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CTBA breaks with Pritzker over education funding proposal

Friday, Feb 21, 2020

* From the Center for Tax and Budget Accountability…

Governor Pritzker’s approach to the state budget stands in stark contrast to that of Governor Rauner. While both emphasized the need for fiscal responsibility, Governor Pritzker is actually supporting his rhetoric about fiscal responsibility with actions. For instance, Illinois has had a “structural deficit” in its General Fund for decades. That just means revenue growth under current tax policy is insufficient on a year-to-year basis to continue funding the same level of public services, adjusting solely for inflation and assuming no changes in law. This structural deficit, coupled with the fact that Illinois has traditionally underfunded core services like education, healthcare, public safety, and social services, are some of the key fiscal realities that motivated Governor Pritzker to support raising an estimated $3.6 billion in new revenue through implementation of a graduated-rate income tax - a policy initiative that has the corollary benefit of creating more fairness in Illinois taxation - by having income tax rates comport with ability to pay.

However, as Governor Pritzker recognized in his budget address, that new revenue will only be realized if this coming November, voters ratify the amendment to the state’s constitution needed to permit a graduated rate income tax. And even if voters ratify this amendment, the state won’t implement the new, fair, graduated-rate structure until halfway through upcoming FY 2021 - meaning it will only generate $1.4 billion in new revenue during FY 2021, growing to $3.6 billion annually thereafter.

Which is why Governor Pritzker took the fiscally prudent step of proposing two separate General Fund budgets for FY 2021, forcing the state to live within its fiscal means, whether or not the amendment passes. The Governor’s “recommended” budget identifies appropriations for core services that would be made, if the amendment to the constitution permitting a graduated rate income tax is ratified. During his budget address, Governor Pritzker emphasized he will devote a portion of the new revenue a graduated rate income tax will generate to shoring up Illinois’ questionable fiscal condition, rather than to enhanced spending on services. He does this by devoting $100 million to deficit reduction, investing $50 million to build-back the state’s rainy-day fund, and contributing $100 million more to the state’s five public employee pension systems than is required under current law.

The Governor also proposed a far more stringent “base budget,” built upon the assumption the Fair Tax amendment does not pass, and hence the state has $1.4 billion less in revenue to spend in FY 2021. Because of that, and in the name of being fiscally responsible, Governor Pritzker makes numerous “hard choices” (his words) to invest less than what the Governor believes is needed to fund core services like education, healthcare and public safety. He accomplishes this by “reserving” a portion of the target appropriations made in his recommended budget proposal, that ultimately would not be made if the amendment permitting a graduated-rate income tax does not become law.

CTBA agrees with Governor Pritzker’s focus on being fiscally responsible, and applauds his efforts to reduce the accumulated deficit, build the rainy-day fund and pre-pay some of the significant debt owed to the pension systems. Indeed, any effort to prepay what’s owed to the pension systems to flatten the unaffordably back-loaded repayment schedule his administration inherited that covers the existing pension debt is sound fiscal policy. We at CTBA think he should go much further and have a full reamortization plan (click here for more info) to deal with this problem once and for all, but laud the fact that he is focusing on the issue in a rational way.

However, CTBA disagrees with his proposal to reserve up to $150 million of the $300-$350 million in Evidence-Based Funding appropriated for FY 2021. Effectively, that means K-12 funding under the base budget proposed by the Governor for FY 2021 would [grow] by only $200 million over FY 2020 levels. If that happens it would be the first time K-12 funding did not grow by the minimum amount of $300 million targeted in statute, since the Evidence Based Funding Formula was enacted in FY 2018. It also means that Evidence Based Funding for FY 2021 would barely keep pace with inflation, effectively providing little true new money for school districts to invest in providing those evidence-based practices shown to enhance student achievement over time. That’s problematic, given that according to the Illinois State Board of Education, as it stands today, overall K-12 funding is some $7 billion less than what the evidence indicates is needed for all students to receive an adequately funded education. Barely keeping pace with inflation does nothing to close that material shortfall. And by failing to reduce that funding gap in any meaningful way, the $200 million appropriation for Evidence Based Funding in the “base” budget proposal increases the pressure on local property taxes to fund schools. Considering that Illinois is already the state that is most reliant on property taxes to fund K-12 education in America, it would be far better fiscal - and education funding policy - for the state to continue down the path of boosting the state investment in K-12, thereby taking pressure off of property taxes. An alternative to a reduction in K-12 funding that still allows the state of Illinois to live within its means would be withholding a portion of the $500 million appropriated for research facility investments for the University of Illinois, as proposed by Representative Will Davis. This would allow Illinois to continue making the necessary investment in K-12 education vital for students to succeed at the college level.

