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Sunday, October 22, 2006

Wrong Kind of Reform for Illinois

Illinois will probably pass an "education funding reform" bill next month during the veto session. The problem is SB 750 is all wrong on how it tries to fix the funding of the Illinois public schools.

In my interview at Basil's Blog one of the things I mentioned I'd do as governor would be to try and fix our screwed up tax system. In Illinois everyone pays the same income tax rate regardless of income (3%). I like the low rate, in fact it's why I changed my residence from Wisconsin to Illinois.

However, the state gives very little to public education, laying most of the bill for it on local property tax payers. SB 750 gives some relief, but none mandated, and in fact, it's a rug waiting to be pulled from under the property tax payers. If income from the tax hikes falls, mostly likely during a recession, then property tax payers would lose a portion of their abatement. What worse time could there be to hit folks with higher income taxes, and a property tax increase?

SB 750 missed the mark on a number of points other than tax relief though, and those are bigger problems. For one thing, to get the votes for it to pass instead of the money that would be raised by increasing taxes on upper income folks goes to all schools, there is nothing needs based about it.

Secondly, there is nothing in the bill mandating the money actually be spent on classroom needs. Instead, like all other state money it can be used for anything the district would like. So while a struggling district could probably use more than SB 750 will give them for teachers, an affluent district may be spending the extra money on furniture for lounges and new "stuff" for administrators.

Third, like the current state money, there is very little accountability in how it will be spent. Finding out where a districts dollars go in the state is nearly impossible.

I'd suggest a different package for reforming financing education. First off, any increase in state money must be needs based. There are hundreds of failing schools in the state that need the money, and many more affluent districts that are fine without extra state funding.

Second, the money must be earmarked for classroom expenditures, and nothing else. If you want a new football field, go to the local taxpayers with a bond issue. If you need more teachers or updated equipment for science classes, that's where the money should be going.

Third, 75% of all money provided by the state should be returned to local taxpayers in the form of property tax relief. This would require some coordination between the state and school districts, but it wouldn't be "undoable". It would also still increase school budgets while reducing property taxes.

Finally, any district getting any of the additional funds would be required to hold annual, publicly available outside audits of their finances. This should be a requirement on all school districts every few years anyway, but for some reason it isn't in Illinois.

How to fund it? Well while I hate raising taxes Illinois's got a very generous income tax system. No retirement benefits are taxed, regardless of income. No one pays more than 3%, which is the lowest in the region.

Before we do that though, the state needs to push through a bill to consolidate school districts. For those no living in Illinois, you'll be amazed to know that many areas have multiple school boards, one for K-6 or K-8 and then another for High School.

The high school distict I live in is fed by 3 separate K-8 districts, each of the four is it's own taxing body. By consolidating all four into one district more than a million dollars a year in administrative costs and excess non-teaching positions could be eliminated, and tossed back into the classrooms.

On that tax issue, after consolidations the state could then look at raising the income tax on those over $75,000 AGI to 4%, and tax the pensions of those making more than $50,000 in retirement at the normal rates and raise enough money to help a lot of schools.

SB 750 look raises the base tax rate to 5% for all individuals, only includes retirement income for those over $75,000 and includes a 66% increase in the states business tax. Those types of increases are enough to push a larger number of folks outside the borders of the state, especially when added to the other fees and taxes in the state, a number of which become increase under the bill.

The raise that I proposed wouldn't be a big enough tax hike to drive folks out, in fact the taxes would still be lower on the upper income folks than most of the surrounding states. Indiana has a flat 3.4% tax, but not enough taxpayers would move there to make it an issue.

There are a lot of groups out there, like A+ Illinois, pushing for reforming the school funding methods in the state, and education reform in general. I'd recommend if you live in Illinois you start looking into them, and where they stand to see who you can support to try and fix the screwed up the mess that is education funding.

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Blogger shoprat said...

We have a ballot proposal in Michigan that is supposed to be money for education, but it goes entirely to the teachers' pension fund.

9:33 AM  
Blogger Crazy Politico said...

Here the governor just "deferred payments" on about 3 billion dollars to that fund so he can claim he balanced the budget.

I'm not crazy about any new tax law that isn't specific about how the money will be spent. The current proposal has no controls over what districts do with the cash, it just shovels more at them.

10:24 AM  
Blogger Extreme Wisdom said...

A+ Illinois is one of the biggest proponents of the "fake" tax swap concept.

After about 20 years of looking into virtually every aspect of education, I've come to the conclusion that there is no "incremental" reform that can't and won't be co-opted by the education establishment (which I affectionately call "Big ED" or "Ed-Mart - always the high price, always.)

While there may be plenty of paths to the goal, those interested in American Education have to realize that universal fully-funded school choice is the only viable solution to numerous large problems (financial and cultural) posed by the corrupt education industry and their "privatization" of our education dollar.

Bring very familiar with Illinois numbers, I've written a complete overhaul of taxation and education.

The first version is heavy on rhetoric, but the upcoming second draft will be longer on numbers and the necessary transition issues.

It's here.

8:51 AM  

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