New School Funding Bill on The Way to The Governor’s Desk

The rollercoaster ride of the past weeks on school funding is coming to an end as the General Assembly has passed a new compromise bill that is expected to be signed by Governor Rauner as early as the end of this week. 

As we reported earlier, the enactment of SB 1, which was the original funding bill passed by the General Assembly during this past session, stalled when Governor Rauner issued an amendatory veto, stripping funding from the Chicago Public Schools and making a number of changes to the proposed formula which would have negatively impacted hundreds of districts throughout the state. When the Illinois House was unable to override the amendatory veto, the legislative leadership came together with the Governor to craft a new funding bill that has now passed both the House and the Senate. The bill maintains many of the elements of SB 1, while also making some important changes. Some key elements of the bill and changes from SB 1 are:

• The bill revamps the funding formula. Illinois’ funding formula, which is decades old, is consistently regarded as one of the most regressive in the country because it fails to distribute enough state dollars to districts most in need. Changes to the funding formula have been the focus of intense legislative efforts over the past few sessions, culminating in the evidenced-based formula that has now been passed. The evidence-based formula compares the cost of providing the educational services a district needs to the local resources it has available and directs State funding to the districts least able to adequately fund those services with local resources. We may see changes to the formula over time – crucially this bill has a professional review panel to review the implementation of the new formula and to suggest changes in the future.
• The bill retains many of the items that the Governor had vetoed, including the hold harmless provision, the CPS block grant, the inclusion of a regionalization factor (with no cap), and the accounting of TIF and PTELL funds within the school funding formula. The issue of CPS’ pension funding is included, but the State’s contribution of the employer normal cost for the pension has been moved from the School Code to the Pension Code. 
• As part of the compromise to ensure enactment, the bill includes $75 million in tax credits for people who donate to private school scholarships. Schools participating in the scholarship program must be ISBE-recognized and must participate in state assessments. There are also income limits on eligibility and guidelines to award scholarships in a geographically balanced manner to areas with the greatest need. This tax credit is scheduled to sunset in five years.
• New to the bill is also the ability for voters to seek a reduction of the educational fund tax levy by 10% if a school district has more than 110% of the funds necessary to meet its adequate funding target. To seek such a reduction, however, 10% of voters need to sign a petition to get the matter on the ballot and the resulting reduction cannot allow funds to dip below that adequacy amount. Such a ballot question can only be submitted at consolidated elections, which occur every other year, and if approved cannot be submitted again for the same school district for the next two consolidated elections.
• The legislation includes a committee to look at the impact of TIF districts and report to the General Assembly by April 1, 2018. School districts that are concerned about the impact of TIFs on school funding should keep an eye out for the convening of that committee and be in touch with the legislators selected to serve to voice any concerns.
• New mandate relief is included which streamlines the waiver process and allows districts to reduce the daily P.E. requirement to three days per week and grant more exemptions from the P.E. requirement for students participating in interscholastic or extracurricular athletic programs. Districts can also outsource driver’s education. The streamlined process allows ISBE to approve, deny or modify a statutory waiver request unless three of the four legislative leaders ask for further review, in which case the waiver request will be submitted to the full General Assembly.
• The bill also contains a small, but mighty, in severability provision. If one part of the law is held by a court to be invalid, the entire Act is invalid. In other words, a successful lawsuit challenging one aspect of the law could result in the entire school funding package unraveling.

The bill goes into effect immediately upon the signature of the Governor. The changes to Illinois’ education funding, with the enactment of this bill, will be nothing short of historic. We will update this alert when the Governor acts.

Thereafter, we will be looking out for guidance from ISBE as it works to implement the new evidence-based funding formula. We will also be working over the next several weeks to provide you with a more detailed analysis of the property tax referendum provision, a provision with potentially significant consequences for many districts.