District 65’s Finance Committee received some sobering news on May 12 relating to possible reductions in state funds for next year and subsequent years.
Kathy Zalewski, business manager, told the committee that Governor Quinn’s budget proposal contains two alternative budgets. The first, which is the “recommended” budget, is based on keeping the State income tax at 5%, rather than allowing it to fall to 3.75% as scheduled under existing law. If the income tax falls to 3.5%, the “non-recommended” budget would substantially reduce funding to education. Under the “non-recommended” budget, District 65 would lose about $1.6 million in State funding next year, said Ms. Zalewski.
Even more seriously, there is a bill pending, Senate Bill 16, that would have a “drastic” impact on the funding District 65 receives from the State, said Ms. Zalewski. That bill, if passed into law, would dramatically change the way in which the State allocates its funding to school districts in the State. Under SB 16, approximately 92% of State funding for K-12 education would be distributed using a single formula.
SB 16 is designed to ensure that through a combination of State funding and required local resources, each school district has enough funds on hand to provide a “foundational level” of support to each student. The foundational level takes into account certain demographic factors such as income level, English proficiency and disability.
The bill does not increase the level of education funding, but changes the way in which limited State funding is apportioned among school districts. Generally, school districts with higher assessed property values will receive much less State funding if SB 16 becomes law. (See sidebar, below).
The Illinois State Board of Education has calculated the amount each school district would receive next year if the bill became law. District 65 would lose 85% of its State funding or $6.5 million per year, said Ms. Zalewski. District 202 would lose 81% of its funding, or $2.2 million per year.
“It’s devastating, absolutely devastating for suburban school districts,” said Ms. Zalewski. “Some people feel it’s going to pass because downstate school districts are broke,” she added.
If enacted the bill would be phased in over a three-year period, said Ms. Zalewski. In the first year, State funding to District 65 would decrease by 15% of the total amount; in the second year, it would be 40%; in the third year, it would be 70%. The full impact would be felt in the fourth year.
“The bill hasn’t passed yet,” she said. “It was scheduled for a vote last Friday [May 9] in the Senate. It wasn’t voted on.”
District 65 Assistant Superintendent of Business Services Mary Brown said, “It would devastate not only our District but literally at least half the state and most would be in the northern part of the State of Illinois. … To me it’s a rearranging of money.”
Overall, school districts in Cook County and the collar counties would lose about $228 million in State funding, and the rest of the state would gain that amount. (See sidebar, below).
“It’s hard for me to imagine groups of legislators passing this type of a funding bill that would devastate, severely devastate, at least half the state,” Dr. Brown added. “But we’re hearing ‘it has legs,’ whatever that means.”
Bill Stafford, chief financial officer of School District 202, said SB 16 is “well-intentioned,” but “it’s just devastating.”
He said Illinois is 50th among the states in terms of providing state funds for education, so it is not providing that much to start with; that Illinois has been prorating the grants it is making to school districts at a level of 89%; and that the legislature is considering shifting teacher pension costs from the State to school districts.
“How many hits are we supposed to take?” he asked.
When asked how a cut of $2.2 million would impact District 202, Mr. Stafford said, 80% of the District’s budget is personnel costs. “There’s no question we’d have to cut staff – 10 to 20 positions immediately,” he said.
State Senator Daniel Biss told the RoundTable he has not yet taken a position on SB 16. He said, “It’s still being changed a little bit. There’s still plenty of discussion happening. We’re still some distance from a first floor vote in the Senate.”
He said, though, “I support the principles of the bill. The bill is trying to address a really, really deeply important problem in State government. Addressing that problem will be difficult for schools that have high equalized assessed value of their property.”
Sen. Biss said he believes the State has two problems in the way it funds education. One is that Illinois is “extraordinarily reliant on property taxes for school funding,” which, he said, results in “higher property taxes” and “very inequitably funded schools.” The second problem is that “accepting as a given Illinois’ heavy reliance on property taxes for school funding, it’s still the case that our system is more inequitable than it needs to be.”
He said SB 16 is intended to address the second problem – to use State funds to “counterbalance the inequities of property wealth.”
Sen. Biss told the RoundTable there was no provision in the bill to lift the cap on property taxes to enable school districts to make up for loss in State funds.
He said one thing some superintendents of schools on the North Shore were suggesting is to wait until the State has additional funds to distribute, so the State can redirect new money without taking money from school districts that have been counting on it.
He said his advice to school leaders is to make recommendations. “There’s a lot of room for continued discussion of this.”
“My best guess is the bill will likely get a vote in the Senate this session, but will likely not get a vote in the House. That’s what it looks like to me at this point,” Sen. Biss said.
He emphasized that was just a “guess.”
