Reforming Education Funding

Written by John Gordon

After missing the first two installments of state payments to local school districts, the Illinois General Assembly has approved a new education funding mechanism in legislation that also includes a tax credit for scholarship donations, some school mandate relief, and several other measures.

Senate approval on Tuesday (with a vote of 38-13-4) followed a dramatic Monday evening vote (73-34-3) by the Illinois House on Senate Bill 1947. The House vote came after a failed first vote on the bill and a failed attempt to override Governor Bruce Rauner’s amendatory veto of Senate Bill 1. The bill still needs the Governor’s signature and he has pledged to sign it.

Once signed, schools will begin to receive the approximately $6.7 billion in state funding that is currently on hold. Senate Bill 1947 contains much of the same language of Senate Bill 1. A new evidence-based formula for school funding incorporates 27 elements considered essential to high-performing schools, such as reduced classroom sizes, updated technology and computers, advanced teacher training, and increased support for English-learning students. By using the availability and cost of these elements, the formula establishes a unique adequacy target for each school district. Those that are determined to be the furthest from their adequacy targets will receive the largest share of the new dollars appropriated for education. The bill also contains a hold-harmless provision that ensure no school district sees a decrease in the funding they received in the 2016-2017 school year. Chicago Public Schools receives pension assistance from SB 1947, as the state will pick up CPS’ normal pension costs (approximately $221 million) under the bill.

SB 1947 also includes a new measure providing $75 million in tax credits to individuals and businesses that donate to scholarship organizations that provide financial assistance to low and middle-income families who send their children to private school or an out-of-district public schools. Students whose guardians earn an income of up to 300% of the poverty level will be eligible to receive these scholarships. The tax credit is worth 75% of the amount donated and is capped at $1 million per donor for a given year. An independent organization will be tasked to assess the students who receive these scholarships in comparison to similar students in public schools to determine if the private institutions are effectively instructing these students. Any approved scholarship organization must prove that it is spending no less than 95% of its contributions to provide scholarships to eligible students. This program is set to expire in five years unless it is reapproved by the legislature and the Governor.

Senate Bill 1947 also includes measures regarding property taxes. It allows Chicago Public Schools to go beyond its current legal cap on its levy for teacher’s pensions. The current rate is 0.383 on taxable property within the district. The bill allows CPS to extend that rate up to 0.567 if it so chooses. The bill would also allow for certain school districts to lower their property taxes via ballot initiative. If a school district is at 110% of its adequacy target, then voters in the district may put an initiative on the ballot that lowers the school districts property tax levy by up to 10%, granted that at least 10% of registered voters within the district sign a petition asking to do so.

The bill also:

• Provides a certain amount of mandate relief for school districts. Districts may choose to lower the physical education requirement from five days per week to three days per week if they so choose, while also allowing for greater flexibility for students who take part in athletic extracurricular activities. School districts may also choose to contract out driver’s education.

• Allows for the expediting of requirement waivers. Waivers that need approval of the General Assembly will be sent to the four legislative leaders for consideration. If at least three of the four leaders want further consideration of a waiver request, then the request is sent to the full legislative body. If less than 3 of the leaders send a request of further consideration, then the State Board of Education may decide to accept, modify, or reject the request without action from the General Assembly.

Once signed, the legislation is effective immediately. It is important to remember that this formula is for distributing new state dollars and its predicated on increasing state education spending by at least $350 million per year for the next ten years. Some education advocates say that this amount may not be enough to properly fix the education funding system in Illinois, even with these latest improvements. It will be vital for the General Assembly to continue to increase education spending by the state, or the new funding model may fall short of its goal of increasing the percentage of education funding that is taken up by the state and promoting education equity and adequacy across Illinois.