Chicago has vast property wealth and the largest population by far in Illinois. But it also has a large amount of that property wealth locked up in Tax Increment Financing districts.
According to figures released last week by the Center for Tax and Budget Accountability, Chicago has over half of the $12.4 billion in statewide equalized assessed valuation locked up in TIF districts. About 8.6 percent of the city's total EAV is in a TIF district, well above the statewide average of 3.95 percent, but only the seventh-highest percentage in the state. (Twenty-nine percent of Clinton County's EAV is in TIF districts, making it the leader going away.)
And partly because Chicago is by far the largest city covered under state tax-cap laws, the city's public schools were able to claim $125 million in state adjustment benefits in Fiscal Year 2016 for districts with property tax caps, according to numbers crunched by the Taxpayers Federation of Illinois. But the way the laws are written, that $125 million was most of the $141 million claimed by all school districts in Illinois. The total amount was expected to drop by more than half during Fiscal Year 2017.
When valuations go up, so does the subsidy. In 2010, CPS' subsidy was almost $444 million to account for "lost" revenue due to the tax caps. Elgin's school district was second that year, at $18.3 million, but it wasn't even in the top 15 last year.
The governor's amendatory veto of SB1, the school-funding reform bill, would slash state funding to school districts that are within TIF districts and covered under property tax caps. That seems counter-intuitive for this governor, who has railed against high local-property taxes since first announcing for office. While he denied it last week, it's clear he wants to force local school districts to raise their property taxes to avoid state funding cuts.
Why would he do that? Chicago Public Schools funding, obviously. The governor has often put CPS in the middle of his Statehouse wars. One of the events that motivated him to run for higher office was the successful Chicago Teachers Union strike, which angered him to no end. And he's clearly looking for leverage in the wake of the budget and tax-hike veto overrides.
That's not to say the Democrats aren't playing the same sort of game. They added even more money to SB1 for CPS when the bill finally reached the House and then jammed it through on a mostly partisan roll call.
The Illinois State Board of Education said it had finished its number-crunching of Rauner's amendatory veto last week, but then found some data mistakes, so as of this writing we don’t know what the numbers are. But you can bet that CPS will take a big hit.
The bigger question is how many suburban and Downstate districts will be slammed by this amendatory veto. Ford County, which is within Senator Jason Barickman's district, has the second-highest percentage of assessed valuation in a TIF district in the state, over 10 percent of its EAV. Barickman (R-Bloomington) is the lead Senate Republican negotiator on education funding reform. Politically, this could be quite problematic.
These sorts of negotiations take years to complete. First, you have to convince people to open a nasty can of worms – which isn't easy, because so many folks have vested interests in the status quo and have cut little deals over the years to sweeten their own pots. Then you have to convince everybody to create a whole new can of worms. And then you have to actually do it. It isn't easy.
Education funding reform has taken at least four years to get this far. Barickman has suggested that perhaps TIF districts created in the future could trigger a change to state aid. But even that could be a heavy lift at this late stage, with schools about to open.
Fiddling now with TIF and property-tax caps could require a rewrite of the whole bill to achieve the bipartisan goals that were laid down at the outset of this monstrous task.
A last-minute amendatory veto isn't the right way to go. If the governor wanted this stuff, he had over two years to bring it to the bargaining table. And the same goes for the House's last-minute add-ons from the end of May.
What they should probably do is back up and run a bill that's as close to the Senate-approved version as possible.
Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.