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The state of the State

The unexplainable property tax


What a difference a few months make. In June educators won $280 million in new money for public schools via a tax increase that surprised even them. The same educators spent the fall "veto" session trying to hold onto their gains in the face of calls for property tax relief.

The political winds, as they are wont to do, had shifted. In May and June they had filled the sails of proposals to close Chicago's $100 million budget deficit, to provide funds to avoid a Chicago teachers' strike and to assist hard-pressed downstate schools. In October and November the winds were a gale that buffeted lawmakers and threatened to sweep overboard any who stood against property tax relief.

Cook County Assessor Thomas C. Hynes made the first property tax relief proposal in August, following protests from newly reassessed homeowners on Chicago's north side. The Hynes proposal included boosting the general homestead exemption from $3,500 to $5,500 and the senior citizens' homestead exemption from $2,000 to $4,000. The higher exemptions would cost schools and local governments $500 million statewide.

In September Senate President Philip J. Rock (D-8, Oak Park) outlined a package with smaller exemption increases and several administrative changes, including a move to levy taxes on a known equalized assessed value. Rock's package would have cost schools and local governments $525 million, half of the loss from the one-year assessment freeze needed to move to a known equalized assessed value.

In October House Minority Leader Lee A. Daniels (R-46, Elmhurst) offered his plan for tax relief, the most expensive yet. Daniels borrowed from the Hynes and Rock plans and added a 10 percent credit on the state income tax for residential property taxes paid. The credit would have cost the state treasury $240 million.

The Senate Revenue Committee convened on October 30 to take testimony on the property tax relief. Mayors and educators predicted dire consequences. Typical was C. Robert Leininger, state superintendent of education, who told the committee, "The easy thing to do is provide property tax relief without considering the consequences to school districts."

After three days of negotiations lawmakers hammered out a property tax relief bill that included:

  • Increasing the general homestead exemption from $3,500 to $4,500. The increase would reduce local government and school district revenues by an estimated $205 million. However, about $90 million of the loss could be recouped by home-rule governments and taxing units not at their maximum statutory rates, which could raise tax rates. That means $115 million in tax relief and $90 million in tax shifting.
  • Raising the income cap for participation in the circuit breaker program from $14,000 to $18,000. The circuit breaker provides grants to senior citizens and the disabled based on income. The change would add 46,000 new recipients and cost the state treasury $27 million.
  • Raising the income caps for participation in the little used senior citizen tax deferral program, a negligible cost item.
  • Allowing payment of property taxes in four installments instead of two.

The measure held the promise of offering property tax relief in an election year. The vote would come first in the House, where Speaker Michael J. Madigan (D-30, Chicago) and Daniels both urged its passage. A bill that cleared the lower chamber would be harder to stop in the Senate, or so the theory went. The bill needed 71 votes in the House and got only 56. Madigan vowed to call and pass the measure in January when legislative rules will permit passage with 60 votes.

Lawmakers divided on geographic lines. White ethnic Chicago lawmakers and suburban Republicans, both under pressure from their constituents, voted for it. Those from Cook County did so knowing that homestead exemptions are relatively more

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valuable there, because residential property is assessed at a lower rate than commercial or industrial property. Downstaters, whose schools and local governments already face stagnant or declining tax bases, voted against it. And most Black Caucus members, concerned with the Chicago public schools, abstained.

The divisions are geographic; the problems are historic. State law-makers have chosen to allow local governments to raise local taxes, including property taxes, instead of raising state taxes themselves. The property tax has been championed for the accountability that it leaves with local government. If voters are going to hold local officials accountable for spending property tax dollars wisely, voters must be able to understand the property tax system. They cannot.

Property tax reform, as distinguished from the largely relief measures considered this fall, will be slow coming. It should include:

  • Improved assessments. The value that the local assessor places on a property for tax purposes is the first step in the process. If done poorly it taints the entire process, and poor assessment is the rule rather than the exception. In a 1986 study of the assessment system in Illinois, the Illinois Tax Foundation computed the average under-payment or overpayment by county for 1983. The numbers ran from $156 in Jasper County to $548 in St. Clair. Those numbers are averages.

    The first step in property tax reform should be to improve local assessing. The Department of Revenue should be given the resources to monitor and enforce existing law. There should be substantial rewards for good assessment and penalties for shoddy work.

