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Pupils and property: An education in school funding
By SCOTT SIEVERS
News-Gazette Correspondent
Though they're guaranteed a free education in Illinois,
what sort of an education children get can ride on two factors: bodies and
bucks.
And the importance of these two – student enrollment
and the wealth of the community's property – can again affect
children if they eventually attend their local community college.
"The primary source for funding for Illinois schools
is local property tax," said Tom Hernandez, a spokesman for the Illinois
State Board of Education. About 55 percent of a typical school's budget
comes from local property taxes, with another 35 percent coming from state
aid and the remaining 10 percent from federal aid.
"Because of the property tax system, each (school) district in Illinois spends a different amount per pupil than any other district," Hernandez said. Their ability to raise funds, of course, depends on their local property value, and so the very, very property-wealthy districts have a lot of money (while) the very property-poor districts have very little money."
Along with property wealth, school districts' enrollment, as reflected in attendance numbers, gets pumped into a state calculation aimed at leveling the playing field somewhat. A comparison between Champaign and Urbana schools provides some insight into the dynamics affecting the funding of Illinois schools.
In the last decade, Urbana's enrollment has steadily fallen, along with birth rates in Illinois and in Champaign County, according to the Regional Office of Education for Champaign and Ford counties and the Illinois Department of Public Health. And though Urbana's enrollment is up by about 3 percent from last school year, it's still down by about 5 percent from 1990.
Why enrollment has dropped isn't exactly clear.
"I'm not sure if people are moving out because of the high property taxes, if they're putting their kids in private schools, if they're moving completely out of the community or if they're moving elsewhere within the county, if they're moving to Champaign or Mahomet or St. Joe, I don't know," said state Rep. Rick Winkel, R- Champaign, a member of the House Elementary and Secondary Education Committee. "There's got to be a reason or explanation; I'm not sure that I can put my finger on it."
Whatever the reason, declining enrollment affects school funding.
"If enrollment drops, that means general state aid is going to drop, which means in order . . . to run schools, they're going to have to levy more and raise taxes," said Judy Pacey, assistant regional superintendent for Champaign and Ford counties.
Urbana's falling enrollment, though, has had one welcome result: Class sizes have shrunk.
Meanwhile, as its enrollment has dropped, Urbana's property wealth has stagnated, with little new development adding to the tax rolls to spread out the tax burden. Consequently, the school district has raised its tax rate. And that higher rate, in turn, has scared off new development, some believe.
"It's kind of a Catch-22. Our tax rate is higher in Urbana, but we have to tax more because we don't have the base to be able to run the schools with what our tax base is," said Carol Baker, director of business and financial services for Urbana schools.
"If we lower our tax rate, then maybe people would move in because the tax rate would be equalized with Champaign. . . . We're really trying to get our tax rate down to equalize us with Champaign, so there's not such a big discrepancy between the two cities, and then maybe it wouldn't be such a decision factor when not only businesses move in but when families move in," Baker said. "But it's just really hard, because our tax base isn't growing. If we lowered our tax rate, we're not getting as much revenue, and then we're just going to go into deficit."
Urbana is also concerned that its tax base will further erode as properties now generating taxes are taken off the rolls because they become tax-exempt. That happens when the University of Illinois buys private property to expand, as it has recently to build a new computer science building. It could also happen when a for-profit institution merges with a not-for-profit organization, as in the recently aborted Carle Foundation Hospital proposal.
In addition, Urbana schools must educate the children of families living in married student housing at the University of Illinois, yet they don't get property taxes to pay for their schooling because the housing is tax-exempt. For six years, the university has agreed to pay about $300,000 to compensate for the university's impact on the school district, but that agreement ends June 30, and it isn't certain that it will be renewed.
"If the U of I cuts $300,000, that's $300,000 that would come right off the top, and if you don't have that, that's seven or eight teachers' salaries," Baker said. "I'm not saying that if we lost that the board (of education) would cut, but the board's very committed to balancing our budget, and if the budget goes into deficit because we lose $300,000, they're going to make cuts somewhere to make it balance."
Because many of the children don't speak English, Urbana schools also have to provide special education teachers to help them with their lessons.
Financially, things hardly could be more different on the other side of Wright Street, separating Champaign from Urbana.
Though its enrollment took a dip of less than 1 percent since last school year, the Champaign school district has seen its enrollment climb steadily in the last decade by more than 10 percent. Champaign's also been home to both a residential development boom and an even bigger commercial development explosion that's added millions of dollars in property to its tax base.
"We've been able to maintain and keep a tax rate that has stayed very constant every year – actually it's been decreasing in the last couple of years because of the growth," said David Grace, Champaign Unit 4 business manager. That's "because as you have more taxpayers that are paying taxes, the amount that an individual taxpayer pays – if their property's not evaluated higher – is actually a decreasing number."
