Illinois Districts Swarm Bond Market To Blunt the Impact of New
School districts and other local-government agencies in suburban Chicago are speeding up bond issues in an attempt to head off a new tax law that educators predict will force significant program cutbacks in the years ahead.
The Illinois legislature passed the measure this year in an effort to provide tax relief for suburban residents. Under the statute, which takes effect Oct. 1, local property tax-rate increases in five counties surrounding Chicago will be limited to no more than 5 percent a year. Bigger increases will have to be referred to voters, who have been unreceptive to tax-increase proposals in recent years.
The provision does not apply to Cook County, where lawmakers instead imposed a one-year freeze on rate hikes.
Local taxing districts that maintain services ranging from forest preserves to sanitation systems-and, to a somewhat lesser extent, school districts--have swarmed the bend market in recent months in an effort to raise bond revenue, and to establish the new tax levels necessary to pay for the bonds, before the Oct. 1 deadline.
The bend rush has caught state officials and tax-limitation proponents off guard, and some analysts say the proposals threaten the intent of the tax-cap law.
"It is unfortunate because it flies in the face of the law and what it was supposed to accomplish," said Kevin Johnson, a spokesman for the state revenue department.
Seeking an Answer
Because many of the suburban Chicago districts rely heavily on property-tax revenues to fund their budgets, rising bend debt generally translates into higher property-tax rates. For many districts, next year's tax cap will also mean a ceiling on the size of bend issues districts can initiate without going to the voters.
School officials who have been turned back in recent tax referendums said the rate-limitation law left many districts potentially in the position of being able to obtain new funds to accommodate growth, academic programs, and administrative costs only by making cuts in existing programs.
"I don't know what the answer is," said Sybil Yastrow, regional superintendent for schools in Lake County.
'I realize we need to have some tax reform," she said. But the law will make cuts inevitable, she warned, with enrichment programs for special-education students and at-risk children among the first to go.
"Anything that is not mandated will be cut," Ms. Yastrow predicted. "I don't see any other answer. It is next to impossible to pass referendums."
Many districts that have hastened their bond issues did so in response to the legislature's decision not to exclude mandated "life safety" building-renovation projects or contributions to tort-immunity funds from the tax-increase ceiling, according to Pete Weber, director of government relations for the Illinois Association of School Boards.
Mr. Weber said the impact of the tax-limitation measure will be compounded in the suburban counties by the state's decision to delay one monthly general-school-aid payment this year.
Officials in School District Unit 46 in Elgin moved a $7-million bond sale scheduled for next spring to late this month. In addition, they added $5 million to the bond issue in order to stockpile cash to preserve existing programs.
"While there may be some cuts for the 1992-93 school year, we feel that the $5 million will ensure that they won't be drastic or major," said Gordon Schulz, the district's assistant superintendent for finance.
The reserve funds, he said, will be necessary to serve the district's growth. Elgin officials opened four building additions last year and plan four more later this year. Two new schools are scheduled to open next year.
The Elgin district will use $4 million of its bond proceeds for life-safety building work, ranging from roof replacements to asbestos removal. Another $3 million will fund a cash-management program that allows the district to pay its bills until local tax revenue is collected later in the school year.
Ms. Yastrow said the tax-cap issue has underscored longstanding doubts about the level of education local taxpayers are willing to support.
"I'm with people every day who are not in education that say we need property-tax relief and at the same time need the same government services," she said. "I don't think they believe the programs will truly be cut."
"I think there's no question about it now in terms of the schools," Ms. Yastrow observed. "I'm not saying that the world is going to fall apart, but we're going to have to look at different kinds of services."
Vol. 11, Issue 01, Page 33Published in Print: September 4, 1991, as Illinois Districts Swarm Bond Market To Blunt the Impact of New