School officials across the state are wary of Gov. Pat Quinn's new property tax relief proposal. Given the General Assembly's budget woes, it's hard to blame them.
It's an undisputable fact that Illinois homeowners pay a lot in property taxes. The median homeowner in the Land of Lincoln pays $3,384 per year in property taxes, which takes up 5 percent of income for the state's median earner. Only four states in the country have a higher ratio. That reality makes property tax relief a potent political issue, one that Gov. Pat Quinn tried to capitalize on Wednesday by incorporating a mandated "tax swap" into his income tax proposal. Here's how he described the new plan:
"What I would envision is, the amount of money that the school districts get, additional new money from the state, a portion of that would be abated in property tax abatements — reductions — to the families and businesses and farmers of Illinois. … If you get additional new money from Springfield, from the state government, then I think part of the bargain has to be that the local school districts at least roll back a portion of their property taxes. … They end up getting more money. … They’ll get more money for education, and the taxpayers will get lower property taxes."
Unfortunately, there are a few big problems with Quinn's approach. The first we detailed yesterday: the tax swap would not increase education funding in Illinois, especially in the poorest districts. The state's Education Funding Advisory Board has recommended that the state bumps up its per-pupil foundation level spending by $2,000 a year. The nearly $3 billion in new revenue the Quinn administration says its education surcharge would generate could help close this gap. But forcing municipalities to lower their property tax rates simultaneously means there would be no net gain in funding. And there is no guarantee that lawmakers wouldn't divert that cash toward other stressed programs in the future. Schools using old books, in other words, wouldn't get more flexibility to purchase newer versions.
The other problem is one of credibility. Take Elgin's U-46 district, the second largest in the state. Increased state funding for education would help that town dramatically. In 2006-2007, Elgin's property tax rate stood at 8.5 percent, one of the higher figures in all of Cook County. At the same time, their school district spent (PDF) just $8,663 on each student annually, almost $1,000 less than the state average. Compare those numbers to nearby Barrington, whose residents paid a paltry 5.7 percent property tax rate but whose schools spent roughly $2,000 more per pupil than district U-46 in Elgin. That's because rich districts like Barrington (with huge houses and thriving businesses) can raise more money through property taxes while keeping the tax rate in those districts modest. It's the primary reason Illinois' education system disadvantages children from poor neighborhoods and towns. And it's why increasing the state's historically low contribution to K-12 education is so important.
But Elgin school officials are wary of Quinn's proposal. Why? They don't trust that the governor or the General Assembly, still $774 million behind in payments to schools for the 2009-10 academic year, will make good on its promise to deliver the funding on time and in full. "The difficulty," Elgin Area School District U-46 spokesman Tony Sanders told the Daily Herald, "is that we have become very accustomed to local property taxes being the most stable form of revenue that districts have." Elgin itself is missing nearly $30 million in state aid payments. Last year, the district fired 407 staff members because of its budget shortfall.
There is one solution out there that could satisfy all of the above parties. HB 174, the comprehensive tax reform proposal that passed the State Senate in 2009, would both increase education funding and lower the property tax burden on homeowners. How? By raising the state's income tax rate by 2 percent and expanding the sales tax to discretionary consumer services, the legislation would raise roughly $6 billion annually. Initially, much of the money would pay down the state's backlog of unpaid bills, building back trust between local and state officials. In the second fiscal year after the bill passes, one-third of the new revenue (about $2 billion annually) would be routed directly into the state's Common School Fund. The legislation would also double Illinois' property tax credit, which would provide the needed tax relief Quinn is trying to attain through the tax swap without forcing districts to reduce the amount of local tax revenue they spend on their children's schools. It's an elegant, if imperfect, solution.
Gov. Quinn and many House Democrats have vocally supported the bill in the past. With the November election coming, they've tucked that proposal into their back pockets. Instead of continually tweaking a plan that won't even begin to solve Illinois' budget problems, it's high time some folks in Springfield start to sell the benefits of a substantive bill once again.