Understanding SB1: Changing the Illinois School Funding Formula

Senate Bill 1 (SB1) is aimed at improving how Illinois distributes money to local school districts. The bill uses an Evidence-Based Funding Model, as recommended by Governor Rauner’s Illinois School Funding Reform Commission to distribute new state education funding in a more equitable manner than the existing formula. SB1 has passed both houses and awaits the governor’s signature or veto. The budget passed by the legislature requires that school funding use an evidence-based model, such as SB1, without which no funds will be distributed to K-12 schools this fiscal year. SB1 is the only such funding formula bill to pass both houses.

Why do we need a new funding formula?

Last fall, Advance Illinois released a report on public education in Illinois called The State We’re In 2016-2017 noting that an increasing number of Illinois school districts are teaching more children living in poverty and more children learning English, both populations that require extra supports for success. As state funding for education has fallen further behind the foundation level (the state-determined cost to adequately educate a student in Illinois), school districts have increased property taxes to make up the difference. However, property wealth is not evenly distributed across the state, with some districts able to raise significant funding through property taxes, while others are able to raise very little even with high tax rates. The funding provided by the state is also not evenly distributed under the current funding formula, as for every $1.00 Illinois spends on a non-low-income student, it spends only $0.81 on a low-income student—the worst ratio in the country.

How will the new formula work?

The new formula calculates a unique adequacy target for each school district by applying 27 evidence-based criteria based on a district’s demographics (e.g., class size, technology, up-to-date materials, special education teachers and aides). The formula also identifies how much state funding a district currently receives and locks it in as the district’s base funding minimum and measures how much local capacity the district has to raise funds through property taxes, called its local capacity target.

Districts are then divided into four tiers based on how close they are to their adequacy targets, with Tier 1 districts being furthest away and Tier 4 districts being the closest. When new funding beyond the base funding minimum is allocated, Tier 1 schools get the first 50%, Tiers 1 and 2 split the next 49%, and the final 1% is split between Tiers 3 and 4. Those additional funds are then counted as part of the following year’s base funding minimum, so districts will move out of the lower tiers as they get closer to their adequacy target.

Will any school districts lose funding?

No. The formula locks in a district’s current funding level as its base funding minimum. All new state funding for education going forward is in addition to what districts currently receive, and it is those additional funds that will be allocated using the Evidence-Based Funding Model.

Is this a Chicago Public Schools (CPS) bailout?

No. Under the current formula, CPS is handled differently, receiving a block grant that other districts do not but also paying for their teacher pensions that the state pays for other districts. That means that CPS currently has to keep tax dollars away from the classroom to pay for pension costs that other districts do not have to pay. It is estimated that state pension payments on behalf of districts other than CPS are worth an average of $1,880 per student in the Chicago suburbs and $1,420 per student in downstate school districts.

With SB1, the block grant is folded into CPS’s base funding minimum and eliminated going forward. Regarding pensions, CPS is treated like every other school district, with the state paying for the cost of pension benefits its teachers are earning today. That means that CPS receives approximately $220 million that it is required to use for pensions, just like every other district has had in years past. However, CPS will still be the only school district required to pay for its own legacy pension costs, or “unfunded liability.” That means that CPS will spend approximately $0.14 on its unfunded pension liabilities and $0.86 on educating students. The new formula accounts for this by crediting CPS’s local capacity target, since it can only spend a tax dollar once, but does not give CPS additional funding for these legacy costs.

Additionally, if the state were to push pension costs to all local school districts to reduce the state’s pension liabilities in the future,  SB1 would treat all districts identically to CPS.

Where can I learn more about SB1?

There are several places you can find more information about SB1:

What is Illinois PTA’s position on SB1?

Illinois PTA’s mission is “to make every child’s potential a reality.” Our legislative platform supports adequate, equitable, and sustainable funding for education in Illinois. The current state funding formula and level of funding meets none of those three conditions. SB1 represents an important step in moving public education funding in Illinois towards being adequate, equitable, and sustainable. The hold harmless clause in SB1 protects existing levels of state funding for every school district in Illinois indefinitely, rather than phasing out like previous funding formula proposals did. For these reasons, Illinois PTA supports SB1 and urges Governor Rauner to sign the bill into law.

What can I do?

Contact Governor Rauner and urge him to sign SB1 into law. Should the governor veto SB1, Illinois PTA will issue a call to action that will provide you with a message to your legislators asking them to override the veto. Sign up for the Illinois PTA Takes Action Network to be sure you get the call.