The Illinois Senate passed Senate Bill 16 in late May, and it is currently pending in the House. If enacted into law SB16 will dramatically change the way in which the State allocates approximately $6.7 billion to school districts throughout the State. Under the bill, approximately 92% of State funding for K-12 education would be distributed using a single formula. The stated purpose of the bill is to ensure that all school districts in the State have funding available, through a combination of State aid and property taxes, to provide a foundational level of support for each student.
We support providing adequate funding so that each child receives an education that prepares him or her for college or a career. We are also willing to pay our share of any tax increase needed to accomplish that. Unfortunately SB16 does not increase the amount of State funding for education, but divides a small pie in a different way – and in a way that we think is unfair to School Districts 65 and 202.
We are concerned about the impact SB16 will have on children in Evanston. The Illinois State Board of Education has calculated that District 65 would lose 85% of its State funding, or $6.5 million per year. School District 202 would lose 81% of its funding, or $2.2 million per year. We think these losses may force the districts on a combined basis to cut staffing levels by more than 100 persons.
The potential cuts are devastating because more than 5% of District 65 students are classified as “homeless” and approximately 40% of the students who attend Districts 65 and 202 are from low-income households. In addition, 13.6% of District 65 students are English language learners (ELL); and about 14% have a disability. These and other children will suffer if the State slashes its funding to our schools.
To address the needs of all children, the legislature should commit additional funds to education. It appears, though, the legislature lacks the political will to do so. If it is going to simply reallocate funding to school districts, in a different way, it should do so in a way that is fair and equitable to all school districts including Districts 65 and 202.
The Failure to Give Full Effect To The Impact of Property Tax Caps
SB16 creates a model to calculate a school district’s theoretical Available Local Resources (ALR) and to calculate a theoretical expense budget for the district. If the ALR exceed the expenses, the school district receives no primary State aid. If the expenses exceed the ALR, then the school district receives the difference as primary State aid. Losses in State aid are capped at $1,000 per student.
A school district’s ARL is thus important because it is a key factor in determining whether a school district receives primary State aid, and if so, how much.
In the RoundTable’s Oct. 9 editorial, we argued that SB16 is flawed because it fails to take into account $3.5 billion in federal funding in determining a school district’s ALR – a flaw that substantially understates many school districts’ available resources.
Here we argue that SB16 is flawed for an additional reason: It fails to recognize the full impact of property tax caps in determining a school district’s ALR – a flaw that substantially overstates some school districts’ resources.
SB16 computes a school district’s theoretical ALR by multiplying the equalized assessed value of property (EAV) within its borders by an assumed tax rate of 2.36% if it is a K-8 district, and by 1.1% if it is a high school district. Corporate replacement property taxes are then included.
This initial calculation does not take into account the fact that many school districts are subject to property tax caps which have limited the amount by which they may increase property taxes. The tax cap is the lesser of the increase in the Consumer Price Index or 5%.
SB16 contains what is called a “PTELL [Property Tax Extension Limitation Law] Adjustment,” which gives recognition, but only partial recognition, to the impact of property tax caps. The bill requires ISBE to calculate what is called an “extension limitation EAV,” which in effect represents the EAV amount a school district may levy in light of property tax caps.
The problem is that SB16 imposes a floor – or a limit – on the amount of the PTELL adjustment. It does this by providing that the PTELL adjustment will be calculated using the higher of 1) the extension limitation EAV or 2) 80% of the district’s EAV. The higher of the two is used in calculating the PTELL adjustment.
For school districts which have an extension limitation EAV that is less than 80% of their EAV, this formula has the effect of inflating their ALR. Using data contained in the Illlinois State Board of Education’s August 2014 analysis of the impact of SB16, it appears the floor has the effect of inflating District 65’s ALR by approximately $16.1 million.
While eliminating the 80% floor might not be enough to enable District 65 to receive primary State aid under SB16’s current formula, it would put it on the cusp. And District 65 would have an opportunity to obtain primary State aid if the foundation funding amount (currently $5,154) is increased in this or in future years; or if the funding weights for low-income, low-income concentration, special education or English language learning are modified; or if federal funds are counted in calculating ALR; or if the State shifts pension costs to school districts and those costs are deducted from ALR as is provided in the bill.
If, however, the 80% floor remains in SB16, it may inflate D65’s theoretical ALR and put it out of reach of receiving primary State aid above the hold harmless amount.
Because the legislature has imposed property tax caps, which limit District 65’s and 202’s ability to raise property taxes, SB16 should fully recognize the impact of those property tax caps in determining the amount of State aid they will receive.
Possible Reasons for The 80% Floor Are Bogus
The State’s current general aid formula that is used to calculate an equalization grant contains a PTELL adjustment that does not contain an 80% floor. We assume that the 80% floor was inserted in SB16 as a way to reduce the amount of general State aid paid to school districts subject to property tax caps.
One could argue that Districts 65 and 202 may raise property taxes up to 80% of EAV if voters approve doing so through a referendum. There is no guarantee, though, that voters would do so – through no fault of the kids who might be affected. Voters may feel their property taxes are already too high; many low-income and middle-income households and many retirees on fixed incomes may feel they cannot afford an increase in property taxes.
Moreover, if our legislators really think the 80% floor is fair and equitable, then they should lift the property tax caps so school districts may effectively tax up to 80% of their EAV.
Another approach to limiting the amount of PTELL adjustments – and we think a fairer approach than an 80% floor – would be to take “local effort” into account. This could be done by calculating what the extension limitation EAV would be if a school district had increased property taxes the maximum permitted under property tax caps each year since they were implemented.
School Districts 65 and 202 have made a significant local effort to fund education by raising property taxes the maximum allowed in virtually every year. Yet they will receive no benefit from a PTELL adjustment because of the 80% floor.
In contrast, Chicago has reportedly not raised property taxes to fund education in many years since property taxes were implemented. Yet under SB16 it will receive more than $500 million as a PTELL adjustment.
We think this result is arbitrary and unfair to Districts 65 and 202.
Simply put, it is unfair and inequitable to ignore the full impact of property tax caps in determining a school district’s available resources. Doing so inflates the ALR. The inequity is compounded because SB16 understates other school districts’ available resources by ignoring $3.5 billion in federal funding that goes to those school districts.
In a subsequent issue of the RoundTable, we will look at how SB16 proposes to allocate funds based on the concentration of low-income students, and urge that it take a more nuanced approach – one that takes into account the depth of poverty and the cost of living.
If you are concerned about the impact SB 16 will have on Districts 65 and 202, we urge you to contact Senators Daniel Biss and Heather Steans and Representatives Robyn Gabel, Laura Fine and Kelly Cassidy, all of whom represent portions of Evanston in Springfield, and express your views.