April 28, 2022
Illinois' General Assembly again left an important priority unaddressed when it adjourned early for the campaign season, writes a veteran observer.
Two weeks ago, in a scene reminiscent of a Faber College all-nighter, the Illinois General Assembly successfully ignored the benefits of sleep, general transparency and thoughtful deliberation to complete passage of Illinois' $47 billion spending plan for 2023. Luckily, the General Assembly followed most of Gov. Pritzker's proposed budget CliffsNotes and moved Illinois forward financially without creating too severe of a budget exam for next year.
One important tax priority left unaddressed among the Springfield pizza boxes and rush to adjourn was any movement on comprehensive property tax relief. Despite years of repeated calls by elected officials of almost all political affiliations, meaningful property tax reform in Illinois remains elusive.
The property tax is not inherently bad. It is an important component of our overall structure of taxes that are critical to local governments. It can be a stable, consistent revenue source for local government services (including schools), and its high collection rate makes it a reliable pledge for debt and bond security.
The property tax is also a highly visible tax, meaning that most Illinois property owners are typically—and often painfully—aware of the exact amount of property tax they pay, because they are explicitly billed twice per year. Visibility can have the benefit of provoking taxpayer interest in the cost of local government services, thereby encouraging citizen involvement and monitoring of government expenditures. Unfortunately, it has also incented many public officials to offer more slogans than answers to improve the situation.
Although Illinois has not levied a state property tax since 1932, the Illinois legislature has contrived a number of statutory changes to the local property tax system that have moved it about as far away from the ideal tax on value as possible.
Retaining Illinois' highest-in-the-nation 9,000 units of local government drives up tax bills, contributing to property tax rates that are among the highest in the U.S. In Cook County, especially, the system is opaque, complex and too confusing for most nonexperts to track effectively. Decades of politically motivated property tax exemptions and other tweaks have moved the property tax away from being a tax based on value. Springfield's continued mandates of increasing local government pension benefits mean that many municipalities' property tax levies—including the city of Chicago's—effectively go straight into the pension funds or toward related debt. We now see that some property-poor cities and towns in Illinois cannot raise enough property tax revenue and have reverted to instituting various user fees, selling infrastructure or laying off public safety personnel to keep up with their pension costs.
To address some of the challenges facing local governments and property taxpayers, half of the Illinois General Assembly rushed in mid-2019 to join a Property Tax Relief Task Force. Over the course of five months, these brave members held public hearings that culminated in an unfinished draft report, never to be revisited as far as the public can tell.
If members of the General Assembly are still serious about meaningful property tax reform and providing relief to taxpayers, they need to thoroughly examine the structural oddity that is Illinois government.
Reconvene as many still-eligible task force members as possible and commit to presenting an updated final report. While the world has changed a lot since the end of 2019, most of the task force's original work should still be usable. Illinois still has 9,000 local governments that need to be consolidated or streamlined. Pension benefits are still mandated at the state level but funded at the local level. State funding of education has grown, thanks to the evidence-based funding formula, but it remains insufficient to allow too many cash-strapped school districts to slow down their reliance on property taxes.
Since the General Assembly adjourned early to accommodate campaigning for the June 28 primary election, all of the candidates for the Illinois House and Senate should be encouraged to answer in detail how they will tackle Illinois' high property taxes and the factors driving them. For example, how they might propose to streamline so many Illinois school districts that rely heavily on property taxes. Consolidation does not have to mean closing schools; it more likely means streamlining administration and spending property tax money more efficiently. The same is true for thousands of other redundant special purpose governments throughout the state.
Whatever the course of action, legislators should act soon. This is not a problem that will solve itself or get easier over time. Inflationary pressures mean that many Illinois governments subject to tax caps will now be able to raise their levies higher than ever for the upcoming tax year. Illinois' unwieldy property tax burden needs Springfield's ideas and commitment to addressing not just one part of the property tax bill, but reform of the entire system. Such an effort would be a real reason to celebrate.