Coffee Break 8-7-17

ILLINOIS UPDATE: DAGGERS, UNSHEATHED

But a system where the rich get great schools and the poor folks get whatever crumbs can be scraped together seems a highly resilient model that would survive any attempts to alter it.”

Neil Steinberg, Chicago Sun-Times

Education-funding cognoscenti and Illinois politics devotees are now caught up in a new drama: the governor’s Amendatory Veto (AV) of SB1 (Senate Bill 1), which has been re-christened (twice) as SB1124 and HB 4065 and sent back to the Illinois GA, where there are four possible outcomes: (1) Override: (a) overridden by both houses (magic numbers: 36/71 for Senate—where it will start—and House, respectively), in which case SB1 becomes effective immediately, or (b) not overridden, in which case SB1 is dead; (2) Accepted: (a) not acceptedbill dies or (b) accepted, in which case the AV version of the bill goes into effect immediately (we think—there’s some question about this).

Note: there’s only one “path to passage” of SB1 in its May 31, 2017 form, to wit, an override by a three-fifths majority in both houses of the GA. That’s it. Only three days remain before the first checks to Illinois’s 855 school districts are due from the office of Comptroller Susanna Mendoza (August 10, 2017; second installment due August 20,  2017). The clock is ticking.

Background: Illinois has the most inequitable school funding formula in the nation—an average of something over $13,000 per student (fifteenth-highest per-capita spending in the nation) is spent per student (Illinois has the 9th-best performing K-12 school system in the U.S.) but the state provides a small percentage of the total, and the actual amounts spent from district to district vary depending on local tax property wealth. Such a regressive formula has made districts (a) far more dependent on property taxes to fund education than in other states (under the current formula, around 66% of school funding comes from local sources, mostly property taxes, versus 45% nation-wide).  And of course poor districts in both urban and rural Illinois are (b) hurt by the fact that the state doesn’t make up the substantial differences in property tax receipts between rich urban/suburban districts and poor urban/rural districts.

Something had to be done, and SB1, which provides for an evidence-based funding model (EBM) for the state, was the product of much back-and-forth among education experts appointed to the governor’s 25-member Illinois School Funding Reform Commission, composed of state officials and legislators. The committee first met in August 2016, but discussion about how to “fix the formula” had been ongoing for years.

Remember: SB1 was the only school funding bill to pass the GA (both houses).

Now the governor has issued an AV, claiming that while he is in agreement with 90% of SB1, he won’t allow a “bailout” for CPS (Chicago Public Schools). There’s a lot of “Chicago bailout” mud-slinging by the governor, and maybe it appeals to his voting base (?), but it’s not going anywhere with Chicago—or downstate—principals and superintendents. They believe in SB1, and they’re appalled at the veto, by both its contents and the massive collateral damage it would wreak on downstate school districts, particularly those which are poor, rural, in PTELL or TIF districts (or both), whose enrollment may decline, whose COL may  rise, etc.

The AV makes it clear the governor isn’t in agreement with 90% of SB1. He’s about 90% opposed to it, in fact. Nor is the SB1 a “bailout” for CPS. That talking point was designed to drive the wedge deeper between Chicagoans and downstate residents. As if Illinoisans haven’t had way more of that sort of thing than they need–or deserve.

Whatever this is, it isn’t leadership, unless the governor is following the model set by POTUS, which relies on divide-and-rule, animus-filled rhetoric while actual policy proposals serve the 1%. A genuine leader would seek to unite the people of Illinois, not divide them. A genuine leader would seek to bridge the very real gap in sympathy and understanding between rich and poor, urban and rural, upstate and downstate.

Here’s a brief overview of what the governor’s AV would do. We’ll start from basics –commenters highlight different features of the AV—and then move on to the bigger picture. (emphasis added throughout)

“At a time of scarce resources, this broad amendatory veto hits low-income school districts the hardest, cutting funding from poor kids while diverting dollars from low-income districts to wealthier districts, including a cut of more than $200 million from Chicago Public Schools by removing the cost of its block grants from the district’s base funding minimum. The veto punishes all districts by putting a cap on regional costs, ignoring inflation, and removing protections for districts in the future in the event that local resources are used to pay for pensions.”

