End and Means: Senate Committee Looks at Revamping Formula for State Aid to Schools

Oct 1, 2013

Charles N. Wheeler III
Credit WUIS/Illinois Issues
Officially, it’s “Sec. 18-8.05. Basis for apportionment of general State financial aid and supplemental general State aid to the common schools for the 1998-1999 and subsequent school years,” in the statute books.

More familiarly, it’s known simply as the “state aid formula.”

By either name, it’s the prescription by which the state doles out billions of dollars each year to public school districts across Illinois to help pay education costs for more than one million children from kindergarten through high school.

The intent of the formula is clear enough: to help close the gap between property-rich and property-poor tax districts so that the combination of state aid and local resources available to educate each student meets at least a minimum level.

But the process is so complex — some say near unfathomable — that the long-standing joke has been that only a handful of experts truly understand its ins and outs, and they’re not permitted to fly together on the same plane.

Now, a bipartisan Senate panel co-chaired by Sen. Andy Manar, a Bunker Hill Democrat, and Sen. David Luechtefeld, an Okawville Republican, is reviewing the formula with an eye toward proposing updates to the 15-year-old law.

“The state has changed dramatically since 1998,” Manar said. “Property wealth is as disparate as ever, poverty has grown in rural areas, attendance has changed ... resulting in circumstances today where the formula doesn’t accomplish its intended purpose, to act as an equalizer between the haves and the have-nots.”

The renewed interest in revamping the formula stems in part from complaints by downstate lawmakers that Chicago schools are reaping a windfall at the expense of children elsewhere in the state.

Of particular concern are two provisions intended to channel more dollars into school districts with high percentages of low-income students and to mitigate the loss of potential property tax dollars in tax-capped school districts. Together, the poverty grants and the tax cap adjustments accounted for 47 percent of general state aid spending in Fiscal Year 2012, almost four times the programs’ 12 percent slice in FY 2000. As a result, the share going to support the foundation level dipped to 53 percent from 88 percent.

Taken at face value, state Board of Education’s financial data appear to support the charges of favorable treatment for city schools. Despite having only about 18 percent of the state’s public school students, Chicago schools received 47 percent of the poverty grant funding and 49 percent of the tax cap adjustments in fiscal 2012.

In fact, the numbers show the formula is working as intended. For example, the additional dollars to help educate low-income children reflect near-universal agreement that youngsters growing up in poverty require more resources to educate than children from better-off families, especially in high numbers.

So the additional per-pupil state aid increases on a sliding scale as the concentration of low-income students increases, from $355 for districts with fewer than 15 percent low-income students, up to $2,994 for a district with all poverty-level students. Chicago, with more than 90 percent of its students from low-income families, qualified for $2,513 more per pupil.

Underscoring the poverty grant’s importance, state education officials report the number of low-income students has increased over the last decade, from 38 percent in 2003 to 49 percent in 2012 — more than 1 million youngsters — with most of the increase coming in the wake of the Great Recession. Chicago continues to have the most poverty-level students, but growth in the low-income student population in the last two years has been greater in every other region of the state — 44 percent in the collar counties, 31 percent in suburban Cook County, and 18 percent in the other 96 counties — compared with 9 percent in city schools.

During its inaugural meeting several weeks ago, the Senate panel questioned the sliding scale used to calculate the grants and the way poverty levels are measured. Since 2004, it has been based on whether a student qualifies for welfare programs such as Medicaid or food stamps, a yardstick deemed more accurate than the once-every-10-years federal census poverty count that was used earlier.

The challenges for the panel, Manar said, are how to best identify low-income students and how to best distribute the money. “It’s such a big piece of what we spend, it deserves scrutiny.”

Similarly, the tax cap adjustments are intended to counter a so-called “double whammy” that used to hit school districts in tax-capped counties. Under tax caps, a district can’t impose annual property tax increases greater than 5 percent or the inflation rate, whichever is less, even if its property values have grown at a greater rate — the first whammy.

Then, for the first decade of caps, a district’s state aid was calculated as if it could tax all its property value, even the portion excluded by the caps. That cost mainly Chicago and suburban schools millions of dollars in state aid — the second whammy.

After a 1999 formula change, a district’s state aid calculation now is based on the actual property value that can be taxed. In Chicago’s case, the difference between the total value of city property and the school district’s actual tax base was some $34 billion in 2012, entitling city schools to more than $280 million in additional state aid, 56 percent of the total awarded to all districts.

The Senate panel will be looking at that provision, too, Manar said, as part of its overall study of the nuts and bolts of the formula, with the goal of proposing changes in time for the 2014 legislative session.

Most challenging will be the mandate given the committee by its creating resolution: Make recommendations to implement an education funding system that is adequate, equitable, prepares students for success after high school and supports teachers and school leaders, especially given the state’s current budget woes.

How much is adequate funding? A per-pupil foundation level of $8,672, an advisory board reported in January, compared with the $6,119 level that’s been in place since 2010. That would cost some $4.7 billion the state clearly does not have.

What’s equitable? Despite the best intentions of the current formula, the gap between the “haves” and the “have-nots” has not closed appreciably. School districts blessed with factories, shopping malls, power plants or high-end residential property can spend upwards of $20,000 per student, while their less fortunate brethren struggle to reach the $6,000-plus foundation level.

The imbalance — by some accounts the worst in the nation — is a direct result of the state’s over-reliance on local property taxes, which account for more than 60 percent of school funding. In fact, Illinois ranks last among the states in its share of public school funding, according to the U.S. Department of Education, picking up just 28 percent of the costs for K-12 education, compared with the national average of 47 percent state to 44 percent local.

Absent radical change, such as a statewide property tax for schools to level out regional differences, the gap likely can’t be closed without directing billions of dollars more to property-poor districts — again, dollars the state doesn’t have.

So will the Senate panel look at the revenue side, too?

“We won’t get to the revenue discussion until we get the formula right,” Manar said. “We have to show how we can spend what we have better... we’ve got to get that right first, to show taxpayers that the way we distribute the money is fair.”

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois Springfield. 

Illinois Issues, October 2013