Fair and equitable school funding must eliminate PTELL and TIF subsidies

For years, many have sought an equitable and fair funding formula for Illinois school district finances. Senate Bill 1 is not that solution despite numerous educational leaders, politicians and media endorsements of the bill’s passage by overriding the governor’s amendatory veto.

SB1 retains the most unfair and inequitable practices within the current school funding formula – subsidies related to Illinois’ Property Tax Extension Limitation Law (PTELL) or Tax Caps and Tax Increment Financing (TIF) districts.

Most don’t realize that after local taxing districts complained about lost revenue due to PTELL and TIFs, the districts demanded and received state subsidies years ago costing state taxpayers hundreds of millions of dollars per year benefitting only a few districts.

Currently, the General State Aid (GSA) formula calculations are partially based on the property wealth within each school district that could be used to determine the property taxes levied locally to finance its educational needs. The less property wealth a district has the more GSA it receives to equitably fund less wealthy districts.

As a result of the laws passed in 2000, the GSA currently grants large subsidies to school districts that have reduced property values not because of poverty but due to PTELL and TIFs underreporting the district’s actual property values. Chicago has the largest PTELL and TIF subsidies per student in the state.

PTELL does not result in a loss of revenue for any district unless the Consumer Price Index is greater than 5 percent. In the last 35 years, the CPI has only been higher than 5 percent one time and that was in 1990 when CPI was 5.4 percent. Why is there a subsidy?

GSA distributed more than $500 million of PTELL and TIF subsidies in 2013 alone, with just 40 school districts – 97 percent of them in Chicago, Cook County and the collar counties – grabbing almost the entire subsidy. Downstate school districts received just 3 percent of the total subsidy.

The PTELL Adjustment in the GSA funding formula allows Chicago to underreport the $88 billion in actual property value within its boundaries to $54 billion, resulting in a GSA subsidy of $284 million compared to $16 million for the entire downstate districts.

The substantial majority of the school districts – 570 districts out of 862 receive no PTELL subsidies; 238 districts receive only a total of $43 million, while only 54 school districts, including Chicago and Cook County school districts receive $459 million or 91 percent of the total PTELL subsidy.

The data from the Illinois Policy Institute for the PTELL Adjustment shows that Chicago receives more than $800 per student in subsidies, related to its reduction in property wealth, while downstate districts receive only $25 per student.

Chicago also benefits from the $10.1 billion in property value in 145 TIF districts in 2016, and receives an additional $264 million in GSA subsidies, almost five times the amount of reduced property wealth as downstate and more than twice that of the collar counties.

Unlike TIFs in downstate Rockford, which limit their TIFs to blighted areas, Chicago has TIFs in many of the wealthiest areas within the city limits.

Chicago also receives $2513 of poverty funding per low income student, almost double the $1343 per student for downstate districts. Chicago’s total GSA funding has grown at a rate of 11 percent annually since 2000, a rate nearly six times higher than that of downstate’s 2 percent growth.

Is this the equity and fairness endorsed by local education leaders, politicians and the news media? This is why SB1 was vetoed by the governor to eliminate subsidies in the current GSA funding formula to make that distribution fair and equitable to all school districts.

With the amended veto, no district would receive any less than it currently receives and that includes Chicago. It will not cost CPS $463 million because the Chicago pension costs would be voted on in separate legislation.

Rockford would get $9.5M with the PTELL and TIF state subsidies eliminated compared to what it now receives with the subsidies and 97 percent of the school districts would receive more state funding under the governor’s amendatory veto than SB1.

The amendatory veto also reduces funding for declining enrollment in 2021. Why should taxpayers give the same or more money to districts such as Chicago, where enrollment has declined by over 30,000 students or 7.5 percent in the last 5 years?

Proponents of SB1 bemoan the high local property taxes as one reason for billions in additional education dollars from state taxes. But how much do you think our local property taxes will be cut with the passage of SB1, with billions in “new state dollars” paid to the state by the very same local taxpayers that also pay the property taxes?