Illinois lawmakers pitch bogus property tax freeze to sell Pritzker’s ‘fair tax’

Property tax increases cannot be capped without addressing the costs driving high property taxes. Some lawmakers are ignoring that to draw support for Gov. J.B. Pritzker’s progressive tax.

Illinoisans are desperate for property tax relief, pain that some state lawmakers are leveraging to sell a different tax rather than targeting the cause of high property taxes.

An amendment added to Senate Bill 690 would freeze property taxes levied by certain Illinois school districts. And while Gov. J.B. Pritzker signed the bill into law in June, there’s a catch: Illinoisans would first have to approve a change to the state’s income tax system that has long topped Pritzker’s wish list. The property tax freeze wouldn’t take effect until Jan. 1, 2021, and only after voters approve a progressive income tax constitutional amendment at the ballot box.

But the flawed “property tax freeze” on offer in SB 690 is hardly worth the price of Pritzker’s progressive tax hike.

School districts consume around two-thirds of local property tax dollars in Illinois, so it makes sense to target them for a property tax freeze. But the state’s inefficient education funding system would qualify most school districts for an exemption under the amendment unless the state ponied up hundreds of millions in additional education dollars it can’t afford. As a result, few districts would see property tax freezes.

For example, if the state does not reimburse school districts for at least 97% of “mandated categorical” costs, such as transportation and special needs, the district qualifies for an exemption from the property tax freeze. One lawmaker admitted the state hasn’t met these requirements in any of the past 10 years, meaning districts would have been free to hike property taxes without voter approval under this proposal. School districts failing to receive their full funding promises under the state’s unreliable “evidence-based” model also qualify for an exemption.

In order for any school district to be subject to the property tax freeze under SB 690, the state would have to increase education funding by $350 million, and categorical funding by $300 million, annually. This unsustainable spending increase would guarantee that few school districts would see a property tax freeze.

And for the districts that do? The amendment would still allow school districts to raise property taxes to pay for employee pension benefits and debt service – two primary drivers of property tax increases.

While most school district pension costs are funded by the state, there have been recent proposals for these costs to be paid by local school districts. Furthermore, because these growing pension costs are funded at the state level, pension spending could crowd out other types of state school funding that could lead to school districts being exempt from the property tax freeze.

What’s more, the bill does nothing to address property taxes collected by Illinois’ nearly 7,000 other units of local government.

While state lawmakers are offering the illusory promise of property tax relief to scrap the state’s constitutional flat tax protection, long-term tax relief can only be achieved by fixing a different part of the Illinois Constitution.

Amending the Illinois Constitution to protect already-earned public pension benefits, but allow for adjustments to the growth rate of future benefit accruals, is the only sustainable way to achieve lasting tax relief at the state and local levels.