I generally concur with much of the above.

The governor essentially presented a maintenance budget, dressed up with some extra funding promises if the voters approve a constitutional amendment on taxation this November. I have no real problem with that.

But a governor’s budget is essentially his list of priorities. He told reporters yesterday that education was his top priority. His official budget proposal plainly does not reflect that claim.

* And the Republicans are eagerly putting the wood to him

Rep. Avery Bourne, R-Morrisonville, said school districts are required by law to submit their budgets to the state by September. However, under Pritzker’s budget plan, they won’t know how much state assistance they can expect until months after that deadline.

“It will force their budgeting process to make difficult decisions without the certainty of knowing what the state will be sending to them at the end of the year,” Bourne said. “It means local school districts will be making decisions on hiring, on resources for their classrooms before we know the outcome of the governor’s political agenda.”

But they can only go so far before their logic falls apart. Governor’s office response

“Governor Pritzker is a tireless and staunch advocate for education funding, which is why he fought to find a way to actually pay for substantial increases for our schools and why he strongly supports the fair tax,” Bittner said. “It is the height of hypocrisy for Republicans to demand increased spending and refuse to pay for it. The governor’s door is always open to hear ideas from both sides of the aisle on addressing our challenges.”

* Related…

* Gov. Pritzker’s budget address concerns some Illinois school administrators: Pritzker’s contingency on the graduated income tax is not ideal for Vienna Superintendent Joshua Stafford. “We can’t have political contingencies tied to education of our children of Illinois. It’s impossible for a school district to plan for next school year and have contingencies tied to our funding,” he said.

* Budget bully? GOP accuses Pritzker of holding ‘funding to our schools hostage’ to income tax plan

* House Republicans disagree with Gov. Pritzker’s school funding proposal: “When I was listening to the Governor’s speech and he mentioned this, I couldn’t help but think of the old line - it’s a nice funding formula you got here. It would be a shame if something happened to it,” Rep. Steven Reick (R-Woodstock) said.

* Pritzker stumps for higher education budget at UIC

- Posted by Rich Miller        

  1. - Smalls - Friday, Feb 21, 20 @ 10:57 am:

    I don’t expect the governor to include this in a budget proposal, but let’s be honest. We know they can accomplish a “fair tax” without the constitutional amendment by adopting a higher rate that applies to everyone, and then increasing the deductions and exemptions for the lower levels of income. That could all be passed the day after the election if the constitutional amendment fails.

  2. - Oswego Willy - Friday, Feb 21, 20 @ 11:01 am:

    === adopting a higher rate that applies to everyone===

    No political will to do so.

    If the voters reject the progressive income tax, I suspect that will be in the table, and part of the closing argument to support it, as 97% will see no increase in their own taxes.

    ===That could all be passed the day after the election if the constitutional amendment fails.===

    To that specifically, that will be the threat, but in actuality, will still be difficult for many to vote Green.

  3. - Lester Holt’s Mustache - Friday, Feb 21, 20 @ 11:01 am:

    == It means local school districts will be making decisions on hiring, on resources for their classrooms before we know the outcome of the governor’s political agenda.”==

    That’s a laughable argument, coming from a person who, just a few years ago, had absolutely no problem forcing schools to make such decisions before they knew if they would be getting any funding at all. ‘Member that, representative, when the superintendents were telling you, specifically, that “We don’t know if we’ll be able to open our doors when the school year starts?” And you were A-ok with that, because that’s what Bruce Rauner wanted?

    She’s such a clown, I have no clue what her constituents see in her

  4. - Oswego Willy - Friday, Feb 21, 20 @ 11:06 am:

    It should be also noted Ms. Bourne, as a member of the 99th General Assembly held a whole state, not just education, hostage for an agenda, gleefully, and ran on the pride she felt supporting a governor bent on hurting Illinois.

    As a total hypocrite and ignoring her own actions against this state, it’s comically sad and terribly disingenuous to her own constituents to ignore who she is and was, and let her own damage to Illinois be something she readily forgets for… politics.

