By JOYCE E. KUSTRA
A graduate of the Public Affairs Reporting Program at Sangamon State University and formerly employed as a secretary for the Illinois Senate, Joyce Kustra resides in Glenview and is active in community and local affairs.
Full funding and the resource equalizer formula

State aid to schools

ONE OF THE most quoted sentences from Illinois' 1970 Constitution is the statement, "The state has the primary responsibility for financing the system of public education" (Art. X, sec. 1). Since 1970, the state's share of financing elementary and secondary education has climbed from 30 per cent to almost 50 per cent and education has become one of the state's heaviest funding responsibilities. Legislators, teachers, and just about everyone interested in the education of the children of Illinois have debated how much money the schools need, how much the state's sagging budget can bear, and how the funds should be distributed among the state's school districts.

In 1973, the complex, controversial "resource equalizer formula" was adopted and became the primary method used to compute how much money a district will get from the state. The Illinois Office of Education has determined that it takes an average of $ 1,260 a year to educate a child, and the formula is designed to equalize the money available to all of the state's students by equalizing the value of resources (taxable property) in the state's economically diverse school districts. Equal access to education has been an issue in several states where school-financing systems were similar to the method used by Illinois before 1973. In those states, the courts usually found that funding formulas denied equal access to quality education. When a wide range of taxable wealth dictates the amount of money available to educate students, it follows that an equally wide range will exist in the distribution of the funds and the quality of education. The U.S. Supreme Court, however, did not endorse these findings when it declared that the Texas education system, although it might be inequitable, was not unconstitutional. It left the decision to change unfair school aid systems with the states. Strayer-Haig plan
In 1973 Illinois revised its school aid formula in response to the equal access argument heard around the country. The new law added a second alternative for computing a district's share of the state's education dollars. The original plan was the 50-year-old Strayer-Haig formula (named for its authors in the state of New York where the plan originated). It was designed to guarantee every school district a "foundation" level for providing adequate education of each pupil. All districts would have a financially equal starting point, although the plan ignored the local disparity in wealth in the local districts' ability and willingness to add to that base. In its first year (1927) the foundation level was $34 per pupil from state and local funds. The bulk of education funds came at the local level. In 1973, the Strayer-Haig system guaranteed a foundation of $520 per student. By this time, however, several other stipulations had been incorporated to account for special needs, so many students were actually receiving more. This practice is known as "weighting," or counting individual students more heavily to increase the district's state aid.

Under the Strayer-Haig plan, high school students, whose education was judged to be more costly, were weighted at 1.25 (for every $ 1 given at the grade school level, its value was $1.25 at the high school level). Also a larger share of the state's funds was directed to poorer districts by allowing them an 8 per cent "add-on" (this figure has been gradually increased to the current 25 per cent). Another boost to poorer districts is a "density bonus" which was added for districts with more than 10,000 students. This provision expired in 1974 on the premise that density and poverty aren't always related and was replaced by an extra .45 weighting factor for Title I children (those from families with annual incomes of $3,000 or less), a designation used in the Federal Elementary and Secondary Education Act of 1965 to aid impoverished families. These weighting factors are incorporated into the final student population figure of a district to come up with what is called the weighted average daily attendance (WADA).

In spite of these provisions, the Strayer-Haig plan does not alter the fact that a wealthier district can add to the "foundation" and thus provide a better education for its children than a poorer district. As a result, the old plan was actually a favorite of a few wealthier school districts who were reluctant to give up favored status. Because they found that they fared much better by computing under the old method, the legislature worked out a compromise by giving the local districts the choice of receiving aid under either plan rather than scrapping the Strayer-Haig formula. Only 165 of the state's 1,019 school districts file for state aid under the Strayer-Haig plan and receive only about 1 per cent of the state school aid funds. Common School Fund
The Common School Fund dispenses approximately 80 per cent of the education dollars in general state aid through the mechanism of the resource

4 / June 1977 / Illinois Issues


equalizer formula. Additional aid is given to local districts through categorical grants, that is, grants for specific needs such as special education. Aid from the Common School Fund, however, is by far the largest source of state education funds, and the formula is the way the amount of these funds is determined.

