Don’t be fooled by ‘penny for schools’ tax

A multibillion-dollar business based in Missouri — Stifel, Nicolaus & Co. — is making a pretty penny helping to hike local sales taxes across Illinois.

A Missouri corporation is making a pretty penny helping to hike local sales taxes across Illinois. But in the process, it’s proving how local governments shirk responsibility to keep their spending in check.

Ten years ago, Illinois passed a law authorizing the Illinois County School Facility Occupation Tax, or CSFT. This law allows elected school boards representing a majority of the county’s student population to place a sales tax hike referendum of up to 1 percent on the ballot.

To pass, it requires a simple majority vote. And all that money has to go toward school facility projects. Odds are you’ve seen this question at the polls at some point over the past decade, as around 70 counties across Illinois have voted on this ballot question since 2007.

Take Jackson County, where 57 percent of voters approved a 1 percent CSFT last October. That means families in Carbondale will pay an 11.75 percent sales tax on food and beverage items, and a 9.75 percent sales tax on other goods. Those rates rival those paid by families in Chicago, which is home to the highest sales tax in the nation among major cities.

The fact that these new sales taxes pile on to already-excessive tax burdens across the state is bad enough. (A March report from consumer finance website WalletHub found Illinoisans shoulder the nation’s highest state and local tax burden, at more than $8,100 annually for the median household.)

But what well-meaning residents may not know about the CSFT is that a multibillion-dollar business based in Missouri – Stifel, Nicolaus & Co. – is often pulling the strings.

A 2014 Illinois Policy Institute investigation found Stifel involvement in 12 of the 14 CSFT hikes in that year’s fall election cycle, and dozens more over the seven years prior. The company provided guidance to Jackson County officials last year.

Stifel’s business model looks like this: employees trek across the state offering free consultation to school boards that want more money for their districts. Then they make a pitch to handle the lucrative bond business for the ensuing projects funded by the sales-tax hike. Nice work if you can get it.

But nickel-and-diming tactics like the CSFT end up masking accountability for local spending decisions. They also show why a weak property tax freeze from Springfield won’t force local governments to get their spending under control.

Look at Hillsboro, a small rural community about an hour south of Springfield and the seat of Montgomery County. Montgomery is one of Stifel’s latest targets. Last year, Hillsboro voters rejected a referendum to build a new high school at a cost of more than $60 million. Soon after, Stifel representatives showed up and persuaded Montgomery County Schools to put the CSFT on the ballot this spring.

“There’s nothing left here to pay a new tax like this,” said Jeff Dunn, a Hillsboro small business owner. “Really good jobs that would support a family have left. All of our industry is gone now.”

Hillsboro already levies a special telecommunications tax. And the local school district hiked its property tax levy by 55 percent from 2006 to 2015.

“We have high unemployment, high poverty and a high number of residents on food stamps,” Dunn said. “That tax is a real burden on many people but it’s not enough for the school?”

Biased advising from Stifel often leads to questionable claims from local officials regarding the CSFT. One popular myth: If voters approve the sales tax hike, property taxes will go down.

Don’t count on it. Just ask taxpayers in Champaign.

Stifel, local school districts and the Champaign County Board promoted claims in 2009 that the sales-tax hike would result in lower property taxes in 13 Champaign County school districts. The CSFT passed in all of them. But only one of those school districts lowered property tax levies over the next five years.

The other 12 districts raised property tax levies by an average of 22 percent as of 2014. And that’s on top of the new sales tax, which has taken tens of millions of extra dollars from Champaign County residents.

While school districts can place CSFT referendums on the ballot every election, wearing down any opposition, voters can never initiate a referendum to repeal the tax once enacted.

New local revenue across Illinois often serves to only prop up an unsustainable system, one where collective bargaining agreements ensure benefits far above what residents working in the private sector can expect, administrative pay continues to rise, and prevailing wage requirements inflate the cost of public projects.

Part of the Illinois Senate’s failed “grand bargain” was a two-year property tax freeze. But such a freeze means nothing without reforms to local government spending, and comprehensive changes to the roadblocks that protect residents from other tax and fee hikes like the CSFT.

Without necessary safeguards, companies like Stifel are all too happy to take advantage of tax-hungry officials.