt to the Illinois Municipal Retirement Fund.
Investment losses associated with the economic downturn have helped create an unfunded IMRF liability for District 73. The district contributes to the retirement plan that covers a range of employees who are not certified as teachers, officials said.
"We have a shortfall of about $4 million and it is something that needs to be paid back to those who contribute to IMRF," Superintendent Nick Brown said.
Brown and Brad Goldstein, the district's associate superintendent of finance and business operations, say they will craft a schedule for the board to consider to pay down the debt more quickly than if no action was taken.
The initial step could involve an additional payment of $500,000 toward the debt. The deadline to do that is the end of the year, Brown explained, and the school board will consider that recommendation Friday at its last meeting of the year. The board was apprised of the situation last week at a meeting that featured a presentation by Dick Decleene, the chief financial officer of IMRF.
"We want to get rid of that obligation," Brown said.
The amount of the shortfall was noted during the annual district audit review, Goldstein said. As the budget has been in the black the last few years, money for an additional retirement fund payment is available from working cash, he added.
"We obviously wanted to make sure we were on level ground before we started putting money toward this," he said.
Hawthorn is one of about 3,000 employers in the system that are responsible for the IMRF contributions to the retirement funds of active and retired noncertified staff who work 600 or more hours each year. That includes instructional aides, office and technical staff and secretaries, for example. About 167 employees in District 73 are covered by IMRF.
Employees pay 4.5 percent of their salaries toward the fund. The district pays a fluctuating rate determined by IMRF, which this year is 13.53 percent of an employee's salary. Including active and retired employees, District 73 has about $14.1 million in assets and $18.1 million in liabilities.
If the district simply continued to pay what it was directed for the next 30 years, the bulk of those payments -- about $9 million -- would go toward interest, Brown said. The lower the liability, the less the district is required to pay as a percentage of an employee's salary. For example, if the unfunded balance was zero, District 73 would pay about 5 percentage points less than it does now, Goldstein said.
"The decision to pay this debt down makes sense in the long run," Brown said. "You're reducing the debt, you're reducing the rate to taxpayers and you're freeing up," funds for other uses, he added.
IMRF is funded solely from investments, employers and members and does not receive state funding.