Annual School District Levy/Truth in Taxation Hearing
by Dan Oakley
November 12, 2010
Explanation of the annual tax levy request for December 2010
Dan Oakley, Superintendent
Avon Community Unit School District #176
Each year, taxing bodies in the state of Illinois must submit a levy request to their respective county clerk's offices. The levy request is the document that tells the county clerk how much money the district requires in local taxes in order to continue operations. This document is due to the county clerk in December each year.
Each taxing body is required to post the levy request for public review for thirty days prior to approving the request. If the increase in dollars requested from one year to the next exceeds certain limits, the district must hold a Truth in Taxation hearing prior to approving the levy request.
Taxing bodies often ask for an amount of funds that exceed the limits, requiring the Truth in Taxation hearing to be held. At the same time, it can appear that the taxing body is shooting for the moon and ignoring the previous voted directives of the voting populace. The reason is that there are complex, overlapping issues that taxing bodies must address.
First, although a taxing body can ask for the moon, that body can receive no higher tax rate than the voters (in the case of capped funds) have already approved or the law (in the case of uncapped funds) already allows the body to receive. For school districts, taxpayers have already voted for rate limits on the capped funds, which include the Education, Operations & Maintenance, and Transportation funds. The law caps the Working Cash, Special Education, and Fire Prevention/Safety funds. The law also requires that the district pay for bonds sold for the purpose of repairs to facilities as ordered by the state of Illinois. These rates are set and cannot be changed without either public vote, change in law, or an order by the state of Illinois to repair facilities.
Second, tax revenues are figured from the value of property in the district. Taxing bodies must ask for dollars for the upcoming year prior to knowing what the value of the property will be. In the case of school districts, the request must also be made months before the district knows what its costs for the next year will be. Taxing bodies must make a guess as to what revenues will be needed to complete the next school year.
Third, in recent years, the state of Illinois has not completed its budget for the upcoming year until the year has already begun, and taxing bodies have already begun incurring costs. For school districts, once the month of March prior to the upcoming school year has passed, it is legally almost impossible to reduce costs by any realistic margin, and that is months before districts know what General State Aid (GSA) will be available. With the state of Illinois' history over the past two years, many districts have received sharply less revenues from the state of Illinois than expected when the state's final budget is passed, and the district's expenditures are already set. In addition, the legislature and governor have made a habit recently of making additional changes as the year has gone along, moving dollars in and out of funds or reducing or deferring payments, making financial losers out of some districts. (Avon has found itself in both of these shoes recently, including a drop of $500,000 in GSA due to the cessation of Hold Harmless funds a year ago.)
These factors mean that superintendents and school boards must protect the ability of their school districts to function prior to the fiscal year beginning. In these times when revenues are being withdrawn after the fact, school boards must do their best to ensure that their districts can survive not only one year but further into the future.
The Avon district carries another complicating factor that cannot be overcome in the long-term in the current school finance climate in the state of Illinois. The loss of $500,000 in Hold Harmless funds noted above is causing an annual budget deficit for the district of around that amount annually. The district has no way to overcome that amount, only to slow it down somewhat, and therefore is facing financial insolvency in the next few years if something is not done to alleviate the situation. The district is in consolidation talks with the Bushnell-Prairie City and Abingdon school districts but must be able to survive until the consolidation can be completed. The timeline is, at earliest, two years. At the same time, the district cannot survive financially for more than three years unless there are changes in revenue streams that are outside our control, our student population grows significantly, or our property values increase dramatically.
The Avon school board has worked hard to keep taxes down. The board intentionally decided to forego nearly $100,000 in taxes last year, because the Transportation fund was healthy and could afford to be trimmed. The district can no longer forego tax revenues that have been approved and are legally available to the district as the board works to keep the district solvent until consolidation can be completed.
The tax levy that has been posted, along with Truth in Taxation Hearing Notice, outline an increase in tax revenue request that seems to fit with the "shoot for the moon" scenario outlined above. Remember, though, that cannot receive more in tax dollars than through the tax rates voters have already approved, legally set caps, or funds collected as ordered by the state of Illinois for repairs of facilities. Although the Truth in Taxation Hearing Notice states the increase in revenue requested by the district is 18.09%, the school board is setting the rate high to cover all eventualities regarding property values in the district. One never wants to say "never", but in all likelihood, the actual increase in taxes, if any, will be much lower than 18%.
Anyone with further questions regarding the way that the tax levy, or taxation procedures in general, work may contact Superintendent Dan Oakley at [email protected] or at 309-465-3708.