As Chicago Public Schools calls for a dramatic increase of state funding to fill its projected $1.1 billion 2017 deficit, South Suburban school districts are keeping a close eye on the state’s response as plummeting home values make it harder for them to raise the cash needed to fund basic operations.  

In many ways, Chicago Public Schools’ calls for dramatically increased state funding is a precursor for an even bigger crisis for South Suburban Cook County school districts set to transpire next year, when the Cook County Assessor is scheduled to reassesses the value of those homes. Like CPS, many districts have maxed out their property tax caps, but South Suburban districts are also struggling with rapidly declining property values in their jurisdictions. In these communities, because property values are dropping, breaking the caps to raise local taxes would not be enough to provide basic educational services, making the need for state assistance more likely to make up for their growing property tax receipt shortfall.

School districts in South Suburban Cook County’s Bloom, Rich, Thornton and Lemont Townships, where property taxes make up roughly two-thirds of school funding, have seen overall property values drop significantly since they were last assessed in 2014. This has made it harder for these school district to tax the amount need to fund operations and has left districts to keep budgets lean.

These areas are faced with a multitude of challenges, from declining home prices to an exodus of commercial and industrial companies that typically relieve homeowners of swelling property tax bills.

But when the Cook County Assessor’s Office conducts its tri-annual assessment of South Suburban property values in 2017, the expected assessment drop will confront many school districts with the inability to tax properties at the rate necessary to provide basic funding for schools and local government services.

Depreciating home values especially impact property tax receipts for local school districts, because a district’s tax rate is based on an equation that divides the amount of money the district has requested in their levy by the total value of taxable property within each district, called the Equalized Assessed Value (EAV).

So when the denominator bottoms out due to depreciating home values, the tax rate increases, while total receipts continue to drop. This means homeowners are stuck with sinking home prices and higher tax bills. And school districts are left to cover operations with less money than they need.

One school district, Consolidated High School District 230, located about 25 miles southwest of Chicago and includes Orland Park, Orland Hills, Palos Park and Palos Hills, saw its EAV plummet more than $136 million between the 2013 and 2014 tax years, while its year-over-year tax rate increased by 4.88%.

Another district in Oak Lawn, Community High School District 218, saw its EAV drop roughly $109 million over the same time period, while its tax rate jumped 7.26%.

It’s the same case for Bremen Community High School District 228, a district covering parts of Oak Forest, Country Club Hills, and Hazel Crest, which saw its EAV fall roughly $81.4 million while its tax rate rose 8.63%.

“Cook County is the only county in the state of Illinois that has an upside down tax structure,” said Park Forest Mayor John Ostenburg. As the current president of the South Suburban Mayors and Managers Association, a former member of the Chicago Teachers’ Union, and a one-time State Representative for the 80th District, Ostenburg has been following the debate over education funding for decades.

Ostenburg describes Cook County’s complex tax system as outdated, fashioned around a time when the South Suburbs had a thriving industrial economy. Unlike the rest of the state, Cook County is the only county where commercial and industrial properties are taxed twice as much as residential. At a time when factories were driving the economy, this helped relieve the property tax burden off of homeowners.

But times have changed, and when the factories closed their doors and relocated out of Illinois, so too did much of the retail economy that was dependent on workers spending their wages, and more and more, South Suburban homeowners are being saddled with ballooning property taxes that are outpacing actual receipts. “The South Suburbs had a ton of industry when the system was created, but when all the offshoring occurred, we lost jobs, then we lost retail, then we got stripped of virtually everything,” said Ostenburg.

For example, Thornton Township High School District 205 in 2015 received about $5.7 million less than what it requested in its 2014 property tax levy. For Lemont Township High School District, the shortfall was $7.6 million.

“Those of us who have been active in the South Suburbs over the year have been arguing the state needs to the change the way it supports schools,” said Mayor Ostenburg.

Like Ostenberg, the Community Relations Director for Lemont Township High School, Tony Hamilton, says the tax structure is unfairly burdening homeowners in their district, especially those located in a small pocket of the school district that lies within DuPage County. “When Cook County depresses property values, it puts more pressure on DuPage County taxpayers,” he said, explaining his office, in 2014, received calls from several DuPage residents from Woodridge, Downers Grove and a portion of Darien asking why their taxes rose at such high rates. “A larger portion of the burden is being put on a group that is only a quarter of the total size [of the school district].”

“So, we have two different tax rates for two different counties [that] don’t talk to each other when this happens…DuPage doesn’t know when Cook [County] is depressing its values,” he explained.

To remedy the shortfall in property tax receipts from the Cook County side, Hamilton says the district has been relying on its reserves. “But our goal is to make them last as much as possible…we’ve done more to limit expenditures. No extraneous staff.”

Hamilton said over the last five years, the district has closely monitored enrollment in elective classes to determine which teachers to keep on the payroll, added participation fees for athletics, and tried to keep student and enrollment fees flat.

Lemont Township School District is also heavily reliant on federal aid, as it benefits from a subsidy from the federal government for Argonne National Laboratory, part of the Department of Energy. Since federally-owned property is tax exempt, the federal government reimburses the school district for lost revenue. That money varies from year to year. According to Hamilton, the district could receive between $400,000 and $1 million. “We get about five cents on the dollar of what it would have been if it was residential land. But every year it gets zeroed out and then we have to fight for it.”

Hamilton says the district will be able to open next fall by depending on reserves should the state fail to pass a budget in time. But the district is watching the debate between CPS and the state over the school funding formula. Hamilton’s district receives about $700,000 in state aid every year, about 6-8% of the annual school budget. “That’s a significant amount of money we would be losing…if the formula was changed. What happens at CPS is unfortunately tied to us.”  

Meanwhile, Park Forest has been slow to recover since the Great Recession, says Mayor Ostenberg, as it was one of the hardest hit regions. The village of about 22,000 people saw roughly 700 homes go into foreclosure, he said. Some of those homes, about 70, fell so far into disrepair that they had to be demolished, and the village is working with Habitat for Humanity to repair some of the more livable foreclosed properties.

This has left the tax burden on a smaller share of homeowners. According to Cook County Clerk David Orr’s property tax update for 2015, residents of the Village of Park Forest have the second highest property tax rate in Cook County at 36.834%. “There are not enough dollars to go around. The [property tax] rate keeps going up and up and up,” Ostenburg explained. “I know people spending more on taxes than their mortgage.”

Ostenburg has been trying for years to push the state legislature to use state income tax revenue to fund schools as a way to provide some relief to smaller school districts where property values have been on the decline.

“The only solution to the problem of school funding in Illinois is to take the dependence off the property tax and take it from the income taxes,” he said. “If funding was based on income, then if I make more I’ll pay more.”

Ostenburg is pushing for the state to create a pilot program that focuses on alleviating the financial burden of local school districts, especially at a time when state and federal assistance has been unreliable.

“The critical thing in the South Suburbs is that we need to attract more business and industry in the area. The burden falls on homeowners, and there are fewer people participating,” he said. “Homes can’t fund the entire burden of schools and municipalities.”

The pilot program Ostenburg envisions would incentivize businesses that relocate to struggling townships or villages to offset the property tax burden by lowering the tax rate for those businesses.

Ostenburg called Gov. Bruce Rauner’s suggestion that CPS declare bankruptcy “outrageous” and has signed a letter drafted by Mayor Rahm Emanuel’s Office calling for a more equitable share of school funding. The letter, Ostenburg said, was brought up at last week’s meeting of the Metropolitan Mayors Conference. Mayor Emanuel’s press office tells Aldertrack that the letter hasn’t been made public yet, because they are still gathering signatures.