    “Hey, I know the damage that was done with the budget impasse… it was a mistake to hold Illinois hostage. Governor Pritzker should learn from our mistakes.”

    Ms. Bourne chose not to say that.

    It’s quite ironic that she sees the ills now, but was a willing participant not so long ago.

    Ms. Bourne can be both right, and a brazen hypocrite to her own history.

  5. - pool boy - Friday, Feb 21, 20 @ 11:12 am:

    B.S has been called. He is trying to get his “fair tax” passed anyway he can. I would also suggest if it passes down the road more than 97% will see an increase, since it will be easier to change. JB doesn’t like paying taxes, but he sure likes to increase them.

  6. - Jibba - Friday, Feb 21, 20 @ 11:12 am:

    “An alternative to a reduction in K-12 funding…”

    As opposed to others, CTBA has the integrity to list what they would cut instead of education. At least now there can be a discussion. Cheers.

    And to Bourne and others who say they don’t want cuts and don’t want to pay for the full cost either, jeers. Who can negotiate with that?

  7. - Gob Bluth - Friday, Feb 21, 20 @ 11:26 am:

    Isn’t the Discovery Partners Institute at U of I going to be paid with capital funding - not operating?

  8. - City Zen - Friday, Feb 21, 20 @ 11:28 am:

    Since EBF was passed with no funding source identified, it shouldn’t come as a surprise when that funding appears on the budgetary chopping block.

    I cocnur w/ CTBA assessment that higher ed R&D investment should happen only after we meet our prior commitments.

  9. - JS Mill - Friday, Feb 21, 20 @ 11:28 am:

    Sorry, Anonymous at 11:27 was me.

  10. - Captain Obvious - Friday, Feb 21, 20 @ 11:36 am:

    I think blackmailing voters into passing the unfair tax by making education funding dependent on it is a mistake on Jay Bob’s part. Makes him look petty and mean plus gives the opposition an easily understood bullet point.

  11. - Oswego Willy - Friday, Feb 21, 20 @ 11:43 am:

    === I think blackmailing voters into passing the unfair tax by making education funding dependent on it is a mistake===

    Ok. Then don’t say “let the voters decide” one thing or another later.

    This *is* an opportunity for voters to decide. The monetary constraints still exist. The voters can decide on a priority and how Illinois going forward will see income taxes.

    Sure, that will be the argument, and it can be framed as hostage taking… but not a single Raunerite still in the General Assembly can make that argument, and no Raunerite can honestly be on the side of Illinois in a hostage taking discussion unless they want to be for it.

    “Hey, I know the damage that was done with the budget impasse… it was a mistake to hold Illinois hostage. Governor Pritzker should learn from our mistakes.”

    I didn’t hear it, read it.

    Ms. Bourne will hold Illinois hostage as fast as anyone, depending who is asking.

    Again, this doesn’t mean I think what Pritzker is doing is right or my first choice, but the governor feels his approval numbers, the numbers for the tax must be pretty good to leverage it. It’s his closing argument, done in budgetary measure. Tough medicine, or hostage taking? We’ll see.

  12. - Charlie Brown - Friday, Feb 21, 20 @ 11:52 am:

    This is one of those awkward situations where everyone is wrong, to a degree.

    Pritzker is right to show folks what the budget reality is if the amendment does not pass. It was politically tone deaf to do it so brazenly.

    Martire is correct that state education funding takes a whack if it does not pass. But he is wrong to ignore that the impact will not be across the board. A feature, not a bug, of the formula is that the neediest schools in the poorest communities will still get their full increase, while the more affluent districts who presumably may be more likely to oppose the fair tax will get far less money if it does not pass. That actually sounds kind of fair to me.

    And finally, Avery Bourne is correct that the education funding for wealthier districts is being held hostage. But she is wrong to blame Pritzker, it is Republicans themselves that are trying to kill funding for their own education programs in their own districts. Again, this is baked into the funding formula: less money in the state budget means less money for education which means less money for wealthier school districts.

  13. - Jibba - Friday, Feb 21, 20 @ 11:55 am:

    “…higher ed R&D investment should happen only after we meet our prior commitments.”

    I get why you say this and I don’t completely disagree, but this is also one of those things that can be done to help drive future economic and population growth. There aren’t many options left for us.

  14. - Tax your way to prosperity - Friday, Feb 21, 20 @ 12:04 pm:

    As in the past years people are already going to leave. I hope they budgeted for the loss on all of the income tax on those people in addition to the one’s this will push out.

