Unwelcome surprise: Illinois governor proposes holding back some school funds unless tax passes

Saying he had to make hard choices in a hard budget year, Gov. J.B. Pritzker on Wednesday disappointed education leaders and advocates by proposing the state hold back part of an expected bump in education spending beginning in July — potentially upending a milestone agreement to reform Illinois school finance.

The governor would deliver the reserved funds later — but only if Illinois voters approve restructuring the state income tax in November.

A proposed graduated income tax would raise taxes on the wealthiest Illinois residents and lower taxes for low-income families, and is expected to generate $1.4 billion annually. But even if passed, the tax’s added revenues wouldn’t materialize until next year. As for the reserved funds, school districts would not be able to count on them to hire teachers or invest in new programs. 

Pritzker’s $42 billion budget proposal would deliver a $350 million increase for K-12 schools only if voters pass the amendment. If not, he proposes boosting the amount divvied up among districts through the state’s evidence-based funding formula by $200 million. Proposed increases for public universities and community colleges would similarly be held back.

The state legislature will take up the governor’s proposals, and may modify them before passing a budget. 

The news was a one-two punch for education advocates, who said they’d hoped the governor would add upward of $600 million or more to the education budget. Illinois has historically underfunded public education, spending a smaller percentage of its gross domestic product on schools than the national average, and it passed a new education funding formula in 2017 that set specific targets for increases to attempt to close spending gaps and improve student outcomes. The gap between current education spending and the state’s goal is estimated at $7 billion. 

The Illinois State Board of Education asked for a $510 million increase for schools this year. 

Districts have come to count on the annual boosts. That includes Chicago, which must figure out how to pay for a new five-year labor contract that will add an estimated $1.5 billion to its budget.

Robin Steans, executive director of Advance Illinois, a group that helped lobby for a revamp of the state’s school formula in 2017, called the proposal “devastating.”

“This two-tiered budget — with some dollars immediately available and authorized, and some dollars held in reserve pending passage of a constitutional amendment enabling a progressive income tax — is a significant blow to our children and the adults who are committed to shaping their futures,” she said.

Mark Klaisner, president of the Illinois Association of Regional Superintendents, said that, because the formula prioritizes districts that struggle most with local property revenues, schools that need it most would still see an increase. The tricky part is the timing. 

“Some people will say, How do we handle staffing? Or, will we have to let people go in November,” Klaisner said. “It’s a matter of planning.”  

Pritzker campaigned on a pragmatic approach to digging the state out of a fiscal hole, the result of mounting pension debt, a massive bill backlog, battles with labor unions, and the two years his predecessor steered the state without a budget agreement. 

Although Pritzker pledged to invest in all levels of education, he quickly ran into the state’s stark fiscal realities. In addition to its bill backlog, worker pensions will consume 20% of the annual general fund through 2045, the governor’s team said Wednesday. 

“To address the uncertainty in our revenues, this budget responsibly holds roughly $1.4 billion in reserve until we know the outcome in November. Because this reserve is so large, it inevitably cuts into some of the things that we all hold most dear: increased funding for K-12 education, universities and community colleges, public safety and other key investments,” Pritzker said Wednesday in front of the General Assembly in Springfield. 

“As important as these investments are,” he continued, “we cannot responsibly spend for these priorities until we know with certainty what the state’s revenue picture will be.”

Earlier in the day, the governor’s budget team laid out two spending plans — one for if the tax amendment passes and one for it if doesn’t. 

“We agree wholeheartedly with the governor’s approach — that we have to be fiscally responsible,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability in Chicago. “But where we disagree is with putting only $200 million more in funding into the (state education funding) formula. This would be the first time this has happened since we passed it. It is counterproductive in the short and long term, and not the right decision.” 

If the graduated income tax amendment doesn’t pass, the governor has warned the state would have to cut from 10% and 15% in spending on vital services. 

Representative Will Davis, a Democrat who represents south suburban towns including Harvey and Riverdale, said he was happy to see the governor emphasize education but disagreed with the decision to withhold $150 million from schools unless a tax amendment is passed. “That additional money [in the state’s funding formula] is truly a game changer for the districts I represent,” Davis said. 

Instead of holding back K-12 funding, Davis suggested that the budget should withhold a portion of the $500 million earmarked for research facility investments for the University of Illinois. 

He said he would lobby for the General Assembly to prioritize more K-12 funding. 

Education advocates found one bright spot in Wednesday’s address. Pritzker announced a $50 million increase to the state early childhood block grant, less than the $150 million bump that advocates sought, but a sign of his intention to rebuild the state’s early education system.

“In a tough budget year, to have increases (in early childhood spending) is terrific, and it continues to be a statement of the governor’s commitment to this area,” said Ireta Gasner, vice president of Illinois policy for the Ounce of Prevention.

Both the Illinois Federation of Teachers, which represents more than 200 local teachers unions, and the Chicago Teachers Union took the long view, saying the passage of the tax measure would free up more money for future students.

“Passage of the Fair Tax is imperative to the fiscal health of this state,” the federation’s president, Dan Montgomery, said in a statement. “The Fair Tax will ensure our state has the revenue it needs to improve public services and give our students the future they deserve.” 

Federation spokeswoman Monica Trevino said that even if the amendment doesn’t pass, schools would still see at least a $200 million budget boost to the state funding formula. “Schools aren’t getting less money in the meantime, they are still getting the amount of funding they had in years prior plus,” Trevino said. 

Among the other education investments that the governor proposed: 

  • $16.5 million to train new teachers to combat Illinois’ historic teacher shortage. That’s significantly less than the state Board of Education’s request for $44 million for teacher recruitment and retention. 
  • $2.2 million to create a “student care department” under the Illinois Board of Education, which would help schools end practices of restraint and seclusion of students with disabilities
  • An increase to $51.3 million for transportation and special education grants 
  • $2 million for a new program offering districts grants to address student health and well-being 
  • $43 million in career and technical education programs 
  • An increase to $50 million in grants to low-income college students; 15% would be earmarked for community college students
  • $5 million to create a community college apprenticeship grant program