The final version of SB1 "asks" middle tier communities to rely more on local property taxes to fund their schools.
Impact on Future State Education Funding
One of the significant changes to the final version of SB1 was how additional local effort (high property taxes) was accounted for in the funding formula. In the original version of SB1 that passed the Senate, only additional local effort above what a school district should be spending was used to increase a community's expected local contribution. This was an important check to ensure that a community would not be penalized for providing additional local funding to make up for the current gap in State aid. It also provided a check to ensure that limited State dollars were used to help school districts get to adequate funding with fair property taxes and not to help drive up any "spending races" above what was actually needed. This important check was modified in the final version of SB1.
An example impact is seen with the Worth school district. Worth is an inner ring suburb of Chicago that has an above average % of both low-income students and English language learners. The community of Worth is able to get "close" to providing adequate funding for their schools, but it takes a unit equivalent tax rate of 9% to get there. It has often been said that many communities could not tax themselves at a high enough tax rate to reach adequacy. Worth is an example that a community actually can and the final version of SB1 penalizes this community for it. Removing the check that took into consideration how much a school district was actually spending reduced the amount of future State funding for Worth by $400 a student. Worth moved from being the 33rd "highest need" school district/community in our State to 275th with the changes made to the final version of the bill.
Another example is seen with the Oak Lawn - Hometown school district. Oak Lawn - Hometown has an average number of low-income students and English language learners. Their community also provides significant extra local effort to make up for the current gap in State aid. They have a unit equivalent tax rate near 7% and with the final version of SB1 their school district's future funding was reduced from $125 dollars per student to $45 per student.
Potential Property Tax "Swap"
This change was offset by language added to SB1 that would provide the opportunity for property tax relief for high tax communities. This is a positive change that was added to SB1. However, as currently written the property tax swap appears to limit the amount of relief that middle tier communities would receive. ISBE has not modelled the property tax relief component of SB1, but the information posted on the Funding Illinois Future website shows that Worth would be eligible for property tax relief, but that Oak Lawn-Hometown would not. With a unit equivalent tax rate near 7%, Oak Lawn-Hometown should also be able to receive property tax relief.
With some basic modifications, this component of SB1 has the potential to help communities with high taxesthroughout the State.
The following changes should be considered for the property tax relief component of SB1:
- Expand the property tax swap proposal to provide meaningful property tax relief for all high tax communities.
- Only provide property tax relief for the amount of extra local revenue that has been provided to reach adequacy.
- Do not provide property tax relief for any extra local revenue that is provided above a school district's adequacy target.
- Do not reduce the amount of property tax relief that middle tier communities would be eligible for.
- Add language to ensure that a portion of future State education funding is allocated to the property tax relief component.
The following decisions should be discussed further:
- Revisit the decision to remove the language that took into consideration if a school district was spending above or below their adequacy target when determining need.
- Revisit the decision to ask middle tier communities to provide a greater proportion of property taxes to fund their schools.
- Revisit the decision to "de-prioritize" future State funding for middle tier districts.
- Review calculations in the formula that may be incorrectly overstating some school district's actual property tax revenue by 10% and may be understating other school district's actual property tax revenue by 10%.
As part of the appropriations discussions, the following should be considered:
- End proration on English language learner funding as part of next year's appropriation. This additional funding for English language learners would become part of the base minimum funding.
- Ensure that next year's appropriations includes sufficient funding for the property tax relief component of SB1.