  15. - Occam - Friday, Feb 21, 20 @ 12:05 pm:

    Putting in a contingency into the Tier funding for next year does not impact the majority of school districts in the state. The majority of school districts are classified as Tier 2 to 4. The majority of the incremental new money is allocated to Tier 1 districts. Tier 2-4 districts, on average, receive less than $100 per pupil from this formula. A change in the funding level will not have a material effect on those districts’ operations because they are already getting next to nothing from this formula.

    The big effect will be felt by the Tier 1 districts and, in particular, the City of Chicago. Their share of the $300+ million in new funding amounted to over $64 million in Tier 1 funding this year. Does Mayor Lightfoot know she’s potentially the biggest loser in Pritzker’s gamble on passage of the fair tax?

    Other big Tier 1 losers would be Elgin, Waukegan, Aurora, Berwyn, Cicero, and many others.

  16. - RNUG - Friday, Feb 21, 20 @ 12:07 pm:

    I mostly agree with CTBA, especially on the pension funding. Only putting $250M more out of $3.6B towards the pensions is more pocket change found in the couch instead of a serious effort.

    Don’t get me wrong; any extra money to the pensions is good. But it’s clearly not that high of a priority … and a lot of people have been saying you have to fix the pensions before anything else can get fixed.

  17. - RNUG - Friday, Feb 21, 20 @ 12:14 pm:

    == I hope they budgeted for the loss on all of the income tax on those people in addition to the one’s this will push out. ==

    In the past, IDOR has been pretty good at projecting behavior changes and revenue loss due to tax code changes. Any estimates IDOR provided are probably as good as you will get before the fact.

  18. - Grandson of Man - Friday, Feb 21, 20 @ 12:22 pm:

    It’s fair to put tough financial choices before voters but certainly not to hold budgets hostage, like Rauner did, where not only did he not get his demands, he got overwhelmingly rejected by voters.

    Are we going to muddle through financially year after year or boost our revenue to give us more options? The beauty of the Fair Tax is manifold. We would get more revenue, the most vulnerable and the state’s workforce would be put on more stable ground, the wealthiest would take on their rightful financial burden, the tax hike would be relatively small, the vast majority would get at least some tax relief, etc.

  19. - Charlie Brown - Friday, Feb 21, 20 @ 12:37 pm:

    @Grandson of Man

    You are correct, but I would add that “muddling through” really is not an option, I don’t think.

    Much like the school property tax cap levy, where if you do not raise rates the max you fall behind and can’t make it up, failure to pass the tax hike this year will put wealthier districts behind in funding permanently.

    There is no muddling through, it’s either keep up or fall behind…the system is designed to punish the lawmakers of wealthier districts for welching on payments.

  20. - VerySmallRocks - Friday, Feb 21, 20 @ 12:51 pm:

    This is the opening act in a Shakespearen struggle that is most about equitable school funding, taking

  21. - City Zen - Friday, Feb 21, 20 @ 1:11 pm:

    ==I think blackmailing voters into passing the unfair tax by making education funding dependent on it==

    It’s only 2% of state funding and maybe 1% of total education funding for K-12. And, again, it’s additional dollars over the previous year’s budget.

  22. - HardBoards - Friday, Feb 21, 20 @ 1:53 pm:

    ==But he is wrong to ignore that the impact will not be across the board. A feature, not a bug, of the formula is that the neediest schools in the poorest communities will still get their full increase, while the more affluent districts who presumably may be more likely to oppose the fair tax will get far less money if it does not pass. That actually sounds kind of fair to me.==

    Only less than 3 million of the new tier money each year goes towards relatively more affluent Tier 3 and 4 districts. Keeping their increase at 0 does virtually nothing to prevent needy districts from being meaningfully hurt by this proposal.

  23. - Adam - Friday, Feb 21, 20 @ 3:36 pm:

    Doesn’t it serve as a threat then? “Hey pass the FairTax or else exect a property tax increase.”

  24. - RNUG - Friday, Feb 21, 20 @ 3:48 pm:

    Saying you need x revenue for this or we can only spend less than x is just stating a math equation.

    Of course, he hasn’t voiced the third alternative: if the graduated income tax doesn’t pass, we’ll just raise the flat tax high enough that you will wish you had passed the graduated tax.

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* Everyone has their own priorities
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