Senator Manar Puts Lipstick on a Pig

In today’s Crain’s Chicago Business, Senator Andy Manar wrote an article about Senate Bill 1, a bill creating a new formula for funding education based upon what is called the “evidence-based model”. Simply stated EBM is a 27-step formula that measures a school district’s “adequacy” toward providing sufficient funding.

The article contains some inaccuracies which cannot go unaddressed and attempts to put a soft light upon what is the hard truth about this bill: that it’s a multimillion-dollar bailout of the Chicago Public School system.

Senator Manar starts out by stating:

“Illinois has the most regressive education funding system in the nation because of its reliance on property taxes and the state’s inability to meet its annual funding commitment. The result: Wealthy districts invest upward of $30,000 per student; poor districts as little as $6,000 per student.”

On this point I agree with him, but for a different reason. Our funding formula used to be quite progressive, but in 2004, the definition of “poverty” was changed to sweep more people up into its definition, resulting in an increase in the state’s expenditure for Poverty Grants from 10% of the General State Aid (GSA) formula in FY 2000 to more than a third in FY 2012, a 431% increase. I’m not saying that districts with higher concentrations of poverty don’t have unique problems that need additional resources, what I am saying is that you don’t have the right to take a basically progressive formula, change it and then cry foul over it being regressive.

In addition, the PTELL subsidy has grown from just $ 46 million in 2000 to $ 780 million in 2009, an increase of 1,267%. PTELL adjustments have particularly benefited Chicago Public Schools, which enrolls 18% of students, but receives 49% of PTELL dollars. As a result of these programs, Chicago has seen its education property tax rate drop from $3.60 per $100 of equalized assessed valuation (EAV) in 2001 to $2.37 in 2009. The $2.37 tax rate for Chicago compares with rates of $3 to $6 per $100 of EAV in school districts elsewhere in Illinois.

Neither the poverty grant nor the PTELL subsidy is “new money”. This is money that has been taken from what was a relatively progressive general state aid formula, making it much more regressive. As more state money goes into the CPS, local districts are left with nothing but property taxes to pay the bill.

The article then goes on to say that the formula:

“(A)lso eliminates the Chicago block grant, which gives CPS a prioritized, guaranteed level of funding from certain grant programs regardless of need. No more special deals.

No it doesn’t. The bill adds the $250 million of the Chicago block grant into the Base Funding Minimum (BFM) for CPS going forward. Under current law, this is money given to CPS that is over and above the actual claims of the District. None of the other 851 school districts get more than their actual claims. This provision in any form is a $250 million subsidy going directly to CPS at the expense of all other school districts in Illinois into perpetuity, and it is wrong.

The real elephant in the room, both for school funding and for our inability to get a budget, is and always has been pensions. The Senator says in his article:

“What Republicans call a “bailout” is simply the rest of us demanding that Chicago be treated like the rest of Illinois school districts with regard to teacher pensions. The state picks up teacher pension costs for every district except Chicago. Senate Bill 1 adds Chicago into the equation for the first time ever in the interest of fairness under the evidence-based model.”

Yeah, and it does it twice. First, it adds the normal costs of CPS pensions and costs associated with its retired teacher’s healthcare to the CPS Base Funding Minimum. This means that in FY18 CPS will have its Base Funding Minimum propped up by $221 million (not for any evidence-based reason, mind you), in FY19 it will increase by a greater amount to match its normal costs and healthcare expenses, which will continue to pad its base into perpetuity.

Second, it adds the normal costs of CPS pensions and costs associated with its retired teacher’s healthcare to the Adequacy Target going forward. If you are confused because you just read the same thing in the above paragraph, please know that this is not a mistake. The amendment allows CPS to get “credit” for its normal costs in this formula two times–both in the Adequacy Target and again in the Base Funding Minimum. This provision increases the Adequacy Target of Chicago Public Schools by $221 million in FY18 and will continue to increase its Adequacy Target for years to come at an ever increasing rate. An increased Adequacy Target pushes school districts forward in line for new state dollars. However, this provision is not based on evidence or best practices.

Finally, the Senator says: “It offers property tax relief to high-tax school districts”.

C’mon, Senator, it does no such thing. It only provides property tax relief if a district is over 125% of “adequacy”, and then only if the voters agree by referendum. That’s not property tax relief. Putting a hard cap on taxes as a percentage of EAV is property tax relief.

Senate Bill 1 actually does provide property tax relief right away for one school district. Go ahead, guess which one. It lowers Chicago Public School’s Local Capacity (the amount they should contribute locally) by over $500 million in FY18. This is unacceptable for the following reasons:

  • This manipulation, given only to CPS, artificially lowers the amount that would be required locally towards school funding. As a result, CPS is moved ahead in the line for new state dollars. In preliminary modeling, CPS is shoved in front of school districts that really do not have the local wealth to adequately support their schools.
  • The local contribution required by CPS is already much lower than other school districts because, compared to the rest of the state, Chicago is under-taxed. The effective tax rate for a homeowner in the City of Chicago is 1.71%, far below tax rates in other school districts. What’s even more off-putting is that this $500 million windfall will continue to grow over the years as the pension payments ramp up and will continue to drive down its Local Capacity Target.
  • Provides for the use of PTELL EAVs under certain conditions. This provision lowers the local contribution required by the City of Chicago by billions of dollars. As property values continue to grow, use of the PTELL EAV will continue to drive down the amount of funding the City of Chicago should be contributing locally to its schools.

So, Senator, if you want to have a conversation about pension shifts and property taxes, let’s have it out in the open, don’t go burying it in a bill where neither of those issues has a thing to do with any evidence-based reasoning. It’s an important conversation to have, but it doesn’t belong here.

This entry was posted in Education, Illinois Budget, Property Taxes and tagged , . Bookmark the permalink.

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