The formula is based on three factors: tax rate, assessed valuation and pupil attendance. The basic principle under-girding the formula is that state aid should be based, not on a district's property value, but on the willingness of a district to tax itself. The state guarantees to equalize assessed valuation (thus allowing poorer districts to compete for funds with the wealthier), so, in effect, state aid will increase with an increase in local tax rate, and any district taxing at the maximum should qualify for $ 1,260 per student in weighted average daily attendance (WADA). Tax rate ceilings
The local taxing effort varies from district to district and is totally controlled by the district. The state has set a ceiling on the tax rate it will accept in computing the formula. The variance in the ceiling for the three kinds of school districts — grade school districts, high school districts and unit districts with students from kindergarten through grade twelve — makes it easier for some to get state money than for others. This is especially true for the high school districts whose maximum tax rate is 1.05 (or $1.05 per $100 of assessed valuation). The state's high school districts, which benefit from a stipulation which says they do not have to seek voter approval to raise taxes, are already taxing at or above this maximum (the local tax levy which exceeds the ceilings cannot be used in computing the district's state aid, but does generate more local property tax revenues). The two other types of districts, however, have a much harder time raising their tax rates. Grade school districts must tax at 1.90 per cent to receive maximum benefits under the formula ($1,260 per student). The third type of district, unit districts, have a 2.90 ceiling. Both grade school and unit districts must seek voter approval to raise taxes to the maximum rates. In 1976, legislators dealt with this problem by lowering the previous limits of 1.95 and 3.00 for grade school and unit districts respectively to the current 1.90 and 2.90. This change was part of a package of six school aid revisions, four of which altered the formula. Chicago's schools fall under regulations contained in a separate section of the School Code. The Chicago system has sufficient taxing power, without voter approval, to levy the taxes necessary for maximum benefits under the formula.

The state has set a ceiling on the tax rate it will accept from local districts when computing the formula
Any amount a district levies beyond the maximum, as mentioned above, cannot be used to calculate its state aid. Until the 1976 revision, districts whose rates were above the ceilings were required to "roll back" gradually to the ceilings imposed by the state, that is, to actually lower their tax rate. The 1976 provision eliminated the "roll back," thus allowing districts to tax themselves higher at the local level without increasing their state aid. Most of the districts now taxing beyond the state limits are wealthier suburban Cook County districts.

A maximum tax rate would not do much good for a school district with a relatively low property value to tax if the state did not guarantee a certain level of assessed valuation. The formula is based on the value of all property within a school district. This is where the districts with low property tax bases get a boost. The state assures a school district a yearly sum equal to what the local tax rate would raise if its assessed valuation per pupil was equal to the level guaranteed in the formula. The state has set the guaranteed property values for each student in weighted average daily attendance (WADA) at $66,360 for grade school districts, $120,000 for high school districts and $43,500 for unit districts. The guaranteed level for grade school and unit districts was raised last year by the General Assembly in the same law which lowered the tax rate ceilings of these districts. Previously the levels were $64,615 and $42,000 respectively.

