Finance & Taxes

Funding Public Education in Illinois

How public education is funded varies greatly from state to state. The following discusses the advantages and liabilities of  Illinois financing public education largely from property taxes.

When compared to  many other states, Illinois has significantly higher property taxes. The reason for this is that, unlike other states who fund public education out of state income taxes or sales taxes, Illinois funds the largest percentage of education from property taxes. Indeed, for the 2010-2011 school year Illinois ranked dead last nationally funding just 16.8% of public education costs. In comparison, Vermont was first, funding 87% of the cost, and the median nationally was 46%. Illinois compounds the problem for school districts located in affluent communities’ such as Naperville by funding them at far lower rates than less affluent districts. For the 2009-2010 school year (the latest years available)  the state contributed only 7.4%, with property owners residing within District 203 boundaries paying 88% of the districts total revenue. 

District 203 has the same problem with federal funds, receiving 4.5% of its income from that source, versus the state average of 12.4%

This is not to say it’s necessarily better elsewhere. In states where the public education systems have a large percentage of state funding, the state income tax rate is much higher than Illinois, and even in good times their school budgets often fluctuate by large amounts making consistent staffing and maintaining programs difficult. Currently, many school districts are in dire financial straits due to significant declines in state tax revenues. This is leading to large scale layoffs, cancellation of programs, and even in some cases, shortening the school week to four days or the school year itself.

While shouldering  the majority of the cost locally is a significant financial commitment, it does have the advantage of allowing an affluent community to fund its schools to the level it desires and enjoy a more consistent revenue stream for its schools, thereby avoiding the annual funding roller-coaster that many school districts in other states often endure. And, of course, it helps that property taxes are deductible on your income tax return.

This is not to say that Illinois or Naperville overspend educating its students, as nationally, Illinois school districts rank 19th in the amount of money they spend per pupil, and  locally, District 203 per pupil costs are just above the state average, and the District spends less than virtually all other high performing suburban districts.

Regardless, property taxes take up a significant portion of Naperville household budgets. With a median household income of $98,000, many Naperville families can afford the annual increase in property taxes to fund public education and other taxing bodies.  However, while approximately 65% of Naperville households have incomes of $75,000 or greater, and have typically experienced wage growth in the last 10 years, the remaining 35%  most likely have experienced little or no wage growth in that time, and ever increasing property taxes places a real burden on them, especially the retired. Shifting more of the revenue stream to an income tax based system could potentially help here, but there are no easy answers.

Lastly,  we have to note that, hopefully in the short term, the high unemployment rate and, in some cases people coping with salary reductions, create additional challenges for more families paying their property tax bills.