End and Means: One Plan to Change School Funding Shines Without Pizzaz

May 1, 2014

Charles N. Wheeler III
Credit WUIS/Illinois Issues
As the Illinois General Assembly girds for what everyone hopes will be the final month of its spring session, the spotlight is on a handful of high-profile issues, topped by crafting a budget for the 2015 Fiscal Year that starts July 1.

Key to budget-making, of course, is whether lawmakers heed Gov. Pat Quinn’s call for keeping in place current income tax rates, now scheduled to roll back on January 1. Allowing the rates to drop dramatically would lead to “extreme and radical cuts” in education and other core state services, the governor warned in his March budget address.

Senate President John Cullerton and House Speaker Michael Madigan, both Chicago Democrats, quickly endorsed the governor’s plan, while Republicans derided the broken promise of a temporary tax increase. Skeptics, some of them Democrats, also criticized Quinn for proposing new and expanded programs in tough financial times. A particular target was his plan to send every homeowner a $500 refund check every year, replacing an existing income tax credit tied to property tax payments.

Quinn touted the idea as “the most significant property tax relief in state history,” at best a dubious claim for a couple of reasons. Chief among them is the fact that the annual $500 check would not be linked at all to actual property tax payments, nor would the giveaway benefit everyone. Indeed, homeowners whose tax bills exceed $10,000 actually would lose money under the governor’s plan, because they’d no longer have the current income tax credit equal to 5 percent of property taxes paid. Renters would get nothing, even though they also pay property taxes as part of their monthly payments.

The governor likened his plan to former Gov. Jim Edgar’s 1997 effort to raise income tax rates to provide more money for local schools and to cut local property taxes, also a stretch if not downright mendacious. The key difference: A major feature of the Edgar tax swap proposal called for a dollar-for-dollar reduction in local school levies for some $900 million in additional state aid, which analysts at the time estimated would amount to almost a 30 percent cut in school operating taxes. Quinn’s plan ignores local property tax levies altogether.

In addition to property tax relief, the Edgar proposal also would have increased state aid to poorer school districts by some $600 million; the only way the governor’s $500 checks would help struggling schools would be if the folks who got them splurged at PTA fundraisers.

Still, maintaining income tax rates at current levels, as Quinn wants, is critical to the financial well-being of the state’s schools, which would lose more than $600 million in general funds otherwise, according to budget documents. With the rates in place, the budget recommends a $291 million general funds increase.

While attention has been focused on Quinn’s tax plan and how many dollars might be available for primary and secondary education, a truly revolutionary change in school funding has registered barely a blip on the session radar screen, perhaps because the proposal does not deal with how much money will be appropriated, but rather how those dollars will be allocated.

The product of a bipartisan Senate task force, the plan would link virtually all state aid for local schools to student-based financial need, instead of the current practice in which some dollars are earmarked for the poorest schools through general state aid, but a larger chunk are distributed through grants that don’t take into account the wealth of a district’s tax base.

The new funding scheme, embodied in Senate Bill 16, is “a dramatic and appropriate departure from the status quo,” said its chief sponsor, Sen. Andy Manar, the Bunker Hill Democrat who co-chaired the task force.

Its key feature would create a single funding formula to distribute state dollars to local districts using a weighting system based on the characteristics of each district’s students balanced against each district’s ability to support its programs through its local tax base. Folded into the new calculations would be almost all of the current grant programs, which typically reimburse districts a portion of their costs for specific services like special education, vocational training, student transportation, bilingual education, and others. Additional funding for low-income students, now part of general state aid, also would be determined through weighting. The only exceptions would be early childhood education, certain high-cost special education programs and school construction.

As an example, in a district in which half its students were from low-income families, each poverty-level child would count as roughly 1.2 children; if half were also English learners, each would count as 1.1 students. The weights are cumulative, so a low-income English learner in the district would be weighted at 1.3. Transportation weighting would vary according to population density, with a higher weight assigned students in districts with fewer pupils per square mile.

The weighted student count would be used to adjust upwards the statutory foundation level — currently $6,119 per student — so that each district would have its individual figure, reflecting the cost of providing a quality education to the diverse mix of children the district serves.

Using a district’s attendance and its property tax base, education officials would calculate the local resources available for each student. If the per-pupil number fell below the district’s foundation level, state dollars would make up the difference.

The new process is complicated, Manar conceded, but no more so than the system in use since 1977, which he said is “very complex, and unpredictable, and complicated, but one thing about it is very simple — it is not working for the students or the taxpayers of the state.”

By taking into account specific student needs through broad-based weighting, instead of relying so heavily on specific grant programs, 92 cents of every education dollar would be distributed based on student needs, compared to just 44 cents now, he added.

The plan includes another laudable change — a requirement that local school districts move to school-based accounting, so that state dollars can be tracked on a building-by-building basis to assure, for example, that funds intended to help educate low-income kids go to the schools they attend within a district.

Implicit in any plan that funnels more state education dollars based on need, of course, is that fewer dollars will go to relatively better-off school districts, for example those with higher property values or fewer low-income kids, unless the pie itself gets much bigger than the $300 million or so Quinn is proposing for FY 2015. One helpful suggestion — why not use $600 million for school aid rather than some spurious tax relief scheme?

While lacking the pizzaz of a $500 check in the mail, SB 16 offers something truly game-changing — the most far-reaching overhaul of school funding since the early 1970s, a prospect well worth top billing in the end-of-session dramatics.

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois Springfield. 

Illinois Issues, May 2014