Title I designation is the feature which means the most to inner city districts when computing their share of state aid under the resource equalizer formula. The Title I provision plays a greater role in the new formula than it does under the Strayer-Haig plan. According to the 1973 formula, students designated as Title I eligibles by the Federal Elementary and Secondary Education Act are weighted on a sliding scale (zero to .75) to account for the concentration of Title I students in a district. A local school district with the same proportion of Title I students as the state (18.2 per cent), could count on .375 per cent extra weighting for each eligible student. As a district concentration exceeds this 18.2 per cent statewide proportion, its weighting increases in relation to the concentration of Title I students up to the maximum of .75. Attendance calculations
The number of students in a district is calculated on the basis of average daily attendance rather than enrollment as an incentive to keep attendance high. With the special weightings designed to favor poorer children, the weighted average daily attendance (WADA) of a district is the student headcount used in computing state aid. Because many state schools are experiencing drastic declines in enrollment, WADA was also an issue in the 1976 legislative session. Arguing that these declines don't always mean a corresponding decrease in costs, school administrators called for a means of "cushioning" the financial impact. They received the "cushion" in a state law which allowed a district to use the higher of two WADA figures — either the present year's attendance or the average attendance of the three previous years. This average was a welcome alternative to those districts which felt they might have to make equally drastic cuts in programs for the remaining students.

As an example of how these three factors produce a district's share, take a sample unit district with a total assessed valuation of $200 million, an operating tax rate of 2.80 and WADA of 10,000 students. This makes the assessed valuation per pupil $20,000. This figure is deducted from the guaranteed assessed valuation figure of $43,500, leaving $23,500 to be multiplied by the

June 1977 / Illinois Issues / 5


2.80 tax rate, then by the 10,000 WADA. The total is $6,580,000 or $658 per student. The local tax rate would produce $560 ($20,000 x .0280). Thus the district would receive the total of the local and the state share, $1,218 per student with the maximum of $1,260 allowed by law. If the sample district raised its local taxes to the 2.90 ceiling, it would receive the maximum.

The resource equalizer formula was also changed in 1976 to aid more rural districts by allowing districts to include taxes on school bus transportation in their operating tax rate. Rural districts did not gain as much from the 1973 reform as did school districts in the large cities and in the suburbs. This is because of the higher property values, lower tax rates and smaller concentrations of Title I eligibles in the rural districts. The inclusion of the transportation tax and the lower tax rate ceiling for unit districts, both effected in 1976, attempted to correct this inequity.

The law which was the vehicle for changing the school aid formula in 1976 also included two more provisions not affecting the formula. The first reduced by $24 million the $55 million penalty Chicago schools had incurred for closing early in spring 1976. The second was a "hold harmless" provision, a one-year-only measure to protect a district from losing money for fiscal year 1977 because of the formula changes. It guaranteed the district would get at least the amount it had counted on before the changes.

The 1976 legislative package of formula changes fell victim to political squabbling between the governor and the legislature, a development which left local school officials uncertain as to how much money they could count on for the school year. After the General Assembly failed to pass a tax acceleration package proposed by Gov. Dan Walker (which he estimated would bring in an additional $95 million this year), the governor decided to give the legislators one more chance in the fall session. He said he could only afford to make the formula changes effective immediately if the General Assembly would reconsider his tax speed-up measure and pass it. Finally in the fall session, the legislature approved a portion of Walker's tax plan in return for his signing the formula changes. Phasing in full funding
As originally designed in 1973, the resource equalizer formula would have been fully funded in the 1973-74 school year, fiscal year 1974, ideally providing $1,260 for every student in WADA where the local district chose to tax itself at the maximum. But because of the demand this would place on the state treasury in a single year, the plan was

State aid to schools The money just isn't there

STATE SCHOOL finance legislation was termed a "Christmas tree" last year because it had so many amendments hanging from it. Besides making substantial changes in the school aid formula, these amendments represented battles between political and regional factions over an amount of money for state school aid which was considerably less than had been anticipated when the formula was approved in 1970.

This year there'll be a lot of tinsel but not much in new money for schools. The money situation is again tight, with Gov. James Thompson's budget calling for only $75 million in new education spending, $150 million less than what the Illinois Board of Education said was needed. With the governor and the General Assembly attempting to avoid a general tax increase this year, most of the proposed legislation on school funding have been piecemeal efforts.

"The reality of the situation is that we can't fully fund this year because of limited funds," said Sen. Arthur Berman (D., Chicago), "in changing the formula we'd just be shuffling around the same limited dollars." Herman, chairman of the Senate Elementary and Secondary Education Committee, predicted a "rough time" for schools during this year's session.

