The opinions expressed on the Rants and Raves of Mac McIntyre (that's me in the picture) are solely those of its author and are shared for the purpose of encouraging dialogue about life and issues in DeKalb County, Illinois. I welcome your comments, public or private, and encourage your participation in community affairs.

Those who earn their paycheck from public education are likely to define the needed reform as more revenue. Those who write checks to the tax collectors, and who are employed in the private sector, are more likely to insist that any such reform include controlled spending, especially in the area of payroll, and more specifically in the areas of administration and support services.

In April of 2004 the Illinois House of Representatives passed HB750 as a "shell bill" (legislation that contains no substantive language). It was touted by its supporters as the most comprehensive education finance reform effort in the history of Illinois. Property tax payers in less wealthy communities would receive a 25% reduction in the education portion of their tax bills. Those in wealthier communities would receive less of a reduction. All would receive a 67% increase in their state income tax, as would all Illinois corporations. A plethora of new taxes would also be created and/or increased.

If education finance reform simply means more money for schools then HB750 was the best thing since sliced bread.

The biggest problem with HB750, for its supporters, was Governor Blagojevich's promise to veto any legislation that increased sales or income tax. It's hard to build consensus among lawmakers when faced with the likelihood of a veto.

State Senators Rick Winkel (R-Champaign) and James Meeks (Ind.-Chicago) introduced compromise legislation to HB750 and attached it, as an amendment, to HB755, which previously had nothing to do with school finance. HB755 was originally intended to require parental notification of police line ups on school grounds.

Confused?

The practical purpose of HB755 is to get 36 votes in the Illinois Senate, or enough votes to override Gov. Blagojevich's likely veto. To get that done every one of the Senate's 32 Democrats plus four Republicans are needed.

The compromises contained in the language of the Senate Amendments to HB755 are designed to put pressure on the Republican members of the Senate. Those compromises are effective as the Illinois Senate Higher Education Committee, which includes four Republicans (including J. Bradley Burzynski), approved the proposed legislation by an 8-1 vote.  Burzynksi was the sole vote against the proposition.

Here are some highlights and comparisons of HB755 and HB750...

HB755:

increases the State income tax rates for individuals from 3% to 5% and for corporations from 4.8% to 8% (estimated to generate $5.8 billion)

HB750:

increases the State income tax rates for individuals from 3% to 5% and for corporations from 4.8% to 8%; expands the present sales tax to include most non-medical services for the first time (excluding professional services from lawyers and accountants); subjects retirement income (excluding retired government employees) above an adjusted gross of $75,000 to personal income; eliminate approximately $250 million of corporate tax incentives in enterprise zones. (estimated to generate $7.1 billion)

NOTE: While certainly an improvement over HB750, the 67% increase in the corporate income tax rate, combined with the substantial increases in fees imposed on businesses, ordered by the Blagojevich administration, will wreak havoc on Illinois businesses, especially small independent entrepreneurs. Illinois' loss of private sector jobs will be gains for Wisconsin and Indiana.

HB755:

raises the foundation level in the school funding formula to $6,100 per pupil from the level of $4,964. This amount would grow annually by the lesser of CPI or 3.5%.

HB750:

raises the foundation level in the school funding formula to a similar level as HB755. However, HB750 calls for annual foundation level increases to be tied to the Employment Cost Index. 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%.

NOTE: The effort (of HB750) to tie the foundation level to the ECI is a blatant example of greed. It is well reported that 80% of the Illinois public school districts are in deficit spending yet many of those districts have doled out exorbitant increases in salaries and retirement benefits despite being in the red. Neither bill even remotely mentions, much less addresses, budget accountability.

HB755:

allegedly establishes a property tax abatement equal to 30% of the dollar amount for K-12 school property taxes. (Supporters are describing the reduction as 30 percent, but the state revenue department says that based on how the decrease is calculated under the reforms, number will be smaller.)

NOTE: HB750 calls for a similar property tax abatement. But there would be a lag time in both bills. Income taxes would increase significantly in 2006 while "property tax relief" would not take effect until 2007. 

The relief fund goes to the school districts. Nothing in HB755 or 750 prevents the school districts from immediately attempting a "no impact" referendum that could allow them to not provide the intended property tax relief. In fact, the first Senate Amendment to HB755 called for any referendum attempt  (if) after the bill becomes law to require a 60% majority vote. This language was quickly removed from the bill and that should serve as an indicator as to how the school districts would react after receiving the "property tax relief funds."

Some sugar coating was added to HB755 to broaden its support:

	HB 755 provides $370 million to higher education (75% to universities; 25% for community colleges)
	HB 755 provides $190 million to counties and municipalities through the Local Government Distributive Fund.

	HB 755 increases the Earned Income Tax Credit fourfold (from 4% to 20%)
	HB755 creates a new renter's tax credit estimated at $150 million
	HB755 doubles the eligible amounts of the income tax credit for payment of tuition to a private or parochial school from a $250 maximum to a $1,000 maximum

Education finance reform is sorely needed but any attempt that does not look hard to address spending is a ruse.  Neither HB755 or 750 addresses spending.

There is a real push to get Springfield legislators to vote on HB755 this week. It is hoped that the legislators will reject this massive tax increase and, if not, that Gov. Blagojevich will fulfill his promise to veto the bill.

Once (if) this legislation is defeated perhaps Springfield will take a more proactive approach to school finance reform. J. Bradley Burzynski (R-Sycamore) has introduced a bill (SB0081) that offers a far more equitable swap between income and property tax for schools. It allows for voters in each school district to decide by referendum whether or not they want the swap.

Another, and perhaps the best attempt at school finance reform, is that of the Illinois Heartland Institute. It is the only attempt to date that focuses on budget accountability.

TABLE 1: How HB755 would affect local tax payers
source: Chicago Tribune