There are a lot of uniquely bad budgetary practices in Illinois that if ceased now, could save taxpayers millions.
This is important to remember not only in the context of budget negotiations, but also when judging different groups’ complaints about the budget impasse. If nothing else positive, the impasse has brought certain bad practice to light.
This could not be more evident than with a lawsuit this week coming from Chicago Public Schools, or CPS. CPS is suing Gov. Bruce Rauner and the Illinois State Board of Education, accusing the state of employing “separate and unequal systems of funding for public education in Illinois.”
The lawsuit asks that the state be found in violation of the Illinois Civil Rights Act for maintaining what CPS calls “separate and unequal” systems for funding school districts and pension obligations. The lawsuit points out that most CPS students are minorities and poor, while public school students in the rest of the state are “predominantly white.”
CPS could be right that there is some sort of discriminatory element to the district – but more so in the fact that poor and minority students are sentenced to terrible schools by their zip code. And that CPS has blocked charter school expansion in the city at the Chicago Teachers Union’s wishes.
But what CPS is not right about is the reasons for fiscal crisis. The district’s financial problem is not due to a lack of money. The district spends an exorbitant amount of money, including on some of the highest paid teachers and administrators throughout the country. Beyond that, the district – like many others across the state – engages in the irresponsible practice of pension pickups.
Since 1981, when it was negotiated as part of a collective bargaining agreement, CPS has been picking up part of teachers’ pension payments each year, meaning the district (and by extension, taxpayers) has been paying 7 percent of the teachers’ 9 percent payment. This practice has cost the district $1.2 billion alone in the last decade.
It’s unsustainable, reckless practice that pushes money out of classrooms.
Pension pickups are just one part of the burden teachers’ pensions impose on taxpayers. Teachers’ Retirement System, or TRS, does the pension system for teachers outside of CPS, does the same thing and has admitted it can’t meet the lofty investment return targets it previously had set for itself, leaving taxpayers with the tab for the shortfall. And TRS’ mismanagement mirrors CPS. TRS’ pension pickups cost taxpayers $134 million in fiscal year 2015 alone.
TRS’s investment return failures combined with pension pickups mean taxpayers are getting hit by pension costs on three sides. First, taxpayers pay the state’s employer pension contribution through income taxes. Second, many pick up their teachers’ required contributions through local property taxes. And finally, taxpayers have been solely responsible for bailing out the billions in pension fund failures.
Now, at the crux of CPS’ lawsuit, is the district asking for more funding, which would be at the expense of taxpayers throughout the state. Downstate taxpayers – who are already paying for their own districts – would have to bail out a failing district in CPS.
As we examine budgetary priorities during the state’s budget impasse, complaints like that in CPS’ lawsuit should be met with heavy skepticism. The district has been mismanaged and is failing financially, as well as in the classroom. The district needs significant fiscal and educational reforms before asking for a bailout from Illinois taxpayers.
Across the State of Illinois, except for Cook County, taxpayers will be receiving their property tax bills in the mail. For most this will cause outrage over how high these taxes are. Here are a few facts:
- Illinois is #2 nationally for the highest property taxes
- Highest Ranking Property Taxes by County, Illinois Counties
- Lake #17 nationally and #1 in the Midwest
- Dupage #23 nationally
- Kendall #28 nationally
- McHenry #29 nationally
- Kane #30 nationally
As you can see 5 of the top 30 counties with the highest property taxes are here in Illinois. So who is to blame for these high taxes and how can we stop them from increasing so fast?
First, a few definitions:
Levy – The amount of tax dollars the taxing body is requesting from the county tax extension office each year. A levy is a tax.
Extension – The actual amount of tax dollars allowed, based on tax rate, that the tax extension office is allowed to tax property owners and requested in the levy. An extension is the actual levy taxed.
Assessment – The assessed value of the property and improvements (buildings). This is not a tax, but what the shared tax liability is based on.
Tax Rate – The calculated rate that will be multiplied with 1/3 of the assessed value to get the actual tax dollars it will cost each property owner. (Cook County is 1/6)
PTELL (Tax Cap) – Property Tax Extension Limitation Law that prevents taxing bodies from increases their extended tax by the lesser of CPI (Consumer Price Index) or 5%.
Maximum Rate – The maximum allowable rate that can be extended in each fund per taxing body
First we must know who is at fault for the tax increases.
- Is the assessor at fault?
- Is the taxing body at fault?
- Is it the legislature in Springfield?
Here is a simple chart to show you it’s the taxing bodies increasing their levy every year. Detail for this chart are the bottom if you want to read further.
Tax rates fluctuate up and down in the opposite direction as the assessments. So when you hear a taxing body saying the tax rate went down, its because the assessment went up. Taxing bodies use this trick to claim they are lowering taxes when in fact they could have, and probably did, raise taxes.
Illinois has approximately 7000 taxing bodies, over 2000 more than the next closest state, Pennsylvania. This allows property taxes of Illinois to be far above average.
Property taxes in Illinois average 2.28 percent of a home’s value, according to the Urban Institute. In New Jersey, they’re 2.32 percent, and in lowest-taxing Hawaii, they’re 0.27 percent. (The lowest among mainland states is Alabama, at 0.46 percent.)
Springfield does not control property taxes directly. They put PTELL in place to prevent increases greater than CPI. They have also been discussing freezing property taxes. They cannot lower the property taxes. They have increased the homestead exemption over the years and aided senior citizens and veterans. Springfield does not control the raising or lowering of property taxes, that is the sole responsibility of the taxing bodies.
So what can citizens do to stop the ever increasing property taxes?
- Attend local taxing body meetings and provide input. Budget hearings start in June running through September. Most taxing bodies build the tax increase into their budgets. Ask them if the do. If they do, a vote for the budget is a vote for a tax increase.
- Attend the levy hearings which are typically October through December. Each taxing body is different so ask by getting involved.
- Run for local office yourself or recruit and help others. These elections are held in off years so 2017 is the next set of races. On April 7th was the last round. Voter turn out was barely over 10% in many areas. These elections are where you can have the greatest impact on your taxes, but few bother to get involved.
Conservatives are winning the debate on spending and fiscal responsibility. Much of the conversation out of both Springfield and Washington is about where cuts can be made and how to stop the growth of debt. The same must be done at the local levels. The only way to do this though is to get involved, ask questions and start holding these local officials accountable for their votes.
Please feel free to contact Illinois Conservatives for help in the questions you should ask and to share the stories you have of you local taxing body, both good and bad.