Despite an ominous-sounding “financial early-warning” ratingissued by the state, Evanston/Skokie School District 65 is notworried.

The Illinois State Board of Education will monitor the financialhealth of 183 districts receiving the rating, which is based on afinancial analysis from June. District 65 is one of these, so itwill have to make regular reports to the state.

The district has struggled financially for years and has hadless income than expected since the mid-1990s. Last year thedistrict had to cut $3.7 million from it’s 2002-03 budget to staywithin its bounds.

Last year, only 11 of 893 districts were given a warning status.Changes in how the districts were rated landed District 65 on thelist.

But despite being tagged with this status, District 65 officialsremain optimistic.

“I believe that (the warning) will have a positive impact on thebudget process,” said Lutaf Dhanidina, chief financial officer forthe district. “It will alert the school board and the businessstaff to look more closely at the budget.”

The district received a 2.8 rating based on a 4.0 scale. Theratings are based on five financial indicators, which are addedtogether and weighted to create a final index.

This is the first survey that accounts for more than one factor,including cash-flow-to-revenue ratios, and long-term and short-termdebt, Dhanidina said.

The new factors are responsible for District 65’s warningrating. The district took in about $69 million in revenue and spentabout $70.1 million in operating funds in the 2001-02 academicyear.

Under the old system, fewer districts were placed on the state’s2001 financial watch list, said Lee Milner, a spokesman for thestate board of education. But the problems with the old system wereobvious and prompted revisions.

In 2002, the state board discovered that about 75 percent ofschool districts across the state were operating underdeficits.

The revisions almost came too late to help one Illinois schooldistrict.

Hazel Crest School District 152.5, in Hazel Crest, Ill., faced afinancial crisis earlier this year and was forced to ask the statelegislature for emergency money to keep the schools running, Milnersaid.

“They were not on the watch list,” Milner said. “We just didn’thave the indicators to plan for what could and did happen.”

For this reason, the state board of education created the newlist, which places school districts in one of four categories:financial recognition, financial review, early financial warningand financial watch.

School districts in the early financial warning and financialwatch categories, such as District 65, will not necessarily faceany penalties but they will be required to report to the state.

“The early warning requires us to provide the state withfinancial projections and cash flow analyses,” Dhanidina said.

After reviewing financial records, the state board willdetermine whether districts will benefit from emergency grant fundsor a financial oversight panel.

But for District 65, the numbers look good for the future. Thereis no new long-term debt or short-term debt projected for thedistrict, and its status should improve, Dhanidina said.

However, Milner said the new system will help the state and theschool districts that are in danger of financial crises.

“We tried to make it simple enough to provide the bestinformation to the public, the community and the district,” Milnersaid.