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Finding the avenue to equity for school funding

By CHARLES N. WHEELER III

Charles N. Wheeler III

In real estate deals, an old maxim advises that three features are key to a property's desirability: location, location and location. In similar fashion, the opportunity a youngster in Illinois has for a quality education also depends far too heavily on "the neighborhood," or, more precisely, on property values within the school district where the child resides. This fact of life about education in Illinois was documented anew in a pair of recent reports that detailed the state's overreliance on property taxes for school finance and the link between a school district's tax base and the educational performance of its students. In a study of school funding patterns, state Comptroller Dawn Clark Netsch found that local sources paid about 56 percent of the cost of elementary and secondary education in Illinois last school year, compared to the national average of 45 percent. The load shouldered locally was even higher in the Chicago suburbs, where real estate taxpayers picked up about 70 percent of the school tab.

The state's share, meanwhile, was about 37 percent of total school costs, far below the national average of 45 percent.

Thanks largely to property taxes, public school students here in Illinois were better financed than the national average with Illinois' per pupil resources of $6,063 last year, $252 above the national average of $5,811. If the local share in Illinois were reduced to match the national norm, the per pupil level would drop $ 1,200, or about 20 percent, placing Illinois some $950 below the national average.

The latest "report card" from the State Board of Education, meanwhile, showed that the state's heavy reliance on local property taxes produced huge funding disparities among individual districts. In the most dramatic example, Dalzell Grade School in Bureau County could find only $2,253 per pupil, while Seneca High School, 35 miles away in LaSalle County, was able to spend $14,316 per pupil, thanks to property tax riches reaped from a nuclear power plant within its district.

Moreover, higher spending was linked to higher scores on the 1991 Goal Assessment Program, a statewide achievement test. One analysis of Chicago-area schools, for example, found that the top 10 suburban schools in 11th-grade reading spent an average of $8,946 per student, about $2,500 more than the 10 high schools whose juniors were at the bottom. Similarly, the 10 schools with the top 8th-grade reading scores spent about $2,000 more per student than the 10 suburban schools with the lowest scores.

Even if one accepts the argument that children from wealthy districts score higher only because they come from more affluent families and enter school better prepared, the current system cannot be defended, for it makes greater resources available to those youngsters who least need additional help, while shortchanging children from poorer communities and less fortunate backgrounds.

That some poorer schools also did well on the tests should not obscure the obvious: Wealthier districts can pay top dollar to hire more of the best teachers for smaller classes outfitted with state-of-the art equipment and materials; poorer districts cannot.

While educators decry the inequities in per pupil support, the current system also results in gross inequities for the taxpayers who foot the bill. For example, homeowners who live in school districts with a strong industrial and commercial tax base can pay lower school tax rates than those living in suburban bedroom communities, yet sustain higher per pupil spending levels than their neighbors.

Displeasure with the current system has been sharpened as well by a steep rise in property taxes in suburban Chicago, in part reflecting higher real estate values. The soaring tax bills led to enactment of statu-

4/January 1992/Illinois Issues


tory property tax limits in the collar counties over the objections of the schools, which collect almost two-thirds of suburban property taxes.

The twin quests for more equitable school funding and for property tax relief have sparked renewed interest in proposals to substitute income taxes either state or local for real estate taxes as the chief source of education dollars. Proponents of such a switch correctly argue that an income tax more accurately reflects a person's ability to pay and is fairer than a property tax, especially given the discrepancies in assessment practices across the state.

But substituting the income tax for the property tax as the primary source of education dollars would shift the school funding burden significantly away from business and onto individual taxpayers. Commercial and industrial property comprised about 43 percent of the state's equalized assessed valuation in 1989, the latest year for which data is available, and thus accounted for roughly the same percentage of statewide property tax collections in 1990. In contrast, corporations paid only 12 percent of state income taxes in fiscal year 1990, while individual taxpayers paid 88 percent. And the split is growing; the corporate share was 11 percent last year and just 9 percent through the first five months of fiscal 1992.

More promising approaches are being explored by a legislative task force that is studying school finance in hopes of offering recommendations this spring. Under one idea before the panel, property taxes generated by power plants, shopping centers and other commercial and industrial property would be pooled, either regionally or perhaps on a statewide basis, and allocated to local districts through a formula designed to even out funding disparities. If the state also were given responsibility for assessing commercial and industrial property as it now has for railroad operating real estate and pollution control facilities the overall property tax system likely would be improved.

Whatever avenue to equity is chosen, the need to begin the journey is urgent. Location may be appropriate as the key factor in valuing real estate, but it should play no role in determining whether a school district has the resources to offer its students a quality education.

Charles N. Wheeler III is a correspondent in the Springfield Bureau of the Chicago Sun-Times.

January 1992/Illinois Issues/5


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