  • More details (2):
  • Maintains a per-district hold harmless until the 2020-2021 school year, and then moves to a per-pupil hold harmless based on a three-year rolling average of enrollment.
  • Removes the minimum funding requirement. While the governor is committed to ensuring that the legislature satisfies its duty to fund schools, the proposed trigger of one percent of the overall adequacy target plus $93 million artificially inflates the minimum funding number and jeopardizes Tier II funding.
  • Removes the Chicago block grant from the funding formula. [i.e. from the outset –dso]
  • Removes both Chicago Public Schools pension considerations from the formula: the normal cost pick-up and the unfunded liability deduction.
  • Reintegrates the normal cost pick-up for Chicago Public Schools into the Pension Code where it belongs, and finally begins to treat Chicago like all other districts with regards to the State’s relationship with its teachers’ pensions.
  • Eliminates the PTELL and TIF equalized assessed value subsidies that allow districts to continue under-reporting property wealth. [property wealth which provides zero revenue–dso]
  • Removes the escalators throughout the bill that automatically increase costs.
  • Retains the floor for the regionalization factor, for the purposes of equity, and adds a cap, for the purposes of adequacy.

The amendatory veto also removes the accounting for future pension cost shifts to districts in the Adequacy Target. This prevents districts from ever fully taking responsibility for the normal costs of their teachers’ pensions.

“Recommends changes to the Chicago Teacher Article of the Illinois Pension Code. Specifies that for State fiscal year 2018, the State shall contribute $221,300,000 to the Chicago Teachers’ Pension Fund. Beginning in State fiscal year 2019, provides that the State shall contribute an amount, to be determined by the Fund, equal to the employer normal cost for that fiscal year for all teachers hired before either (i) the implementation date of certain alternative benefits for members of the Downstate Teacher Article or (ii) the resolution or ordinance date for certain alternative benefits under the Chicago Teacher Article, whichever is earlier, plus the amount allowed under a specified provision to defray health insurance costs for all employees. Provides that the amount shall be reduced by the employer normal cost of the increase in benefits associated with the portion of salary in excess of the amount of the salary set for the Governor. Terminates an additional State contribution to the Fund equal to 0.544% of the Fund’s total teacher payroll. Adds provisions concerning certification of the amount of the contribution and the submission of vouchers for the payment of State contributions to the Fund. Recommends changes to the State Pension Funds Continuing Appropriation Act to add a continuing appropriation for those State contributions to the Fund. Recommends changes to the School Code. In provisions concerning maximum reimbursement per credit hour for adult basic education, removes the consumer price index multiplier. Removes references to “Base Tax Year’s Extension”, “ECI”, “Extension Limitation Ratio”, “Minimum Funding Level”, “Preceding Tax Year”, “Preceding Tax Year’s Extension”, and “PTELL EAV”. In the definition of “employee benefits”, removes the inclusion of costs associated with statutorily required payment of pension normal costs. In the definition of “Organizational Unit CWI”, sets forth a maximum Organizational Unit CWI of 1.04. In the calculation of employee benefit investments, removes provisions concerning the certification and calculation of employer normal cost of teacher pensions for all school districts. Requires the State Superintendent of Education to calculate certain average salaries once (rather than annually). Removes a limitation that certain salary calculations shall only be applied in the first year of implementation of Evidence-Based Funding; removes calculation provisions for subsequent years. Removes provisions for the calculation of the Chicago school district’s Adjusted Local Capacity Target. Removes provisions exempting portions of an Organizational Unit within a redevelopment project area from calculations of the Unit’s EAV; removes corresponding changes in other Acts. Removes provisions that included specified block grants in the calculation of the Chicago school district’s Base Funding Minimum. Limits provisions specifying that the Base Funding Minimum for Organizational Units shall be the sum of the amount of Evidence-Based Funding for the prior school year and the Base Funding Minimum for the prior school year to the 2018-2019 and 2019-2020 school years. Provides that beginning with the 2020-2021 school year, the Base Funding Minimum shall be the sum of the Evidence-Based Funding for the prior school year and the Base Funding Minimum for the prior school year divided by the Organizational Unit’s ASE for the prior school year multiplied by the Organizational Unit’s ASE for the current school year. Changes a reference in the calculation of the Evidence-Based Funding formula distribution system from “Local Capacity Target percentage” to “Local Capacity Percentage”. Removes provisions for distributing New State Funds if New State Funds are less than the Minimum Funding Level. (Adds reference to: 40 ILCS 5/17-127; 40 ILCS 15/1.1).”