At the May 12 District 65 Finance Committee meeting Board member Richard Rykhus suggested that the Joint Legislative Task Force Committee take a look at SB 16. He also suggested that District 65 administrators reach out to state legislators.
Superintendent Paul Goren said, “One of the reasons it [SB16] has legs is that there’s equalization going on around the country. … There are understandable arguments for that, but for a District like ours it has some detrimental effects.”
“I am watching this potential legislation with great concern,” Dr. Goren told the RoundTable. “If it passed there is the potential for District 65 to lose up to 85% of its State aid. This can result in a loss of $6.5 million from our budget. A reduction of this sort most probably will have an impact on our classrooms and students.”
Dr. Goren said he had a brief meeting with Senator Biss over the weekend and planned to have a more in depth meeting in the future.
Board member Katie Bailey said, “There are understandable arguments for it if you’re fully funding education to the right level. When you see how little some school districts are able to fund education, it isn’t right. The solution is not to equalize the funding but rather to have our State fully fund education to the level needed to educate all our children.”
SB 16 sets a base “foundational level” of support at $5,169 for each student. The base amount is increased based on a weighting of these factors: a) either the percentage of students in a school district who are low-income or the “concentration” of low-income students in a district; b) the percentage of students who have limited English-speaking ability; c) an assumption that 13% of the students in each district have a disability; and d) other factors.
The adjusted amount can be significantly larger than the base amount. A key factor is the formula used to calculate the increase due to the “concentration” of low-income students. For school districts with more than 88% low-income students, the increase due to this factor alone is $3,876 per student. Together with other factors this puts the adjusted amount for a significant number of school districts over $9,000. Chicago’s, for example, is $9,965.
The adjusted amount is then multiplied by the number of students in the district to come up with an assumed budget amount for each district.
In its calculations, the Illinois State Board of Education (ISBE) found that District 65 has 45.7% low-income students. Yet, under the formula used to calculate the increase in the base foundational amount due to low-income students, District 65 is allotted only $972 per student (compared to $3,876 for districts with 88% low-income students). This, together with increases allocated for ELL students, students with a disability and other factors, ISBE calculated the adjusted amount per student at District 65 to be $7,308.22. When multiplied by 6,624 students, ISBE assumes a total budget for District 65 of $48,430,916.
SB 16 then requires ISBE to calculate whether a school district has “Available Local Resources” (ALR) to pay the assumed budget. The primary source of available local resources is property taxes. ISBE calculates a theoretical amount of property taxes available by multiplying the equalized assessed valuation of all taxable property (with adjustments) in each school district by an assumed tax rate.
If the ALR is less than the assumed budget, a school district will receive a primary state grant to cover the difference. If the ALR is in excess of the assumed budget, the district will receive a flat grant equal to about $181 per student.
ISBE calculated that District 65 has ALR of about $86.8 million, more than enough to cover its assumed budget of $48.4 million. Likewise, ISBE calculated that District 202 had ALR of about $41.3, more than enough to cover its assumed budget of $20.2 million.
SB 16 provides for a supplemental grant for school districts, such as Districts 65 and 202, that are subject to tax caps. This is in recognition that school districts subject to tax caps are limited by State law in their ability to fully tax all taxable property in their district. The formula used to calculate the supplemental grant, though, gives only partial recognition to the impact of tax caps. Under the formula, ISBE concluded that neither District 65 nor 202 was entitled to a supplemental grant.
Impact By Geographic Region
A schedule prepared by the Illinois State Board of Education (ISBE) shows that school districts in “downstate” Illinois would be the primary beneficiaries of SB 16. The table below shows the regions that will have an increase or decrease in state funding for education.
|
Geographic Distribution of State Funds Under SB 16 | |
|
Region |
Gain/(Loss) in 000’s |
|
Downstate |
$228,150 |
|
Collar |
(82,491) |
|
South Cook |
13,556 |
|
West Cook |
(15,566) |
|
North Cook |
(114,345) |
|
Chicago |
(28,393) |
|
ROE & Lab |
(759) |
While Chicago is shown as losing about $28.4 million, it receives about $1.3 billion in State aid on an annual basis, and the loss is 2.1% of its total funding. Reportedly, Chicago has historically received a disproportionate amount of State aid through its Chicago Block Grant, so the decline is in the context of its having received a disproportionately high amount in the past.
Some other features of SB 16 work in Chicago’s favor. One example is that Chicago would be reimbursed for approximately $174 million in teacher pension costs through the State aid formula.
Another example is that Chicago would receive a supplemental grant of about $515 million as an adjustment in recognition that it is subject to tax caps. Neither Districts 65 nor 202 will receive such a grant.
If Chicago did not receive reimbursed pension costs or a supplemental grant due to tax caps, it would lose an additional $689 million in State aid.