Local Government Budgets

Governor Bruce Rauner introduced his proposed fiscal year 2019 budget on February 14. But despite promising to help close the shortfall from adequate resources identified by the new Evidence-Based Model for school funding, the governor's budget actually cuts available resources for K-12 classrooms by an inflation-adjusted $547 million. This cut frustrates the core purpose of the Evidence-Based Model, which he signed into law just last year: To increase the resources available to Illinois public schools to the levels that evidence shows they need in order to succeed.

On October 11, 2017, the Cook County Board of Commissioners voted to repeal a penny-per-ounce tax on sweetened beverages. The FY2018 budget presented by Cook County Board President Toni Preckwinkle had relied on the sweetened beverage tax to cover just over $200 million of the county's projected expenditures on services.

However, Cook County's budget shortfall is not merely a product of the short-term decision to repeal the sweetened beverage tax without revenue to replace it. The county has an ongoing structural deficit driven by the fact that 43 percent of the county's revenues come from sources that are growing slower than inflation. Moreover, the county has chosen not to increase its base property tax levy since 1996—even to adjust it for inflation. As a result, the real value of Cook County's base property tax levy has declined by 36 percent over the last 20 years.

Now that the tax has been repealed, county officials are considering closing the FY2018 shortfall by cutting spending on core services. Some of the proposed cuts would:

• Significantly increase caseloads for probation officers. Caseloads are currently 108 probationers per officer, or 21 percent above standards recommended by the Administrative Office of the Illinois Court.
• Suspend the Mortgage Forecloseure Mediation Program, which assists low-income homeowners through the foreclosure process.
• Close a branch courthouse, forcing residents to travel farther to attend hearings.

These service cuts would disproportionately affect Cook County residents who are low income and residents of color.

Cook County must address the long-term unsustainability of its revenue system if it is to avoid enacting further harsh cuts to core services.

You can read the full report on the Budget Blog or download a PDF by clicking below.

Governor Bruce Rauner has made a property tax freeze a centerpiece of his demands for a full state budget, and the Illinois Senate passed a bill (SB484) that would enact a two-year freeze in May. But such a freeze, without provision for replacement revenue from the state, would effectively be a massive funding cut for K-12 education in Illinois.

CTBA analysis finds that in the second year of a two-year freeze, education funding would be between $430 million and $830 million lower than if a freeze were not enacted. The range is a result of the fact that SB484 allows school districts to increase their property tax levies by up to the amount of the Consumer Price Index, or inflation, if doing so is necessary to make debt payments.

These cuts would hit districts all over the state. In Cook County, per-student losses could be nearly $500 per year; in the collar counties, and roughly $380 annually per student in the collar counties and downstate districts. Coming after years of disinvestment in public education, with per capita state K-12 funding down about 13 percent between FY2000 and FY2015, adjusting for inflation, this property tax freeze would impose yet another cut that would impose unnecessary pain on public schools and students across Illinois.

Every school district in Illinois except for the Chicago Public Schools has its teacher pension payments made by the state as a consolidated payment to the Teachers Retirement System. Because of this, it is difficult to determine how much money these pension payments are worth to individual districts. CTBA has created per-district estimates for both normal cost (the payment that covers benefits being earned by current employees) and legacy cost (the debt service payment to make up for previous years' underfunding). These estimates show that state TRS payments are worth an average of $1,880 per student in the Chicago suburbs, and $1,420 per student in downstate school districts.

In 2014, CTBA released a report showing that the Chicago Housing Authority had accumulated over $400 million in reserves, in part by issuing an average of 13,000 fewer housing vouchers per year than the Authority was funded by the federal Department of Housing and Urban Development to do.

In this report, CTBA provides two important updates on this situation. First, CTBA finds that the CHA has significantly improved its provision of housing vouchers, reaching nearly 90 percent utilization in 2015. However, because HUD has lost a significant accountability mechanism to encourage local public housing authorities to disburse this level of vouchers, we believe that the issue bears close attention going forward.

Second, CTBA finds that in 2011 and 2012, the CHA used $233 million of its reserves to pay down pension debt and bond debt early. While the CHA will realize savings from this decision, it carries a tradeoff, in that those funds could have been used to provide additional housing assistance in those years, at a time when demand for assistance greatly exceeded the amount available. More transparency would allow these kinds of tradeoffs to be clearly presented to the public so it can weigh in on its priorities.

You can read the full report as a web document here, or as a PDF below.

This Issue Brief is an update to a 2007 Brief, and provides an overview of who pays property taxes in Illinois, the steps in the property tax cycle, and what property tax revenue is used for. 

The CHA participates in the federal program “Moving to Work,” which frees it from much of the oversight that the U.S. Department of Housing and Urban Development usually exercises over public housing agencies. Through the MTW program, the CHA can pool federal funding for public housing, capital construction, and housing vouchers into one General Fund and spend money from that fund at its discretion. Normally, such federal funding has to be kept in segregated accounts by program. Because of the financial flexibility the MTW gives the CHA, the agency has been able to divert money intended for the issuance of housing vouchers to other uses.

CTBA’s report, A Fiscal Review of the Chicago Housing Authority, found that over the last five years in particular, the CHA’s reserve funds have grown significantly. During that same five-year period, the CHA had an average annual surplus of $107 million.

Local governments, such as counties, cities, and townships, provide a number of basic public services that help create safe, clean, healthy, vibrant communities. Cook County, which has over five million residents and is the second largest county in the nation, is no exception. It delivers such essential services as public safety, the operation of the largest court system in the United States, health care for poor and low-income individuals through three public hospitals and 14 community clinics, the operation of the largest jail facility in the nation, and economic and human development programs. The cost of the public services Cook County will provide in FY2007 is $2.8 billion. By comparison, the annual budget for Los Angles County, which has nearly 10 million residents, is over $21 billion annually.

This Report analyzes the County’s fiscal system to determine whether it has the ability to fund and sustain the level of public services it currently provides. The analysis reveals Cook County has what is called a “structural deficit.” A structural deficit exists when a public entity’s fiscal system is unable to generate sufficient revenue to support base-level public services from one year to the next, adjusting solely for annual inflationary costs. It is important to recognize that the model used in this report assumes service levels will remain constant – that is, when running simulations of the cost of public services into the future, no service expansions are projected from FY2007 levels. Therefore, the starting point for the analysis in this Report is the service levels existing after the cuts made in FY2007.

The City of Chicago has undergone a gradual but radical transformation in the past two decades. A city of neighborhoods, once characterized by bungalows and two-flats and smaller rental properties affordable to working families, has morphed into a city of high-rise condos and high-cost homes. The “City that Works”—once a stable home to working and middle-class people—is now losing its heart and soul, as more households flee to the suburbs in search of affordable housing, robbing our city of its tax base, its social capital, and its cultural character, and leaving our city with more neighborhoods of concentrated affluence and more neighborhoods of concentrated despair. Most disturbingly, our elected officials are failing to invest significant public resources or political will in solving this problem. If we allow the status quo to proceed, we put the future success of our city at risk; and most working and middle-class families will continue to move away. If we act together, we can build a city for all Chicagoans. This Report examines the crisis conditions of affordable housing and offers a way forward.