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The Grand Bargain Could Include a Fix to the Broken School Funding System

The state’s schools are heavily funded by high property taxes and highly unequal. A budget deal could address both.

Students play at a school in Galesburg, where the superintendent says schools may not open if there is no budget.   Photo: Scott Strazzante/Chicago Tribune

This week, Whet Moser is Chicago’s Chief Budget Correspondent, reporting from Springfield as the Illinois legislature scrambles to pass its first budget in two years. Find out more about Budget Mayday.

It’s possible that the legislature could end the session without a budget. Maybe probable. It certainly would not be unexpected. If it does, everything that comes after–a supermajority to pass a new budget bill, the slow creep of the 2018 gubernatorial campaign–makes it even more unlikely that the state will have a budget before 2019.

It’s also possible that the legislature could pass a budget, and if they do, it will include a property-tax freeze unless the governor completely folds. Budget or no, whatever choice we make will have significant consequences for schools—but not having a budget until 2019 could be a true disaster.

“This [school] year we can open until maybe October 1st, but my recommendation would be not to open, because we would bankrupt our district,” says Kristin Humphries, superintendent of schools in East Moline, whose district cut 20 teachers in March. “We’d have to borrow. If we wipe out everything we have now, which is very little, we will be in a constant struggle with borrowing and paying back tax anticipation warrants, going for short term loans through banks. It would be a cycle we would never get out of.”

Ralph Grimm, superintendent of schools in Galesburg, faces a similar scenario.

“If the budget doesn’t pass, we’ll open on time, but in all likelihood, District 205 would not be able to have school for a full year,” Grimm says. “This is my 33rd year as an educator, 21 as a superintendent. This is the worst I’ve ever seen it. The state’s inability to pay their bills, their unwillingness to do what it takes to raise the revenue to pay their bills, has put undue pressure of serious magnitude on school districts.”

But raising the revenue to pay the state’s bills almost inevitably comes with the property tax freeze, which affects localities’ ability to raise revenue to pay their bills, after years of the state making that harder. 

“The state hasn’t come through for eight years [of proration, i.e. cuts due to budget shortfalls], so the only place to go is to the property tax owners right now,” Humphries says. "Obviously that’s a very delicate balance. But if [property taxes are] frozen and our state continues to underfund us, our property owners won’t be able to afford our own schools, because … in East Moline we don’t have a lot of property wealth.”

The years of proration have been compounded by the impasse. Schools are receiving “categorical” funding late, essentially reimbursement for a broad range of functions, forcing them into dwindling reserves and compounding the risk of a property-tax freeze. “If we lose that source of new money, we’re going to be in even worse fiscal straits,” Grimm says, citing the late payments, lower state funding, and decreased federal dollars, even as expenses grow.

In order to raise more money through property taxes, localities would have to pass a referendum—a high political bar. Neither superintendent sees that happening.

“I don’t think it’s politically feasible, and much of it is to do with what’s going on [in Springfield],” Humphries says. “Nobody trusts government right now.”

It gets back to the fix the state is in between school funding and property taxes. The state’s public schools are heavily dependent on property taxes, which results in extreme funding inequalities and very high property taxes—especially in poorer districts, where the taxes have to be high because the housing values are so low. There are a lot of reasons to shift this regime away from property taxes, but it needs a mechanism.

That’s why Humphries and Grimm were in Springfield, in support of House Bill 2808, which could be that mechanism. It moves state aid away from a property tax model and towards districts in need—specifically 27 indicators of need. “Think of this model as a recipe for good schools,” is the way NPR Illinois’s Dusty Rhodes describes it. "The version under consideration by the legislature has a list of 27 ingredients. All 27 are backed up by scholarly studies but honestly, your gut would probably tell you the same thing. These are common-sense items like smaller class sizes, full-day kindergarten, librarians, counselors, social workers and computers.” Schools with the most need would move to the front of the line for funding.

“We have about 72 percent low-income [students], an increasing [English-language learner] population, so targeting money to provide programs for those two segments of our population would be extremely beneficial,” Grimm says. "Our class size is going up because of the cuts that we’ve made to our district in the past two years, $3.4 million. Having additional funding to help us lower class size would be phenomenal. Some of the other elements would be phenomenal.”

A similar Senate bill sponsored by Andy Manar passed a House committee with bipartisan support yesterday. If property tax legislation, still the biggest barrier to a grand bargain, is to pass, it’s likely to pull along a different way of funding schools in Illinois.

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