House Bill 750: Proposed School Finance Reform Bill designed to offer property tax relief and increase school funding,
but at what cost?

Proponents of House Bill 750 say it just might be the best attempt to reform education finance in the history of Illinois. Its detractors say it’s probably the largest tax increase ever proposed. Both sides agree that something must be done about public school finance and point to skyrocketing property tax as evidence of a system that is not working.

HB750 passed the House of Representatives as a "shell bill" (legislation that contains no substantive language) on April 3, 2004. Since no action was taken on the bill in the November legislative session, the proposal will likely be re-introduced in January when the new General Assembly convenes.

Key elements in the bill include the creation of a School Property Tax Relief fund that would provide up to 25% tax abatement to property owners in exchange for increasing the state’s personal income tax rate by 67% (from 3% to 5%), increasing the state’s corporate income tax by 67% (4.8% to 8%), creating a new income tax on retirement income for individuals with an adjusted gross income over $75,000, expanding the state sales tax to certain services and deleting many current tax exemptions.

A key goal of the bill is to “raise the bottom up.” The idea is to increase state funding for school districts in areas where property values are low to meet the funding level of districts in high property value communities. It increases the foundation level in the school funding formula to $5,952 in the first year of the law’s enactment. In subsequent years, the foundation level would increase by the rate of the Employment Cost Index (ECI). The estimated cost of this provision is $1.8 billion. It also increases annually the amount of the Poverty Grant by the percent increase in the ECI.

HB750 is authored and spearheaded by the Center for Tax and Budget Accountability (CTBA), a 501-3c non-profit organization financially backed by:

• The Woods Fund of Chicago

• The Joyce Foundation

• The John D. and Catherine T. MacArthur Foundation

• The Chicago Community Trust

• AFSCME Council 31

• The Illinois Federation of Teachers

• The Alphawood Foundation

• The Illinois AFL-CIO

• The Elizabeth Morse Charitable Trust

• S.E.I.U. Illinois State Council

• LaSalle National Bank, N.A.

• The Illinois Southern and Central Laborers’ & Employers’ Cooperation

• Education Trust

• The Freedom Forum

• The New Prospect Foundation

• Mr. Buzz Sawyer

The CTBA has been appointed technical advisor to the Illinois Joint House/Senate Committee on Property Tax and School Funding Reform, the Illinois House Committee on Commerce and Business Development and the Illinois Comptroller's Commission on corporate tax avoidance. The organization is in a position of influence with Illinois’ legislators.

HB750 is also supported by A-plus Illinois, an education advocacy organization that receives financial support from American Federation of State, County and Municipal Employees (AFSCME) Illinois Council 31, Center for Tax and Budget Accountability (CTBA), Chicago Urban League, Illinois Education Association, Illinois Farm Bureau, Metropolitan Planning Council and Voices for Illinois Children.

The bill is receiving grass roots support from the Illinois PTA. Its president, Gayla Boomer, is encouraging all members to promote HB750 to everyone they know, and especially, to bring the bill to the attention of their school board and school administration. To solidify legislative support the Illinois PTA is encouraging an aggressive letter writing campaign addressed to “seven key recipients:” House Speaker Michael Madigan, Senate President Emil Jones, House Minority Leader Tom Cross, Senate Minority Leader Frank Watson, Governor Rod Blagojevich, the local State Senator and State Representative.

Ralph Martire, executive director of the CTBA, is crisscrossing the state in an effort to broaden the support for HB750. His schedule included a visit to Genoa in September and he is scheduled to speak at Rockton-Hononegah High School on December 14.

Opposing HB750 are members of many grassroots taxpayer advocacy groups in Illinois. Among them is Jim Peschke, cofounder of Citizens for Reasonable And Fair Taxes (CRAFT), based in Harvard. He believes that 80% of Illinois' public schools face deficits not because they have a funding problem, but because they have a spending problem. CRAFT has devised an alternate to HB750 called "No Taxpayer Left Behind" (NTLB) which they say balances budgets by restoring local control of school districts.

Peschke labels HB750 a bill by the teachers' union, for the teachers' union.

Chris Jenner, Cary Illinois resident and parent believes the real "structural deficit" in education finance isn't fixed by HB750, but that it is in the bill. He points to the bill’s call for annual foundation level increases to be tied to the Employment Cost Index as evidence that school spending has grown out of control. From 1998 to 2003, the consumer price index (CPI) rose by 12.9%, the ECI by 20.9%, and school spending (operational expenditures per pupil) by 30.2%.

Jenner believes that HB750 guarantees that the prices of goods and services produced in Illinois will rise. He says that nothing prevents a school district from asking for a property tax increase referendum the day after the bill passes, should it pass. He maintains that the recent spending record of government and its schools will rapidly erase any property tax relief.

Governor Rod Blagojevich appears cool to HB750. In DeKalb, at the announcement of the new Target distribution center, he told the audience that there will be no increase in sales or income tax under his administration. The governor has threatened to veto the bill, should it pass, because he sees it as a big tax increase, which it is.

HB750 would expand sales tax to the following service sectors:

How local school districts would fare if HB750 passes:

source: Center for Tax and Budget Accountability

In our next segment in this series DeKalb County Online will discuss alternative solutions to education finance reform.