So the Champaign school district has more money coming in and a tax rate that's falling slightly, along with rising enrollment numbers. But the state funding calculations don't allow Champaign to both reap the benefits of a wealthier tax base and collect more state aid because its enrollment is up.
"Schools that get more in property taxes get less in state aid," Baker said. "For instance, Champaign has a much higher attendance than we do. I mean, their enrollment's twice as much. They don't get twice as much state aid as we do because their property tax base is a lot higher. . . . They get probably about the same or a little less state aid than we do even though their enrollment's twice as much."
The discrepancies in the funding system arise in how the state aid funds are distributed, Winkel said.
"If you're in a (school) district that is growing very quickly and you have, let's say, a low property tax base, sure, your state aid is probably going up," he said. "If you live in an area with a good property tax base, but your student population is falling, your state aid may actually go down, so it just depends from district to district how that may work out."
In Champaign's case, the state calculation factors in the community's economic growth to give it less in state aid, despite climbing enrollment.
"Because of our property wealth in the community, they equalize it downward, they reduce the amount we get," Grace said. "We really only receive about $900 per student. The state 'foundation level' guarantees about $4,300, so that tells you how much our property wealth cuts that down from the state."
The state-set foundation level sets the floor for how much money school districts have available to spend for each of their students. The level was added recently to counter discrepancies that left some property-poor school districts able to spend only about $3,000 year on each student while other, property-rich districts could spend more than $15,000 on each student yearly.
And though Illinois' school funding system affects Champaign and Urbana's schools differently, both districts are concerned about tax caps. Created to protect against soaring property tax bills, the caps limit tax increases from year to year, even though most school tax rates have fixed limits already.
"It basically doesn't allow you . . . to have access to all of the growth in your assessed valuation," Baker said. "It limits your access to either the Consumer Price Index or 5 percent, whichever is lower."
So when the U.S. Consumer Price Index – a measure of inflation – hovers around 2 percent or 3 percent, that limits Illinois schools from collecting more than 2 percent or 3 percent in additional taxes.
The problem, some say, is that the index doesn't necessarily reflect increases in education costs, and when a community's tax base grows at a higher rate than tax caps allow because of rising property values or new development, the school districts can't capture all of that new growth, even though they might not be raising their tax rates at all.
(School districts add the tax value of new development, but that property also is subject to caps in following years.)
Urbana schools could be hamstrung by tax caps and their finances further affected, Baker said. Tax caps could also affect schools in Champaign, where voters previously have approved a maximum tax rate for the school's education fund of $3.05 for each $100 of equalized assessed valuation – a measure of property value.
"We'll see that with the tax caps, the maximum we can go up to will start decreasing from the $3.05 in education to where actually all we're able to achieve is $3, and then $2.90-something and then $2.80-something and so forth, until we have to go back to the voters (for an increase) or make significant cuts in programs," Grace said.
Enrollment numbers and property values affect community colleges as well, but not in the same way.
"It's extraordinarily different," Winkel said.
While local schools can sometimes sell bonds to raise money to build schools, or apply to the Illinois State Board of Education for construction grants, construction on community college campuses is typically paid through the Illinois Board of Higher Education's capital funds.
And unlike the other schools, community colleges can rely on student tuition and fees for a share of their revenue.
But community colleges also rely on local property taxes and on state aid based upon their enrollment numbers, as reflected by the number of credit hours taken by their students.
"If our enrollment is down, we certainly don't capture as many of the state dollars, so we try very hard to keep enrollment stable and at least have as a goal enrollment growth so that we can capture those dollars from the state," said Zelema Harris, president of Parkland College in Champaign.
Parkland suffered enrollment losses when Chanute Air Force Base in Rantoul closed in 1993 and when Heartland Community College opened in Bloomington at about the same time.
"Those were the greatest losses that we've experienced, and then we were able to build back up," Harris said. "We certainly now have more students today than we had when we were serving Heartland (students) and Chanute, so we've done pretty well in capturing new markets."
At Danville Area Community College, declining enrollment has tightened the college's finances.
"In the budget that's being considered for next year, the college . . . will actually lose $11,000, . . . and that's because of enrollment decline," said DACC President Alice Marie Jacobs.
"It will mean that adding new programs will be more challenging. We'll have to become even more efficient, and we will need to add new programs because we're a community college. At community colleges, our mission is to respond to the needs of the community, and communities are always changing, so we need to be able to change and adapt," Jacobs said.
Whether it's paying for schools or colleges, one thing's clear about the way Illinois funds education.
"It's confusing, I know," Baker said.
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