Illinois School Districts Gain New Flexibility for Building Projects Under New Law

Illinois school districts are poised to see significant changes in how they can finance new buildings and renovations, thanks to the passage of House Bill 4582, now known as Public Act 103-0591. Signed into law by Governor J.B. Pritzker on June 7, 2024, the Act introduces several key reforms that will make it easier for districts to take on large-scale construction projects, particularly for expanding pre-kindergarten and kindergarten facilities.

Voter-Approved Bonds No Longer Subject to Debt Limits

One of the most impactful changes brought by the new law is the removal of debt limits for voter-approved bonds. Starting with the bonds approved in the November 2024 general election, this provision allows school districts to borrow more freely for capital projects like building new schools or adding substantial upgrades to existing structures. Previously, school districts were constrained by a cap on how much debt they could take on, even if voters approved the bond issue.

Easier Path for Pre-K and Kindergarten Classroom Expansion

Another significant reform under the Act eliminates the need for referendums for building projects focused on pre-kindergarten and kindergarten classrooms. Effective September 1, 2024, school districts will be able to construct or purchase new buildings to increase early childhood education space without seeking direct voter approval. This move is expected to make it easier for districts to address growing demand for early childhood education programs, especially in communities with rapidly expanding student populations.

Longer Bond Terms for School Construction

The law also extends the maximum term for school bonds from 20 years to 30 years, offering districts a more manageable path to financing major infrastructure projects. This extension is especially beneficial for long-term investments, such as building new schools, adding gymnasiums, or constructing science labs, which often have useful lives far beyond 20 years.

With the ability to issue bonds over 30 years, districts can lower their annual debt service payments, making it more feasible to undertake large-scale construction projects without overwhelming their budgets. However, constituents should understand that while this makes projects more affordable in the short term, it also extends the district’s financial obligations over a longer period, which could affect future budgets and taxes.

Simplified Bond Issuance for Lower Costs

The law also addresses one of the more technical aspects of school finance by simplifying the process of bond issuance. Specifically, it reduces the need for “premium” bond structures, which districts have traditionally used to cover costs like issuance fees. Under the new law, districts can increase the principal amount of bonds by up to 3% to cover issuance and capitalized interest costs. This reduces the need for complex bond structures and makes it easier for districts to issue bonds without adding unnecessary financial burdens.

This change is expected to result in lower overall borrowing costs for school districts, allowing them to allocate more funds directly to construction projects. Additionally, the focus on fire prevention and safety improvements will help districts address urgent safety needs in older buildings.

Community Involvement and Potential Tax Implications

While the new law grants school districts more flexibility in managing large projects, community engagement remains essential. Public hearings are still a required step for major borrowing decisions, ensuring that constituents have an opportunity to express their views and concerns before projects move forward. These hearings are an important part of maintaining transparency and keeping residents informed about how their tax dollars will be spent.

It’s also important for residents to be aware that increased borrowing could lead to higher property taxes. Bonds used to finance school construction projects are often repaid through local property tax levies, which could directly impact homeowners. Schools in Champaign County also have access to the sales tax dollars which can be used for facility improvements, additions and new constructions. As school districts take advantage of the relaxed debt limits and new construction options, it’s crucial for voters to stay informed about how these projects may affect their local tax rates.

The timing of the changes is also worth noting. The exemption from referendum requirements for pre-kindergarten and kindergarten classroom expansion takes effect on September 1, 2024. Meanwhile, the new flexibility for voter-approved bonds applies to those passed in the November 2024 general election. 

A Brighter Future for School Building Projects

With these changes, Illinois school districts are positioned to more easily address their growing infrastructure needs. From building new classrooms for early learners to financing long-term investments with more flexibility, the new law opens doors for districts to plan and execute much-needed capital projects.

The new law represents a significant shift in how school districts can manage their capital projects. Constituents should stay informed about their local district’s plans and participate in public hearings to understand how these changes will impact their community, especially in terms of potential tax implications and long-term financial commitments.