Back-door school subsidies

Oak Park's property wealth brings a bounty of tax dollars to its school system.
(Phil Velasquez/Chicago Tribune)

"That $7 million is a huge percentage of our budget," said Robert Spatz, vice president of the school board, which oversees a budget of nearly $70 million. "Seven million is 100 staff members."

Without the subsidy, Oak Park's basic state aid would have been $1.8 million instead of nearly $9 million.

CPS officials, facing a $1 billion deficit next year, defend the subsidies as a way to help districts that lose out on local revenues because of tax caps, as well as potential state aid because of the way Illinois distributes tax dollars to schools.

But Tom Johnson, president emeritus of the Taxpayers' Federation of Illinois, calls the subsidy program "property tax relief for the wealthiest districts," specifically "those districts that have grown in wealth dramatically."

The subsidies, he said, depart from the original purpose of state aid — to help equalize school spending, whether a district is property rich or poor.

Johnson served as chairman of the Taxpayer Action Board created in 2009 by Gov. Pat Quinn to examine spending and fiscal reforms. The group encouraged a broad school funding review as well as capping — but not eliminating — the subsidies, given the political challenges.

"Any piecemeal change ... would create immediate winners and losers and impede a proper resolution," the group's report stated.

CPS would lose the most if the subsidies were eliminated, so resistance from Chicago lawmakers would be expected.

And now that school districts are dependent on the subsidies, it would be hard for the General Assembly to take them away, said Jeff Mays, a former state lawmaker and president of the nonprofit Illinois Business Roundtable.

Mays is a board member for Quincy Public School District 172 in western Adams County, which isn't under tax caps and doesn't get subsidies.

"That takes money away from us,'' Mays said.

Shrinking resources

The subsidy formula dates to legislation in the late 1990s, said Rob Grossi, treasurer of the Bloom Township Trustees of Schools, who worked on the original formula.

At the time, districts were realizing the impact of the new tax cap law, called the Property Tax Extension Limitation Law, or PTELL.

The tax-cap law emerged in the early to mid-1990s as property tax bills were skyrocketing and taxpayers were growing fed up. PTELL generally limits increases in overall taxes billed annually to 5 percent, or the rate of inflation, whichever is less. Voters can approve larger increases.

Chicago's collar counties were the first to be subjected to the caps, followed by Cook County. Elsewhere, county voters could decide whether to use tax caps.

Districts facing loss of local dollars discovered that tax cap restrictions could affect their ability to get state aid as well, Grossi said, because of the way a district's property wealth was factored into the state aid formula. More wealth usually means less state aid, so the wealth figure in the formula is pivotal.

The solution was to change the PTELL law and create a different formula for tax-capped districts, Grossi said. That involved using an alternate figure for a district's property wealth that would grow generally at the rate of inflation — even if the district's real wealth grew faster.

The state uses the lower of the two wealth figures, to allow a district to get as much state aid as possible.

The extra aid, or subsidies, that districts received as a result became known as "PTELL adjustments."