  • Reform of the tax cycle. The process that begins with the assessment of property does not conclude for 21 months with the payment of the second property tax installment downstate. Just establishing assessments takes a year. Before assessment is completed schools, counties outside of Cook and municipalities except for Chicago must approve their budgets and set tax levies. With the tax base unknown, taxing units are guessing. And taxpayers cannot weigh the benefits of new or existing programs against the costs of starting or continuing them.

    In Cook County the situation is even crazier. The first installment of the tax bill goes out in January. The Chicago and Cook County tax levies are not set until March. The result is second installment shock like what hit the city's north side this summer.

    One solution would be to require a speedier assessment process. Another, and more popular and included in Rock's package, would be to levy taxes on the previous year's equalized assessed value. With a known assessment, property taxpayers would know the precise effects of local spending on their taxes.

  • Reform of the Cook County multiplier. Cook County contains four assessment districts, one of which is reassessed each year, where most other counties are completely reassessed every four years. But Cook County gets a single multiplier, the equalization factor that is supposed to bring the county's average level of assessments up to the 33.3 percent required by law for each county. As a result, owners of newly assessed property get hit twice, once with the new assessment and a second time with a multiplier that relfects the relative underassessment of the other three districts.

    There are two solutions. Issuing separate multipliers for each assessment district would eliminate the double whammy of reassessment. Dividing Cook County into two districts — one Chicago and one suburban — and reassessing every other year would even out the increases. The biennial reassessments would also ease money problems for property tax dependent suburban school districts that see revenue growth only in reassessment years.

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At the October 30 Revenue Committee hearing, Douglas L. Whitley, president of the Taxpayers' Federation of Illinois, criticized the various proposals as superficial: "We unfortunately tend to gravitate toward the simple." Senate Revenue Committee Chairman Dawn Clark Netsch (D-4, Chicago) countered that rebellion is brewing and if the state did not act, demagogues would seize the issue.

Voters are sore about soaring property taxes. If property taxes are good because local officials are held accountable by voters, then voters must be able to understand the system. To criticize property taxes and deny them that knowledge is demagoguery.

Commerce commission appointees in Senate limbo


Cronyism and conflict of interest charges convinced Democratic senators to withhold confirmation of three appointees to the Illinois Commerce Commission (HCC). Confirmation of Terrence L. Barnich, Ellen Craig and Lynn M. Shishido-Topel, who were appointed by Gov. James R. Thompson in October, could have come in the last days of the fall veto session.

But Democratic senators, who hold a 31-28 edge, decided to wait and see how the three, especially Barnich and Shishido-Topel, vote on individual rate cases.

Barnich was named IlCC chairman, replacing Mary B. Bushnell. Craig replaced Susan Stone. Shishido-Topel was named to replace Andrew Barrett. He resigned to take a federal post.

Consumer groups have criticized the appointments of Barnich and Shishido-Topel. The Citizens Utility Board (CUB) claims that Barnich has no utility-related experience. Barnich, 36, of Springfield, had served as legal counsel to Thompson since April 1984. The appointment of Shishido-Topel, says CUB, could create a conflict of interest. She has worked for Lexecon Inc., a consulting firm that has represented utilities before the IlCC since 1979.

Thompson claims it is unfair for Democratic senators to put the new appointees "in a chair and hold a sword over their heads."

As it stands now, that sword could hang until January 1991. The Senate can wait 60 legislative days before taking a vote to confirm. If no vote is taken by then, the appointments become automatic. The Senate used four days in the fall veto session, October 31 to November 3. If the current legislative schedule holds, the Senate would not have to vote until January 1991. By the end of the 1990 spring session next June 30, only 52 legislative days will have been used. If the legislature meets for only seven days in the 1990 fall veto session — as it did this year — the 60th day would not come until the first day of the following session in January 1991.

CUB is not protesting Craig's appointment because she has experience in the utility rate regulation field. Craig, 51, was Thompson's deputy chief of staff in Chicago.

Barnich will be paid $70,455 yearly. His term expires in January 1994. Craig and Shishido-Topel, 38, both will be paid $61,530 yearly. Craig's term expires in January 1994, and Shishido-Topel's January 15, 1990. If not reappointed before then, she will serve until reappointed or until someone is named to replace her, according to the governor's office. Pat Harrison

December 1989 | Illinois Issues | 12

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