Crystal, eh? There seems to be no well-written, comprehensive summary of SB1 (or the AV, for that matter)–interested citizens can either feast on the full version of the bill, all 511 pages of it, or suffer the famine of very selective precis.

  • If you didn’t have the patience to wade through the Senate summary–and who does/would/could?–you can read what Senator Andy Manar (D-Bunker Hill ), SB1’s main sponsor, had to say about the governor’s AV of SB1 (4):

(from a press release by Manar, quoted by capitolfax)

“From punishing schools for enrollment declines to penalizing them for their communities’ aggressive job-creation efforts, Republican Gov. Bruce Rauner appears to be lining up an all-out assault on Illinois’ long-standing commitment to public education.

And most of the unwitting victims in this battle are school districts that already are underfunded by the state of Illinois and struggling with growing numbers of impoverished students and other challenges.

‘What Gov. Rauner outlined in his veto of Senate Bill 1 this week would cause the state to pull back from its investment in public education at historic levels and starve public schools everywhere,’ said Senator Andy Manar, a Bunker Hill Democrat and a longtime school funding reform advocate. Manar is the chief Senate sponsor of Senate Bill 1.

‘This was never about a so-called “Chicago bailout.” This is about Bruce Rauner seizing upon an opportunity to get what he wanted all along: divestment in public education and shifting costs onto local taxpayers.’

In his veto of Senate Bill 1, Rauner proposed more than 100 changes to Senate Bill 1. Among them were provisions that pit schools against local economic development efforts (tax increment financing districts) and penalize schools for losing students.

Many downstate communities utilize TIF districts for job creation and economic development, and more than 360 school districts have seen enrollment declines for various reasons.

In addition, Rauner’s veto language suggests the state should pretend school districts have access to resources that they don’t so that the state is on the hook for less funding, forcing districts to make difficult decisions about asking for local property tax increases or making cuts. He went so far this week as to accuse them of purposefully hiding property wealth.

Manar said the veto language goes against everything Rauner has led people to believe about his commitment to public education.

‘Gov. Rauner has suddenly taken a hard right turn and abandoned all of his own policies and achievements to betray public schools – all within a matter of weeks,’ he said.

‘What the governor has proposed in his veto of Senate Bill 1 does not “make it a better bill,” as he continues to insist. Every lawmaker who signed on to support this veto before they saw the language was sold a bill of goods.

‘We need to override this veto, and we need to do it as soon as possible, because what Gov. Rauner has proposed will devastate Illinois schools and will set us back even farther than we are today.’”

“With school starting in just a few weeks, Governor Rauner shut the door on progress by issuing an amendatory veto (AV) of Senate Bill 1 (SB1), the education funding reform bill that provides more money to local schools without any school district losing a penny of state or local funding.

The most concerning components of the AV are as follows:

  • The AV removes the Minimum Funding Level, an important factor for encouraging the legislature to continue making investments in school funding so that all districts are adequately funded. SB1 sets a goal of a 1% increase of the total state adequacy level each year. If the goal isn’t met, SB1 shields the most underfunded districts. The AV erases this incentive to provide reasonable school funding increases in the future.
  • In removing adjustments for property tax caps and TIF districts, the AV is ignoring the realities that districts face. Property tax laws limit the amount of funding school districts can take in each year. TIFs also divert property tax funds from school districts. Even though districts do not have access to these funds, the AV changes state law to pretend that they do. There is widespread agreement that the way Illinois approaches PTELL and TIF needs modernization, but this approach fails to address that core issue; instead it takes the problem out on school districts and children, who would now be twice denied that funding.
  • The AV punishes districts statewide by capping regional costs, which will impact each of the 313 school districts in Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry, and Will Counties. It also ignores inflation.
  • One component of this year’s budget package shifted pension costs for new teachers from the state to school districts. Districts must pay those costs in order to be adequately funded, but the Governor’s AV eliminates them from the adequacy calculation. [Huh? This doesn’t even make sense—dso]
  • Regarding Chicago, the AV turns its back on the fact that Chicago is the only school district in Illinois that pays its own pension costs. While the statement issued from the Governor’s office talks about the state finally beginning to treat Chicago like all other districts, it approaches this in a manner many experts believe is unconstitutional. The AV also removes the cost of Chicago’s block grant from the district’s base funding minimum, an unnecessary shot at the largest school district in the state and the 85% of its students who live in poverty because the block grant will go away in the future under SB1. [removal of the block grant – over $200 million –would really hurt Chicago’s initial base funding minimum—dso]
  • To avoid a system of winning and losing schools, SB1 has a “hold harmless” that gives each district at least the same amount of state funds as last year. The AV evaporates the hold harmless in only three short years, at which time, as populations continue to move from rural to urban areas, our rural schools will feel the impact of lost resources. Last year, 222 districts lost enrollment.”

