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 Illinoisans are desperate for property tax relief, pain that
some state lawmakers are leveraging to sell a different tax rather than
targeting the cause of high property taxes.
An amendment added to Senate Bill 690 would freeze property taxes levied by
certain Illinois school districts. And while the bill passed the Senate on May
1, there’s a catch: Illinoisans would first have to approve a change to the
state’s income tax system that has long topped Gov. J.B. Pritzker’s wish list.
The property tax freeze wouldn’t take effect until Jan. 1, 2021, and only after
voters approve a progressive income tax constitutional amendment at the ballot
box.
But the flawed “property tax freeze” on offer in SB 690 is hardly worth the
price of Pritzker’s progressive tax hike.
 School districts consume around two-thirds of local property tax dollars in
Illinois, so it makes sense to target them for a property tax freeze. But the
state’s inefficient education funding system would qualify most school districts
for an exemption under the amendment unless the state ponied up hundreds of
millions in additional education dollars it can’t afford. As a result, few
districts would see property tax freezes.
For example, if the state does not reimburse school districts for at least 97%
of “mandated categorical” costs, such as transportation and special needs, the
district qualifies for an exemption from the property tax freeze. One lawmaker
admitted the state hasn’t met these requirements in any of the past 10 years,
meaning districts would have been free to hike property taxes without voter
approval under this proposal. School districts failing to receive their full
funding promises under the state’s unreliable “evidence-based” model also
qualify for an exemption.
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In order for any school district to be subject to
the property tax freeze under SB 690, the state would have to
increase education funding by $350 million, and categorical funding
by $300 million, annually. This unsustainable spending increase
would guarantee that few school districts would see a property tax
freeze.
And for the districts that do? The amendment would still allow
school districts to raise property taxes to pay for employee pension
benefits and debt service – two primary drivers of property tax
increases.
While most school district pension costs are funded by the state,
there have been recent proposals for these costs to be paid by local
school districts. Furthermore, because these growing pension costs
are funded at the state level, pension spending could crowd out
other types of state school funding that could lead to school
districts being exempt from the property tax freeze.
What’s more, the bill does nothing to address property taxes
collected by Illinois’ nearly 7,000 other units of local government.
While state lawmakers are offering the illusory promise of property
tax relief to scrap the state’s constitutional flat tax protection,
long-term tax relief can only be achieved by fixing a different part
of the Illinois Constitution.
Amending the Illinois Constitution to protect already-earned public
pension benefits, but allow for adjustments to the growth of future
accruals, is the only sustainable way to achieve lasting tax relief
at the state and local levels.
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