Gov's SB1 Veto Surprises Some In His Party

Aug 7, 2017

Schools are set to receive payment from the state in just three days, but that can’t happen until the Illinois legislature approves a new “evidence-based” funding model.

But last week, Gov. Bruce Rauner vetoed large portions of Senate Bill 1 — the only such plan that's passed both chambers. At the moment he issued his amendatory veto, the governor was missing some vital information: He didn't know how many votes he would need to enact his changes, he didn’t know how his changes would impact dollars going to each school, nor did he know how long it would take the State Board of Education to do all that complicated math.

He also had not shared his plan with his own party's longtime point-person on school funding, State Sen. Jason Barickman, of Bloomington.

“Well, you know, I can’t speak for my colleagues, I was not given a chance to see the amendatory veto before it was issued,” Barickman told me on Friday.

At first, I thought I’d misunderstood the senator. At Rauner’s request, Barickman is currently one of four Republican legislators assigned to a bipartisan negotiation squad that’s supposed to be hammering out some sort of compromise. Barickman sponsored the first EBM legislation back in 2015. Furthermore, he’s now the sponsor of Senate Bill 1124 — a version of the “evidence-based model” that has never been voted upon, but is the one Rauner finds more palatable. He was one of the more active members of Rauner’s bipartisan, bicameral School Funding Reform Commission that spent approximately 100 hours meeting during the months of July 2016 through January 2017 in an effort to draft a new school funding bill (despite strong nudging from State Sen. Andy Manar, the best the commission could come up with was a “framework”).

Why would Rauner take veto action without running his plan past Barickman?

“Well, we all have different roles in this,” Barickman says. “I’m a Republican legislator. I’m certainly not the governor.”

Lawmakers have several choices: They can approve or override the governor’s veto, but both of those would require a super-marjority vote. They could also come up with compromise, though Barickman says conversations have so far proved so futile, he refuses to call them negotiations.

“Negotiation is a two-way street,” he says. “I give you this; you give me that. And we’re not seeing that in any of our discussion.”

Manar — the sponsor of SB1 and one of the negotiators for the Democrats’ side — admits he’s not budging.

“I’m not the one with the problem with the bill,” he says, “so why would I offer anything against a bill that the legislature passed, first (school funding) one in two decades, to the executive? I have a lot of respect for Sen. Barickman, I do. And despite his characterization of how negotiations are going, my guess is if they weren’t going well, he wouldn’t keep showing up.”

It’s unlikely that any movement will happen before the Illinois State Board of Education produces spreadsheets showing exactly how much money school districts will supposedly receive under each plan. That could happen as soon as today.

But spreadsheets are the school funding equivalent of Cliff Notes, a shortcut that skips crucial details sure to show up on the test. That’s especially true with this new funding model. It is built to annually assess each of the state’s 852 school district’s needs (“adequacy target”) and resources (“local capacity”), then measure how adequately funded each district is. Districts would then be sorted into four tiers: Tier I for districts farthest from adequacy, Tier 4 for districts at or above their funding targets, the rest in between. Under SB1, every district keeps its current state funding, and whatever the state allocates as new money each year (the newly-approved budget would spend $353 million) would be channeled mostly to Tier I, with less going to the higher tiers.

As needs and resources change over the years, some districts would “fall” into a lower tier or “rise” into a higher tier, because this model includes built-in recalibration mechanisms to annually rebalance what each district needs against its capacity to bear that cost.

I asked Ralph Martire, director of the bipartisan Center for Tax and Budget Accountability, to explain how this works, since he has helped develop this school funding model since 2010. He used student enrollment as an example.

“Under SB1, if you lose student population, you’ll get less money from the new state distribution, because your adequacy target will be reduced. It’s not as if the formula ignores it,” he says.  “But, if you’re below adequacy, you still get more money than you got the prior year, so you can move towards adequacy. That’s the beauty of how SB1 works. The math actually accommodates all situations — student population growth or loss.”

Rauner’s veto would change the hold-harmless portion of this feature after two years, to base funding on enrollment. That change would cut dollars for districts that lose students — even if the district has never had adequate funding.

