Cost Shift Doc

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About that Free Lunch

Achieving air, meaningul and constitutionally-

sound pension reorm remains one o the mostdifcult challenges acing our state. In theIllinois Senate, there is clearly a sincere desireby members o both political parties to reacha consensus that will protect and preserveessential state services, while also assuring thefnancial security o retired teachers and otherpublic employees.

Given the tremendous challenge we ace,there is no reason to make it more difcult by

interjecting additional complicated issues intothe pension reorm debate.

One proposed reorm measureand theone most likely to derail any resolutionhassparked a misleading regional battle over statecontributions to downstate and suburban retiredteacher pension unds.

Some lawmakers

propose shiting thecosts or local schooland university employeepensions rom the stateto their employers. Theyargue those employersset the salaries thatdetermine the pensions.But they do notacknowledge that theIllinois General Assembly

sets all the beneftsincluding retirement age,cost-o-living-adjustmentsand contribution levelsthat have a signifcantimpact on pensionpayouts and the growthin ununded liabilities.

Some lawmakers, including House SpeakerMichael Madigan, try to sell it as a matter oeducation airness. The Speaker has termedthe contributions a ree lunch. This rhetoricis misleading, divisive and derisivehardlythe kind o discourse designed to ostercompromise and resolution.

School Funding in Illinois AnExamination

Rather than respond in kind, SenateRepublicans have examined the states systemo school unding to determine i the current

distribution o resources is air and equitable, ori it is instead skewed toward one region or evenone school district.

The unavoidable conclusion is that, i there areree lunches being handed out to schools inIllinois, the portions are indeed inequitable. Butnot in the way portrayed by others.


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In act, i downstate and suburban schooldistricts are receiving a ree lunch, it is onthe order o a kids meal. In contrast, thoughChicago Public Schools enroll roughly 18% oIllinois public schoolchildren, the state has beensuper sizing their value meal.

Through a variety o special considerations andcases, the Chicago Public Schools actuallyreceive nearly $800 million in ree lunch moneythat is not available to their counterparts insuburban and downstate Illinois.

The net result is a signifcant budget disparity

that treats Illinois schoolchildren dierentlysimply based on where they happen to live. Apreschool child in a downstate school districtwill receive ewer education service dollarsrom the state than the child would in Chicago.A developmentally-disabled child living in asuburban community will receive less unding orhis education rom the state than would a similarchild in Chicago.

Perhaps most unair o all, an impoverished child

in Edwardsville must be educated or barely 15%o the state support available to a needy childin Chicago living under comparable economiccircumstances.

Why This Examination is Important

It is not the intent o the Senate RepublicanCaucus to ignite a regional war over schoolunding airness. The goal is not to pull the

fnancial rug out rom under the Chicago PublicSchoolswe recognize that all school districtsin Illinois are acing difcult fnancial challenges.

We simply want to provide a balanced picture owhere unding equity stands today.

An honest, objective review o school undingpolicies in our state is long overdue. Illinoiscontinues to distribute school unds using

outdated ormulas, with at least one datingback to the 1970s. The state should undertakea thorough examination o how we divide upthe dollars that go to our schools. We wouldwelcome such a discussion.

However, the urgency to fx the states retirementsystem unding is too great to risk having thosereorms get bogged down in a protracteddebate over school unding airness even i thediscussion is long overdue.

Six Areas of Funding

State support o school unding in Illinois allsunder six general categories:

Foundation Level Grants; PTELL (Property Tax Extension Limitation

Law) Adjustments; Corporate Personal Property Tax

Replacement Grants; Poverty Grants; Special Education Grants; and Early Childhood Education Grants.

A brie look at each o these categories revealshistorical trends and ormula anomalies thatsteer extra dollars to the Chicago Public Schoolsystem and away rom downstate and suburbanschools.

