Illinois districts with property tax caps reap extra education dollars

Back-door school subsidies

Josh Dwyer
Director of Education Reform

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Fifty-four districts – located primarily in Cook and the collar counties – received an additional $457 million in state education funding subsidies this year thanks to a little-known law passed years ago to bail out districts with property tax caps.

This law – called the Property Tax Extension Limitation Law, or PTELL Adjustment – gives property-tax capped districts additional education funding. It does this through a formula in the General State Aid, or GSA, budget, which is the single biggest education expenditure in the state.

The amount of PTELL Adjustment funding a district receives depends on:

•    How much property wealth a district has
•    How much the state assumes the district can raise in property tax revenue
•    How much funding local revenue sources can provide per student in the district

Essentially, if a district can’t raise enough property tax revenue per student to meet the state’s minimum threshold for what it believes a district needs to spend per student to provide a sound education – currently $6,119 – the state provides additional funding.

The PTELL Adjustment makes up the difference between what the district could have raised locally if tax caps hadn’t been introduced and what it can actually raise. This means that many districts receive more GSA funds than they otherwise would. Property tax caps are voluntary. PTELL funds should go to districts that can’t raise enough property tax revenue per student to meet the state’s minimum standards.

An article in the Chicago Tribune details how Oak Park, one of the wealthiest districts in Illinois, has benefited handsomely from this policy, to the tune of more than $7 million for its elementary and high school districts:

“Oak Park was among those on the receiving end as Illinois quietly doled out some $6 billion since 2000 to boost state aid for select school districts – many in the Chicago region – that couldn’t get more money from property owners because of laws that limit tax collections.”

But Oak Park is nothing when compared to Chicago, a city that received $284 million, or 56 percent, of the state’s total PTELL Adjustment funding in 2012.

How did it receive such a disproportionate share?

Because the state, through a complex formula, assumes that the city – which is tax-capped – can only access $54 billion of its property for education funding. The reality is that Chicago has more than $88 billion worth of property within its borders.

If the state would have used the $88 billion figure instead, the city would have received $130 million in total education funding – not the $413 million it received in 2012.

A property tax cap, in and of itself, is not problematic. However, the money Chicago and other tax-capped districts like it, receive is nothing more than a multimillion dollar subsidy that comes at the expense of other school districts and taxpayers.

It is time for tax-capped districts to live within their means and to stop going to state taxpayers with outstretched hands.