Most legislators are hesitant to propose changes in the school aid formula itself, with some looking for ways districts can generate more money locally.

A measure introduced by Berman would not increase funds but would alter the method of payment to school districts. S.B. 293 provides for "school districts to receive full entitlement" for 10 months, from August through May, Berman said. The amount of the last two payments would depend on how much money was left for schools. The bill is designed to help districts overcome cash-flow problems. However, the bill is opposed by the Thompson administration which sees it as a serious threat to the state's ability to pay bills throughout the year. Berman said the office of Comptroller Michael Bakalis, a Democrat, supports his bill and does not foresee a dangerous cash drain for the state.

Rep. J. Glenn Schneider(D., Naperville), chairman of the House Elementary and Secondary Education Committee, is sponsoring H.B. 694, which would extend to fiscal 1978 the practice of making quarterly payments to districts for special education and transportation. A similar measure was passed last year, but it was in effect for 1977 only. Schneider's bill passed out of his committee early in April and looked likely to receive strong support in the full House.

A different twist at helping local school districts is S.B. 244 sponsored by Sen. Bradley Glass (R., Northbrook). It would permit school districts to discontinue or modify programs when the state reimbursement is less than the amount necessary to pay claims in full.

Several bills affecting the school aid formula and the "hold harmless" provision were introduced during the session and were scheduled to be heard in the education committees the end of April. Among these are H.B. 753 by Schneider which would change the resource equalizer formula so that the maximum value of tax rates to be used would be 3 per cent (now 2.90) for unit districts and 1.95 per cent (now 1.90) for elementary districts. Under last year's Christmas tree bill, the unit and elementary tax rates were lowered from 3 and 1.95 per cent to the present levels. Schneider's bill would reverse that action and tend to help suburban Chicago schools.

Two bills filed by Rep. Richard Brummer (D., Effingham) deal with the formula in an effort to avoid losses a number of districts face as a result of 1976 assessed valuation. H.B. 1880 would allow districts to regain 100 per cent of the expected loss, while H.B. 1958 would only guarantee 25 per cent.

6 / June 1977 / Illinois Issues


H.B, 1880 includes the "hold harmless" clause, which would give the districts the option of using 1975 or 1976 assessed valuation (equalized by multiplier) and the option of using the 1975 or 1976 operating tax rate. They could thus avoid the loss of any state aid. The second bill, which applies to all counties in which the assessed valuation increased, would allow districts to use either the 1975 or 1976 tax rate in computing the school aid formula. The second bill does not mention an option on the assessed valuation.

Perhaps the most daring proposals on funding schools is legislation to allow school districts to levy income taxes. Proposed by Rep. Jim Edgar (R., Charleston), H.B. 788 would allow school boards to ask for a local income tax that would supplement money raised through property taxes. A second variation was proposed by Sen. Vivian Hickey (D., Rockford). Her bill would allow districts to replace property tax with income tax for purposes of supporting schools.

State mandated programs
In Gov. Thompson's state of the state address, he noted that in the course of his campaign he found that "local people had little to say about the wisdom or necessity of programs imposed on a statewide basis and perhaps most importantly, once mandated, state programs are inadequately funded by the state." At the time he said it would be his administration's policy to reexamine state mandates. While professing education to be his "number one priority," Thompson said, "An education program can be every bit as outdated, inefficient and duplicative as a state program in any other field."

On April 20 he announced the appointment of 23 members to the Commission on State Mandated Programs, with a subcommittee assigned to education matters. James Nowlan, the governor's special assistant on education, is heading that panel. At the first organizational meeting, the subcommittee decided to study those programs statutorily mandated and those which require fiscal support.