Foundation Level Grants

Arguably, the Foundation Level Grant is the most

equitable and air ormula distribution in thestate. Its purpose is to assure that all schoolshave access to a basic oundation level osupport deemed necessary to educate a child inIllinois.

It is a resource equalizer, which takes intoaccount the property wealth o school districtsand attempts to even out or equalize the unding


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available to schools. The goal is to ensurestudents who happen to live in property-poordistricts receive a base level o support.

Until the turn o this century, the FoundationLevel Grant was the primary component o stateeducation support. Though the grant was otenthe source o controversy, it was accepted alongthe same lines as Winston Churchills amouspronouncement about democracyeducationunding experts and legislators all seemedwilling to accept that the Foundation Grant wasthe worst ormula or education unding, exceptor every other ormula that had ever been tried.

For decades, Chicago was a property-poorschool district and its political leaders werestrongly protective o the ormula. However,beginning in the 1990s, Chicagos propertyvalues began to climb. Suddenly, the baseormula that had beneftted the City or manyyears was no longer as attractive.

It may not be coincidental that since 2000, theFoundation Level has been consistently reduced

as a component o overall General StateAid. In contrast, two other General State Aidcomponents that could be more targeted to theChicago Public Schools have risen dramatically.

From Fiscal Year 2000 to Fiscal Year 2012, totalunding or Foundation Level Grants has actuallydropped by 6%, while Poverty Grant unding hassoared by 432% and PTELL Adjustments havegrown by an astonishing 1,267%.

Contrary to popular belie, in FY 12 only 53%o General State Aid unding to local schoolswas provided through Foundation Level Grants.Poverty Grants provided 34% o the undingand 13% came to the districts in the orm oPTELL Adjustments. In contrast, in FY 00 theFoundation Level provided 88% o the undingmade available to schools through the GeneralState Aid ormula.

The very ormula that is designed to ensureschool children in Illinois receive a qualityeducation no matter where they live is beingedged out in avor o convoluted policies and

ormulas. There is less money available todayor Foundation Level Grants than there wastwelve years ago.

Value o Free Lunch: No Free Lunch can beassigned here, as the nature o FoundationLevel Grants is to provide at least a minimumlevel o unding per student in all districts.

PTELL Adjustments

With the advent o the Property Tax Cap in the1990s, a new component was added to the stateaid ormula: a specialized ormula adjustmentintended to oset the impact on school districtswhose revenues rom local property taxes wererestricted.

The theory was that school districts should notbe punished simply because the real value oproperty in the district was climbing aster than

allowed under the tax caps.

The Property Tax Extension Limitation Law(PTELL) Adjustments were originally intendedas very modest awards to oer a small oset toschool districts unable to access the growing


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value o property within a district.

However, this ormerly modest program hasexploded since 2000. From FY 2000 to FY 2012,PTELL Adjustments have grown by 1,267%.PTELL Adjustments have particularly beneftedChicago Public Schools, which now receives49% o all PTELL unding in the state.

Chicago enrolls 18% o students, but receives49% o PTELL dollars.

Value of PTELL Free Lunch: $196 Million.

Corporate Personal PropertyReplacement Grants

The Chicago Public Schools have also receiveda windall rom the states Corporate PersonalProperty Replacement Tax.

When the 1970 Illinois Constitution ordered theend to personal property taxes, the GeneralAssembly established a business income tax toreplace the revenues. The distribution ormula othis Corporate Personal Property ReplacementTax revenue has remained unchanged or the30-plus year history o the tax.

Chicago Public Schools, which account or 18%o the student population in the state, receive27% o the total revenues rom this specialincome tax.

Value of Corporate Personal PropertyReplacement Free Lunch: $67 Million.

Poverty Grants

The states expenditures or special PovertyGrants have also exploded in the past decade.In FY 2000, Poverty Grants constituted 10% othe states General State Aid ormula. Today

they represent more than one out o everythree dollars in the ormula. This 431% increasein Poverty Grants seems modest only whencompared to the 1,267% PTELL Adjustmentincrease.