The governor has long said that SB1 is too generous to Chicago Public Schools. By EBM metrics, CPS has about 62 percent of the funds it needs to achieve “adequacy,” but Rauner promised he would use his amendatory veto powers to cut some of the state funds CPS would receive. He toured the state decrying SB1 as a “Chicago bailout” because it would give CPS $221 million to pay teacher pensions (the state already covers teacher pensions for all other school districts), plus count its payments toward the Chicago Teachers Pension Fund’s legacy liability as part of CPS’s cost of doing business (this would net CPS about $40 million). Rauner was somewhat less vocal about his plan to cut the $203 million block grant bonus CPS gets every year, but it was mentioned in the footnote of his website touting how much more money every school district (except CPS) would get from the state under his plan.

But the changes he unveiled last week extend far beyond anything he had hinted at during the extended pause between SB1’s approval in the legislature and the day it landed on his desk.

The most notable change involves TIFs and PTELL — Tax Increment Financing districts and Property Tax Extension Law Limits. These are mechanisms commonly used by municipalities and counties to hold taxes down. In TIFs, taxes are frozen for a specified period of time, typically to encourage development. PTELL provisions prevent property taxes from rising more than 5 percent or the Consumer Price Index, whichever is lower. Both PTELL and TIF therefore limit the amount of property tax that can flow to school districts.

Rauner’s amendatory veto demands that the state ignore those limits, and treat school districts as though they’re receiving the full EAV (Equalized Assessed Value) of all property, even property inside TIF districts or under PTELL.

Rauner’s communications director Laurel Patrick said that change corrects a “fundamental unfairness in the system.” In an email, she wrote:

Illinois' education formula is based on property wealth. In short, the less property wealth (local capacity) you have, the more assistance you get from the state. The more property wealth you have, the less assistance you get from the state.

 

However, there are loopholes in the system that allow communities with a lot of property wealth hide their property wealth.

 

One way they do that is with TIF districts. When a community creates a TIF district, the incremental increase in property wealth within the TIF district is not counted as a part of the school district's  EAV. That's unfair, because a lot of property wealth is hidden in TIF districts. One easy example is Chicago which is riddled with TIF districts in wealthy areas that allows CPS to hide its true property wealth from its EAV.

 

PTELL communities have their EAV adjusted downward in a formula in recognition of the fact that the community is PTELL to create the PTELL EAV. The PTELL EAV is lower than the real EAV, and once again  allows a local district to hide their true property wealth and get more money from the state.

 

Patrick’s description of the state’s education formula is accurate: Illinois schools truly rely on local property taxes, which supply on average about 64 percent of k-12 funding, relying on the state to fill in only what they can’t muster for themselves (despite the state Constitution’s requirement that the state provide at least 50 percent of school funding). But so far, Rauner’s office hasn’t offered any data showing that all or even most school districts are scamming the system by “hiding their true property wealth.” The governor’s amendatory veto simply treats all districts as guilty, and punishes them accordingly.

Number crunchers at the Illinois State Board of Education haven’t produced a model of how this (and other) changes would play out in part because the governor’s amendatory veto introduces new data sets into the school funding model. Since TIF and PTELL districts aren’t designated (or controlled) by school districts, their boundaries aren’t necessarily the same. Figuring out how each school district is affected by each TIF or PTELL is a logistical challenge.

I asked Barickman whether such drastic measures regarding TIFs and PTELL had been a topic among the lawmakers looking for compromise.

“In our negotiations, the discussion about TIFs, specifically, have centered around whether we could make changes to prospective TIF districts. In other words, TIF districts that don’t exist today, but are set up in the future,” he said. “We’ve talked about that, we’ve talked about TIF districts that are extended, or renewed, but we have not discussed a negotiation of existing TIF districts or PTELL.”

Barickman didn’t attempt to explain Rauner’s more extreme approach, except to reiterate several times during our conversation that there’s something less than 100 percent synchronization among Republicans.

“Some perceptions are that everyone’s working in some room together off the same script, when in reality, he’s the governor,” Barickman said. “He’s the head of the executive branch; I’m a Republican member of the legislature.”

Asked whether he planned to vote in favor of the governor's amendatory veto, Barickman didn't give a definitive answer. Instead, he said there's a legislative process that needs to unfold, and he wants to let it play out.​

 

As someone who values being knowledgeable about Illinois, please support this public radio station by clicking on the, "Donate," button at the top of this page.  If you're already a supporter, thank you!