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The Real Effect of the Property Tax Freeze in Illinois

By Steven Kandelman

In Illinois, the concept of a property tax freeze as proposed by Governor Bruce Rauner has general appeal to homeowners who have to deal with escalating tax bills every March and August.  The real question to ask, however, is: will a property tax freeze lead to lower property tax bills?

Governor Rauner’s proposed property tax legislation is misleading because it exempts all home-rule municipalities.  What does that mean?  It means that approximately 7.8 million Illinois residents would technically not be subject to the property tax freeze including residents of Chicago, Naperville and Peoria, as well as all residents of Cook County, all these governmental bodies hold “home-rule” designation.  As a result, the proposed property tax freeze in Illinois described as part of a “Grand Bargain” would not affect the majority of Illinois property tax payers since it wouldn’t apply to the largest cities, or the most populous county in Illinois, all of which have home-rule status.

In essence, the property tax freeze would “cap” the total amount of money a governmental body could ask from all property owners within its borders.  One important fact to consider is that every cent of property taxes collected goes to one of Illinois’ 6,000-plus units of local government and does not go into the state’s “general fund” coffers.

Who is most affected by a proposed property tax freeze?  As reported in Illinois Issues: The Real Chilling Effect of a Property Tax Freeze, by Charles N. Wheeler III, March 6, 2017, Illinois Municipal League Executive Director Brad Cole stated that smaller communities without a strong retail or manufacturing base would be hurt the most because these villages and communities derive most of their revenue from property taxes.  “Many communities spend their entire property tax collection on state mandates such as pension contributions,” said Cole.  “So when the hands of municipalities are tied behind their backs and they’re unable to collect more dollars to pay for the never-ending state mandates, then we have a serious disagreement”.

The bulk of property taxes payable last year, or 59 percent, went to local school districts across the state as the chief revenue source for pre-K through 12 education in Illinois, according to the state revenue department.  Property taxes comprise 63 percent of schools’ operating resources according to the state education board.  Not including retirement contributions, the state’s share in funding education is only 26 percent of the total, well below the 44 percent national average.  Federal funds completed the picture.

What might a property tax freeze mean for public schools?  William Phillips, a professor at the University of Illinois Springfield states that “No new tax money [a tax freeze] assumes that all a district’s bill are going to stand still … I can’t believe they’re thinking along those lines.  It’s really horrible.”  If a freeze was passed in the Illinois legislature, the school districts would have to look at future cost-cutting measures like reducing the teaching force which means larger class sizes, or reducing programs like after-school activities such as sports, or eliminating funding for social services like The Autism Project or youth employment programs.

Advocates of the property tax freeze, note that schools and other governmental units can seek voter approval through referenda to exceed the tax limit.  However, only 46 out of 136 such referenda have been passed by Illinois citizens to raise the statutory tax rate limits or tax cap ceilings.

From a cursory perspective, a property tax freeze might appeal to taxpayers, but when you start peeling away the onion, one can see the detrimental effect it will have on our public school system in Illinois, as well as on local governments.

For more information on this article, contact the Law Offices of Rieff, Schramm, Kanter & Guttman, LLC.