In real dollars the Poverty Grants illustrate jaw-dropping increases, dramatically increasing rom$295 million to almost $1.6 billion over the lasttwelve years.

The dramatic rise has not come withoutadjustment. Prior to FY 2004, PovertyGrants were awarded based on Censusdata o low income students. However theIllinois Department o Human Services began


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determining the number o low income studentsusing Medicaid and other programs in FY 2004.In that time, Average Daily Attendance (ADA)has remained stable, yet students identifed aspoverty students have more than doubled. In FY2012, Chicago Public Schools received nearly50 percent o these dollars.

I Poverty Grants were distributed equitably,it would be hard to argue that awarding moremoney to educate impoverished children is notair.

But, as with almost everything about school

unding in Illinois, the distribution is ar romequitable. Instead, Illinois uses a curvilinearormula that assigns a Poverty Grant o $2,513to an impoverished student in Chicago, while animpoverished student in Mt. Zion receives $390.

One cannot reasonably argue that animpoverished student in one school district isworth more than $2,500 to that school district,while an impoverished student in another schooldistrict is worth $390. Yet the state Poverty

Grant ormula dramatically rewards high povertyconcentration school districts, like the Chicagoschool district, or having a high percentage oimpoverished students.

At some level, this is logical and reasonable. Noone would argue that a school district with 15%o its students living in poverty aces the samechallenges as a school district with 90% o itsstudents living in poverty.

By the same token, it is hard to justiy the grossdisparities in Illinois Poverty Grant program.Perhaps more than any other component ostate education unding, Illinois system oawarding Poverty Grants to schools cries out orreview.

The Chicago Public School District enrolls 31%o the poverty students in Illinois, but receives47% o Poverty Grant unding.

Value of Poverty Grant Free Lunch: $255Million

Special Education Grants

Under a ormula devised in 1995, ChicagoPublic Schools receives a guaranteed blockgrant o 30% o special education unding. Atthis time, 30% o total unding is directed to aschool system that is responsible or just 17% othe special-needs students in Illinois.

The Chicago Public Schools are guaranteed afxed percentage o the states special educationbudget, regardless o the number o studentsthey serve. Downstate and suburban schooldistricts must compete or the remaining dollars

by submitting vouchers or reimbursement oactual costs incurred.

Chicago Public Schools enrolls 17% o thespecial education students in Illinois, yetreceives 30% o the special education unding.

Value of Special Education Free Lunch: $197Million


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Early Childhood Education Grants

The fnal major component o state educationunding is Early Childhood Education. LikeSpecial Education Grants, the Early ChildhoodEducation Grants are awarded under a fxedblock grant created in 1995.

Under the block grant, Chicago is guaranteed37% o the states Early Childhood Grant

unding. This is a substantial percentage o theEarly Childhood Grant revenue that is beingdirected to a school district that has only 18% othe student population in Illinois.

Once again, a child in Chicago has accessto state resources ar beyond what a child insimilar conditions would have in a downstate orsuburban school.

Chicago Public Schools enroll 18% o total

students, but receive 37% o Early ChildhoodEducation dollars.

Value of Early Childhood Education FundingFree Lunch: $57 Million

Summary

The purpose o this report is not to launch araid on state unding or the Chicago PublicSchools. In these difcult times, no schooldistrict can sustain major changes in undingormulas.

Instead, we hope to bring some balance to thediscussion o school unding in Illinois, and toput an end to gratuitous and deceptive potshotsabout ree lunches.

I the Chicago Public School system bears

a slightly higher burden or teacher pensionpayments, that is oset many times over byother components o school unding.

During the course o our examination, we haveuncovered serious issues that undermine airaccess to education or all Illinois students.Indeed, some o the discrepancies areparticularly troubling because they impact ourmost at-risk students.

Illinois must have a candid, thorough andresponsible debate over school undingormulas. But today, we must conront the crisisat hand.


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