Steve's Blog

“The State has the primary responsibility for financing the system of public education.”
Constitution of Illinois, Article X, Section 1

Question: Why do property taxes keep going up?
Answer: Because they can.

Over the past several posts, I’ve discussed the means by which the state funds education, primarily through the General State Aid formula and the Poverty Grant. Just as every golfer knows that putts break toward the water, both of these means of funding have been gerrymandered in such a way as to bend the funding curve toward Lake Michigan and the Chicago Public School system, away from the collar counties and districts downstate.

That leaves the property tax as the last leg on the funding stool. As GSA and Poverty funds get diverted toward Chicago, districts in the collar counties have had to rely to a larger degree on property taxes to fund their schools. With the real estate crash of 2008, homeowners in McHenry County found themselves paying property taxes at unheard of levels, often reaching 5-7% of their homes’ values. When the value of your house goes down and taxes don’t go down as well, you don’t own your home, you’re just renting it from the government.

One would think that when property values decline, taxes would decline, as well. Not so. Local taxing bodies, including schools, are not subject to the same laws of economics as the rest of the world. Government never has to do with less, only those who pay the bills are expected to cut their standard of living. Local taxing districts can and do increases their property tax extensions annually, with such increases limited to the lesser of 5% or the increase in the national Consumer Price Index (CPI) for the year preceding the levy year. Your taxes may not go up so much when your assessed valuation declines, but it’s precisely at those times that local governments increase their levies to the maximum so as to maintain their level of funding.

The politicians in Springfield love this arrangement for several reasons. One is that they can impose all sorts of unfunded mandates on schools and stick the locals with the tab. The second is that, since the majority of the Democrats’ power structure resides in Cook County, howls of protest from overburdened property owners in the collar counties tend to fall on deaf ears. The following chart will illustrate what I mean:

Click Image to Enlarge

These two properties belong to clients of mine. One lives in McHenry, and the other lives on the north side of Chicago. Their houses are roughly the same value, but the guy in McHenry pays almost double the taxes as the guy in Chicago, even though his house is house is worth almost $6,000 LESS.

That’s because the Chicago property is assessed at 10% of its fair market value and the McHenry property, like every other residential property in Illinois is assessed at 1/3rd of its fair market value. There’s a “state multiplier” which is supposed to bring equivalence to the properties inside and outside of Chicago, but as you can see, it falls far short of the mark. In addition, the Homestead Exemption in Chicago is $7,000, while the homestead exemption outside the city is $6,000. Adding insult to injury is the tax rate, which is 37% lower in Chicago than in McHenry, all because the money you send to Springfield isn’t coming back to your school district, it’s being sent to subsidize Chicago property taxpayers.

So there you have it, folks. You now know as much about school funding in Illinois as I do. So how do we fix it? We’ll discuss that in the next installment.