Budget & Finance

Gaming, Tax Reform on Table in Illinois School Aid Debate

By Sean Cavanagh — May 17, 2005 3 min read
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In search of more money for schools, elected officials in Illinois are weighing two markedly different funding strategies, both of which have proved popular in other states: raising income taxes while cutting property taxes, or tapping into more gambling revenues.

Some members of the Illinois Senate back the idea of swapping higher income taxes for lower property taxes, a trade-off they say would bring a more stable source of cash, and greater equity, to school districts across the state.

But that proposal faces a major obstacle in Gov. Rod R. Blagojevich, who says he will not support any kind of a tax increase. The governor considers the proposed tax swap to be a tax hike, his budget spokeswoman said.

The first-term governor, a Democrat, is instead promoting a plan that would expand the number of slot machines in existing Illinois casinos. Taxes on those additional slots would raise as much as $300 million in new revenue annually for schools, he predicts. The governor has also proposed an additional $140 million in his fiscal 2006 general-fund budget of roughly $5.9 billion for education.

Jackpot or Snake Eyes?

Critics contend that the governor’s revenue proposal would do little to help school districts that have absorbed painful budget cuts in recent years.

Bindu Batchu, the campaign manager for A+ Illinois, a statewide advocacy organization that seeks to increase school funding, says the long-term financial stability of schools depends on more fundamental changes in tax policy than Mr. Blagojevich is proposing. “The way we fund schools in Illinois is unfair to children, unfair to taxpayers, and it’s clearly unsustainable,” she said.

Her organization instead favors two plans that were emerging from the Senate last week, offered by Sens. James T. Meeks, an Independent, and Richard J. Winkel Jr., a Republican.

Sen. Meeks’ plan would raise the state income tax from 3 percent to 5 percent. It would also reduce a portion of property-tax bills that support education, though the amount of that reduction was still being debated last week. Sen. Winkel has authored a similar tax-swap proposal, and last week, the two lawmakers met to try to work out a compromise. Senate President Emil Jones, a Democrat, has also called for a school-funding overhaul.

Mr. Blagojevich’s opposition to raising taxes remains unchanged, however, said Becky Carroll, a spokeswoman for the governor’s office of management and budget.

“The needs of schools are going to increase each year,” Ms. Carroll said. “At some point, you’re going to have to go back to taxpayers again and ask them for more money.”

Public school advocates in Illinois have long complained that the state’s method of school funding relies far too heavily on property taxes. That system, they say, penalizes property tax-poor school systems, as well as relatively stable or wealthy districts that are crimped by local tax caps.

But efforts to lessen the reliance on property taxes have consistently failed to muster enough legislative support in recent years. (“Illinois ‘Watch List’ Snares Rich And Poor Districts,” Sept. 3, 2003.)

Some advocates, such as Ms. Batchu, hope that lawmakers could override a governor’s veto, and approve such a tax plan—an uncertain prospect at best.

Tax Resistance

Michael D. Johnson, the executive director of the Illinois Association of School Boards, said his group favors raising the income tax, but has concerns about trading that money for lower property taxes, partly because he believes voters in local districts would become even more resistant to future property-tax levies for schools.

While he does not oppose the governor’s plan to generate school funding through slots revenue, Mr. Johnson noted that gambling revenue does not always prove as stable as forecasters predict. When Illinois officials devoted a portion of state lottery funds to schools years ago, that extra money was later used as a justification for reducing general funds for education, he said.

Michael Griffith, a policy analyst for the Education Commission of the States, which is based in Denver, said it had become common for states in recent years to channel gambling money to schools, through lotteries or other types of gaming. But he agreed that a steady flow of money was no sure thing, in part because so many states are competing with their neighbors for gambling business, and the resulting revenue.

An increasing number of states, like Illinois, have sought to wean themselves from using property taxes to fund schools, turning to income or sales taxes instead.

Such tax trade-offs tend to have more public backing if they do not result in higher taxes overall, he said. “If it’s a one-to-one swap,” Mr. Griffith said, “that’s where you get support for it.”

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