There are now 16 education programs mandated in the statutes. These are in addition to those basic courses of study such as language arts and math which are required by statutes and the Office of Education regulations. The 16 are: adult education, adult education with public assistance, adult education basic, special education transportation, special education private tuition, special education extraordinary, special education personnel reimbursement, special education orphanage tuition, bilingual in Chicago, bilingual downstate, regional vocational education, breakfast-lunch, vocational education, textbook loan, deaf-blind, and materials for visually handicapped.

The legal section of the Office of Education is currently compiling a list of mandated programs. Those which might come under question this year are the length of the school week, health regulations such as those regarding air circulation, certifying levels for school nurses, driver education and desegregation. While desegregation is not a program as such, it is a situation that requires funds.

The Office of Education wants to add two new programs this year, contained in H.B. 2361, sponsored by Rep. Thomas Hanahan (D., Chicago). The ESR model program would provide$250,000 to educational service regions for regional programs. The desegregation assistance program provides $2 million in grant funds for district programs.

The State Board of Education in March initiated a policy development process that would put most major education issues under scrutiny during the next three years. School finance will be a principle subject in fiscal 1978 and mandated programs will be a topic the third year. In June 1976 the board named a blue-ribbon citizens commission to conduct a major review of state aid programs to local schools. The commission has studied the problems with the state's resource equalizer formula, variations of wealth and assessment practices in local districts and funding categorical grants on a current year basis. The commission's recommendations were to be presented to the board May 4. / Mary C. Galligan 

Full funding of the formula appears doubtful for the third year in a row because of tight money and last year's changes

altered in the General Assembly to spread the increase over four years. In the first year, 1973-74, the local school districts received one-fourth of the increase as computed by the resource equalizer formula. Actual claims paid totaled $914 million. In the second year, 1974-75, they received one-half of their total increase, with total payments of $1.054 billion. In these years, because of the decision to phase in full funding, school experts considered the formula to be fully funded.

However, for the 1975-76 school year, when districts were expecting their claims to be funded at three-fourths of the computed increase, Gov. Walker reduced the appropriation to provide only 95 per cent of the three-fourths figure. The state paid out $1.173 billion in claims. In the current 1976-77 school year, the year scheduled as the fourth and final step to actual full funding, the formula is being funded at 89 percent of the actual full claim as computed by the local school districts. Total payments are approximately $1.250 billion.

The fiscal year 1978 budget is now before the General Assembly, and full funding of the formula appears doubtful for the third year in a row. This is due to several factors. First of all, the state is still suffering from the tight money situation which first plagued it two years ago. Second, Gov. James R. Thompson is determined to hold spending at the $10 billion level; his total recommended budget calls for only $311 million in new state spending above the current year's budget. With a two-year term, Thompson cannot afford politically to be forced into an increase in the state's income tax either this year or next. In giving elementary and secondary education $75 million more than this year, he pointed out that education received the biggest hike of all areas in his budget. He also admitted that he expects education to be the biggest controversy as the legislature appropriates for fiscal year 1978.

The six changes which passed last year combine to make yet another problem area in fully funding the school aid formula. The cost this year of those changes is estimated to add approximately $111 million to formula costs. The Illinois Office of Education has projected that it will cost $1.386 billion

June 1977 / Illinois Issues / 7


to fully fund the formula for fiscal 1978, with these changes in effect. If the 1976 package had not been incorporated into the plan, it might have been fully funded in 1978. The formula's future
With school funding at the center of almost every debate over state spending, the big question is whether the new formula is working. Are schools better off than they were before? With the resource equalizer formula in use for the fifth consecutive year, some answers should be emerging.

Dr. Ben C. Hubbard of Illinois State University, who was one of the architects of the formula, claims that one only has to look at the state aid that went to schools in 1973, the year before the formula was instituted ($800 million), and the current level of funding under the formula ($1.250 billion) to see that it has raised the state's share of funding schools by 50 per cent. That alone, he says, should be the answer. But he adds, "The formula is working — at the 1973 dollar level." He explains that the formula was designed to withstand some degree of inflation, but not the double-digit inflation it has experienced. He says the money is now going to the poorer schools as it never did before. He cites downstate Cairo and East St. Louis as two previously impoverished districts where the formula was a "lifesaver," and where the schools can now offer their students a real education.

