Tax and Budget
Released April 24, 2023
In collaboration with the University of Illinois School of Labor & Employment Relations Project for Middle Class Renewal, CTBA’s report, “Reforming the Illinois Estate Tax to Advance Tax Equity and Fund Public Services” provides a historical overview of the Estate Tax in Illinois. In addition, the report highlights how the Estate Tax can be used as good, sound fiscal policy in today’s economy. Even more, this report estimates how changes to the Illinois Estate Tax policy could have significant impacts on future Illinois budgets
Released April 19, 2023
Between FY 2022 and FY 2023, aggregate Personal Property Replacement Tax ("PPRT") revenue for all school districts increased by a record 76 percent. As things stand today, more record growth in PPRT revenue is projected for FY 2024. That revenue is a welcome addition to school district resources, however, if the projections for FY 2024 prove to be accurate, it will mean that collectively over the FY 2020 through FY 2024 sequence, the statewide Adequacy Gap under the Evidence Based Funding formula was reduced at a significantly faster rate because the local revenue increased at a faster rate over this time period compared to the increase in state-based revenue (new Tier funding).
CTBA’s most recent report highlights how the Personal Property Replacement Tax is a relatively odd revenue source that allocates revenue to school districts in accordance with their respective collections of Personal Property Tax revenue in either 1976 or 1977 and how this revenue source has big impacts on Illinois education policy.
Released October 1, 2022
Volume VI of the Fully Funding the EBF series continues CTBA’s modeling of fully funding the EBF to 90% of Adequacy, which aligns more closely with the Illinois State Board of Education’s methodology. Volume VI uses the Enacted Fiscal Year 2023 General Fund Budget appropriations for the Evidence-Based Funding formula found in Volume V, but applies the ISBE EBF calculated shortfall for FY 2023 (released in August 2022), rather than a projected shortfall as provided in Volume V. The new release maintains the four scenarios found in the Fully Funding the EBF series Volume V.
Released June 20, 2022
Volume V of the Fully Funding the EBF series keeps adjustments to CTBA’s model to align more closely with the Illinois State Board of Education’s methodology and reporting but based on the Enacted Fiscal Year 2023 General Fund Budget appropriations for the Evidence-Based Funding formula. This change is made to the overall Adequacy Gap funding level (changes from 100% to 90% to accommodate for Federal funding). This change in methodology is applied in the same manner as it was for the four scenarios found in the Fully Funding the EBF series Volume V.
Released February 2, 2022
The Earned Income Tax Credit, or “EITC,” rewards work and reduces poverty by targeting tax relief to low-income families with children. The EITC has become one of the more effective anti-poverty programs in the United States. The reason the federal EITC is so effective is because it is designed as a “refundable” tax credit. When a tax credit is “refundable,” the taxpayer who qualifies to receive it gets the full dollar value of the credit, even if that dollar value exceeds the income tax liability said taxpayer owes. The EITC effectively boosts the earnings of workers who qualify to receive it, thereby increasing their purchasing power and alleviating poverty. The Child Tax Credit (“CTC”) initially provided qualified taxpayers with a $400 per child nonrefundable credit and was intended to provide tax relief to middle-income families. In 2001, the CTC was made refundable, on a limited basis, with a maximum refundable benefit of $600. Its refundability feature also makes the CTC effective at making tax policy fairer, because like the EITC, the CTC functions to offset taxes other than income taxes—like sales, excise and property taxes—which place a disproportionate burden on lower income earners. Illinois currently does not have a CTC at the state level. In addition to alleviating poverty and stimulating the economy, the refundability feature of the EITC also creates a very effective, as well as administratively facile way to make tax burden fairer.
Released October 18, 2021
In response to the economic challenges created by the pandemic, elected officials in both parties have expressed the desire to pursue fiscal policy initiatives that will help spur private sector growth. Historically, two very different approaches have been taken to stimulate the economy by changing fiscal policy—one focuses mostly on growing private sector demand by increasing public sector spending, while the other focuses primarily on growing private sector supply by cutting taxes.
The fiscal policies taken to boost demand through enhanced spending generally involve increasing investments in core public services and infrastructure, as well as providing direct income supports to low- and middle-income families. These income supports include a number of initiatives, covering everything from enhanced unemployment compensation benefits, to targeting tax relief solely to low-and middle-income workers—precisely because those workers are likely to spend any such tax relief on purchasing consumer goods and services.
On the other hand, the use of tax cuts to boost the economy has typically involved providing either general tax relief to all individuals and corporations—which initially was referred to as “Supply-Side” economics—or targeting tax relief to primarily benefit corporations and wealthy individuals—which initially was referred to as “Trickle-Down” economics. Interestingly, neither Supply-Side nor Trickle-Down is really an economic theory. Instead, both are concerned with how fiscal policy actions impact private sector behavior. Over time, the distinction between these two approaches has blurred, and they are now both generally referred to as “Supply-Side” economics.
Read CTBA’s most recent report to find out more about the impact of Supply-Side policies on the U.S. economy.
Released September 23, 2021
Contrary to what the governor proposed in the FY 2022 General Fund budget proposal, K-12 funding under the Evidence-Based Funding formula (EBF) resumed funding of the $300 million Minimum Funding Level in the FY 2022 Enacted General Fund Budget, as it had in FYs 2018,2019, and 2020. This is certainly better than being held level with the prior fiscal year, as was done in FY 2021.
Volume IV of the Fully Funding the EBF series makes some minor adjustments to CTBA’s model to align more closely with the Illinois State Board of Education’s methodology and reporting. This change is made to the overall Adequacy Gap funding level (changes from 100% to 90% to accommodate for Federal funding). This change in methodology is applied to the four scenarios found in the Fully Funding the EBF series Volume Three.
Released July 12, 2021
On March 11, 2021, the Biden Administration secured passage of the American Rescue Plan Act (“ARPA”), which provides fiscal relief designed to counter economic issues created by the pandemic. ARPA is considerable in size and provides a total of $1.9 trillion in federal aid for state and local governments to use to support the provision of various core public services such as healthcare, human services, and education, as well as to infrastructure.
Given the significant federal aid flowing through ARPA, CTBA has compiled the following answers to some of the most frequently asked questions about that legislation and how it will impact Illinois.
Released March 16, 2021
In the FY 2022 General Fund budget proposal the Governor announced in February, K-12 funding under the Evidence-Based Funding formula (EBF) is once again held level with FY 2020, in nominal, non-inflation adjusted dollars. While that is certainly better than being cut from FY 2020 levels in nominal dollars, it represents a step backward. By not providing additional new funding for the EBF, the state is extending the time it would take to fully fund the EBF by two years – if the state continues to put in a minimum of $300 million yearly beginning in FY 2023. That two year extension would mean extending the timeline to more than four times longer than what is required by statute.
This update is the third installment in the Fully Funding the EBF Series.
Released February 16, 2021
Without new revenue available from the proposed Fair Tax, short-term borrowing, Federal Aid, and cutting some expenditures has allowed Illinois to hold on during the current fiscal year. But this is a short-term solution, and not a sustainable solution in tackling the long-term fiscal woes of Illinois. In our new short report, “Increasing the Income Tax Rate: One Method for Addressing Illinois’ Long-term Fiscal Problems” CTBA analyzes potential benefits of increasing the income tax rate, while ensuring that any increase in the income tax address the regressivity of a flat rate income tax structure through refundable tax credits.