School financing is notoriously complex, and we don’t pretend to have understood all the twists and turns  (neither has the governor), but there are one or two points here in addition to those made by political commentators and the bill’s Senate sponsor in the quoted sections above.

First:

  • None of the above summaries highlight our own favorite amendment to SB1, which experts may not have anticipated and consequently hadn’t esteemed at its true gravity. A provision for scholarship tax credits has been inserted into the AV, providing a 100% (!) tax credit for every dollar donated towards “scholarships” for students to attend private schools. Presumably, corporate AND individual donations (individuals could donate up to $1 million per year) would go to a 501 (c) (3) for distribution in the form of “scholarships” (i.e. vouchers) to children’s families to cover (part of) the cost of private (religious) schools.*

*Update 1: Fred Klonsky picked up on it today—or rather, he picked up on the fact that WBEZ picked up on it.  And Rich Miller has also featured related posts with some perceptive comments.

** Update 2: Rich Miller came out with more just as we were preparing to post. And he links to the text of the plan, which has one of THOSE titles: “Invest in Kids Act”.

This is a stealth means of introducing vouchers into Illinois’s K-12 education system, and while those who have picked up on this feature have written about Catholic schools’ declining enrollments and the Archbishop’s meeting with the governor to discuss, etc., this isn’t actually about Catholic schools, it’s about private Christian schools of the type favored by the Secretary of Education.

Only 17 states currently feature scholarship tax credits (essentially, vouchers) for private (religious) school attendance; this last-minute bargaining chip would make Illinois the eighteenth such state.

Passage would be a huge coup for the Illinois Policy Institute.

Second:

Apropos of the Institute, let’s consider an analysis from earlier this year (Feb 2017) by the Center for Tax and Budget Accountability (CTBA) of how the IPI’s “balanced” budget would affect education in the state.

IPI’s report attempts to balance the budget without additional tax revenue, which means $7 billion in cuts for fiscal year 2018. These include:

  • $1.22 billion in cuts to K-12 education (or 16 percent of the baseline as estimated by the Governor’s Office of Management and Budget), including $250 million in cuts to PTELL and TIF adjustments and $970 million in pension costs added to local district budgets, without compensation;
  • An additional $375 million cut to teacher take-home pay statewide by eliminating pension pickups;
  • $950 million (or 51 percent) in cuts to public colleges and universities, including $500 million in direct cuts and $450 million in pension costs added to college and university budgets without compensation;
  • Ending health insurance coverage for 600,000 Illinois residents by repealing the Affordable Care Act’s Medicaid expansion;
  • Ending $1.75 billion in aid to local governments through the Local Government Distributive Fund, worth roughly five percent of a typical city’s budget, according to IPI.

We note that forcing districts to include PTELL/TIF “theoretical” tax revenues in their base funding goes a way towards doing away with PTELL/TIF districts–and lowering the baseline funding (along with all those other cool measures) by a substantial percentage.

Other features of the AV bill –which would abolish inflation-linked incremental increases in funding (Illinois would apparently no longer be subject to inflation—a rare accomplishment indeed), and would switch to a per-pupil (rather than per-district) funding formula after three years—would essentially gut the benefits of evidence-based funding–the whole purpose of SB1.

If Chicago were forced to include PTELL/TIF “ideational” tax revenues in its local funding (to most people, including revenues a district doesn’t receive might seem a stretch) and lost its block grant in initial calculations of hold harmless funding for 2017-2018 (“hold harmless” = no district starts the new funding system with less money than it had before), then CPS could get kicked up to Tier II status—this, for a district with an 85% poverty rate. Beyond bizarre, frankly.

Meanwhile, in other Illinois education news:

CPS’s Walter Payton College Prep has been named the best public school in the U.S. Another four CPS schools–Northside College Prep (No. 2), Whitney Young Magnet High School (No. 5), Jones College Prep (No. 9) and Lane Tech (No. 10)—were also among the nation’s top 10 public high schools.

Guess whose child attended Walter Payton College Prep? Well, well, well.

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