Dr. Hubbard says there are two reasons local schools are struggling under the formula. If it can't be fully funded, he says, it can't be expected to equalize the level of education. Hubbard says that it's time for the General Assembly and the governor to realize that if they really want quality education, they must pay for it, through a tax increase ~ a solution, he says, that the politicians won't consider at this time. The second problem with the formula, according to Hubbard, is the failure of local school districts to plan. He says as enrollment drops, schools could shift burdens and save money if they faced the problem instead of insisting costs don't decrease along with enrollments. At some point, he says, costs do begin to decrease.

State Sen. Arthur Herman (D., Chicago) is one of many legislators who agrees with Dr. Hubbard that the formula is sending money where it's most needed. Berman represents three school districts, one in Chicago and two in Evanston. He says Chicago's problems are critical, but doesn't think there's enough state money to bail them out. He maintains that last year's changes provided "greater equity all the way around." And Berman says if Gov. Thompson has underestimated this year's revenue, as he believes is the case, the legislature might be able to appropriate state aid at a higher level.

But some legislators and school officials from districts which receive minimal aid under the formula don't agree that it is working. In some downstate school districts where assessed valuation is relatively high, tax rates are low and the voters are reluctant to raise them. One solution proposed by some downstate lawmakers this spring would allow local school districts to impose an income tax upon referendum approval. An income factor in the formula would work to the advantage of rural districts whose farmlands put them in the high-assessed valuation category. Sponsors say, however, that property no longer is synonymous with

If the governor and General Assembly really want quality education, they must pay for it through a tax increase

wealth or high income. They argue that an income tax would be more equitable than the property tax. A local income tax, the downstaters feel, could even reduce property taxes. Obviously, this idea would meet with stiff opposition from income-wealthy suburban legislators as well as central city lawmakers whose areas benefit more from the current property adjustments than they would with the income tax.

Some further changes might be in store for unit districts, mostly found outside the Chicago area. Unit districts now have a 12-cent limit on their transportation tax rate. If the General Assembly would agree to allow unit districts to raise transportation taxes as high as 24 cents without voter approval, these districts might get a larger share of the pie.

Some observers feel that the reluctance on the part of the voters to increase local tax rates, and thus increase state aid, deprives the children of a quality education and should be circumvented. One solution sometimes mentioned is to leave the decision to raise taxes with the local school boards, a politically impractical position which is not taken too seriously.

The General Assembly could decide to drop the Strayer-Haig formula and require all districts to compute their state aid by the resource equalizer formula. This would save the state about $8 million, but the $8 million loss could be crippling to several districts now receiving state dollars through the old Strayer-Haig plan. For this reason, the plan will not be easy to scrap.

There are still those who argue for abandoning the whole system of equalizing aid in favor of a flat-rate per student payment to districts. But these individuals are a minority, and this alternative is not likely to emerge as a threat to the formula. No school district is getting more than it needs, and most are getting less than they want. Yet, few are blaming this condition on the formula.

It must be remembered that the resource equalizer formula is simply a mathematical mechanism designed to equalize the amount of education money available to the students of the state. It cannot eliminate all of Illinois' educational inequities, especially if the myriad factors which shape a child's life are considered. The formula addresses the education issue from one front by attempting to provide equal support to all students.

Since the one ingredient that the state will guarantee under this plan is a school district's assessed valuation, high property value is no longer the determinant of a quality education in Illinois. The district which will benefit most from the resource equalizer formula would be the district with the maximum taxing rate, a good share of Title I students and a stable or increasing enrollment. Ideally, districts like these are the ones most deserving of state funds; Any local district not meeting this description will probably not agree, but at the present time the formula is in no real danger of extinction.

8 / June 1977 / Illinois Issues


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