Rauner’s Real Estate Tax Freeze Proposal

It will be interesting to see how House Republicans who attacked State Rep. Jack Franks’ proposed “property tax freeze” will react when they discover that Govenror Bruce Rauner’s takes the same approach. (Read the language of Franks’ House Bill 695 here.)

Tax House + DollarsFranks proposed amending the Property Tax Cap law, which tells local governments other than Home Rule units, that they may increase their total tax take by the rate of inflation, as defined by the Consumer Price Index.

Below you see the history of the CPI:Tax Cap History 1991 through 2014
You will notice that for taxes to be collected next year, local governments may not increase the amount they college by more than 8/10 of one percent.

(Tell me one budget that can’t be cut by 8/10 of one percent.)

Those tax districts can still capture new construction, so, even without the inflationary increase, governments in growing areas will still get more cash.

In any event, Franks was criticized that his proposal would not freeze the tax bill for all property owners.

Well, neither will Rauner’s.

Here’s the language (remember new language is underlined):

3     Section 5-10. The Property Tax Code is amended by changing
4 Sections 18-185, 18-205, 18-213, and 18-214 and by adding
5 Section 18-242 as follows:
6     (35 ILCS 200/18-185)
7     Sec. 18-185. Short title; definitions. This Division 5 may
8 be cited as the Property Tax Extension Limitation Law. As used
9 in this Division 5:
10     "Consumer Price Index" means the Consumer Price Index for
11 All Urban Consumers for all items published by the United
12 States Department of Labor.
13     "Extension limitation", for levy years prior to 2016, means
14 (a) the lesser of 5% or the percentage increase in the Consumer
15 Price Index during the 12-month calendar year preceding the
16 levy year or (b) the rate of increase approved by voters under
17 Section 18-205.
18     "Extension limitation", beginning in levy year 2016, means
19 0% or the rate of increase approved by the voters under Section
20 18-205.
21     "Affected county" means a county of 3,000,000 or more
22 inhabitants or a county contiguous to a county of 3,000,000 or
23 more inhabitants.
24     "Taxing district" has the same meaning provided in Section
09900SB1046sam001 – 10 – LRB099 05357 MLM 36008 a
1 1-150, except as otherwise provided in this Section. For the
2 1991 through 1994 levy years only, "taxing district" includes
3 only each non-home rule taxing district having the majority of
4 its 1990 equalized assessed value within any county or counties
5 contiguous to a county with 3,000,000 or more inhabitants.
6 Beginning with the 1995 levy year and through the 2015 levy
7 year, "taxing district" includes only each non-home rule taxing
8 district subject to this Law before the 1995 levy year and each
9 non-home rule taxing district not subject to this Law before
10 the 1995 levy year having the majority of its 1994 equalized
11 assessed value in an affected county or counties. Beginning
12 with the levy year in which this Law becomes applicable to a
13 taxing district as provided in Section 18-213, "taxing
14 district" also includes those taxing districts made subject to
15 this Law as provided in Section 18-213. Beginning with the 2016
16 levy year, "taxing district" means each unit of local
17 government, school district, or community college district in
18 the State with the power to levy taxes, including, but not
19 limited to, home rule units and taxing districts that were not
20 subject to this Law prior to the effective date of this
21 amendatory Act of the 99th General Assembly.

Next is a lot of language that there’s no need to plow through.

The following is important, however:

11 Code. For referenda to increase the extension limitation for
12 levy years prior to 2016, the The question shall be presented
13 in substantially the following manner for all elections held
14 after March 21, 2006:
15         Shall the extension limitation under the Property Tax
16     Extension Limitation Law for (insert the legal name,
17     number, if any, and county or counties of the taxing
18     district and geographic or other common name by which a
19     school or community college district is known and referred
20     to), Illinois, be increased from the lesser of 5% or the
21     percentage increase in the Consumer Price Index over the
22     prior levy year to (insert the percentage of the proposed
23     increase)% per year for (insert each levy year for which
24     the increased extension limitation will apply)?
25     For referenda to increase the extension limitation for levy
26 year 2016 and thereafter, the question shall be presented in
09900SB1046sam001 – 28 – LRB099 05357 MLM 36008 a
1 substantially the following manner:
2         Shall the extension limitation under the Property Tax
3     Extension Limitation Law for (insert the legal name,
4     number, if any, and county or counties of the taxing
5     district and geographic or other common name by which a
6     school or community college district is known and referred
7     to), Illinois, be increased from 0% to (insert the
8     percentage of the proposed increase)% per year for (insert
9     each levy year for which the increased extension limitation
10     will apply)?
11 The votes must be recorded as "Yes" or "No".
12 If a majority of voters voting on the issue approves the
13 adoption of the increase, the increase shall be applicable for
14 each levy year specified.

Later the language allows a county board not currently under the Tax Cap to put a referendum on the ballot, which, if passed, would set the amount each local tax district could increase the money it extracts at zero.


Rauner’s Real Estate Tax Freeze Proposal — 23 Comments

  1. If the measure becomes law wonder how many of the taxing districts will just issue non-referendum bonds every so often to make up the difference and then some.

    A lot of the taxing districts have not hit their maximum limit on non-referendum bonds.

    1992 – 2014 (23 years) CPI was a cumulative 54.08 for an average of 2.35.

    The Illinois public sector retirees at the state, county and local levels receiving 3% COLA adjustments have come out ahead of CPI with their annual 3% COLA increases.

    The Federal government ties their increases to CPI not to a flat 3% COLA.

    If CPI is consistently above 3% in the future retirees will likely advocate to legislatively hike the 3% COLA.

  2. I do support a freeze of and a reduction in property taxes and all other taxes and fees.

    That said, currently, all taxing bodies can reduce their levies for property taxes legally.

    Such is not the case for public sector pensions.

    Public pensions are protected by the State Constitution.

    All the attention being paid to property tax limitations is a smoke screen because politicians, now including Rauner, are afraid of the UNION power base in the State.

    Until we change the Constitution and repeal Prevailing wage laws, Illinois will continue its decline.

    Mark is spot on.

    In addition, the approach of “let the voters decide” has put us in the position we are in.

  3. I reject the faulty premise that because pensions cannot be reduced, property taxes must grind ever higher.


    There is now a reasonable certainty that any new public employee hiring cannot be funded within the law, given legal pension entitlement guarantees,


    A decision making Board proceeds recklessly authorizing any new hiring in the face of reasonable certainty that the legally mandated guarantees cannot be fulfilled,


    Individual members of decision making Boards initiating any new public employee hiring are willfully negligent, and exposed to individual civil liability.


    There is now a reasonable certainty that current public employee entitlements cannot be funded within the law, given legal pension entitlement guarantees,


    A decision making Board proceeds recklessly authorizing the maintenance of current workforce levels, recklessly disregarding the legal obligation to provide pension entitlements to first priority past employees,


    Individual members of decision making Boards who knew or should have known that such shortfalls will occur in the future are willfully negligent, and exposed to individual civil liability.

    I suggest all teachers get tolling agreements started on individual school board members, for example, to protect future litigation rights which may have lapsed by the time the actual damages accrue.

  4. It is definitely the American way to sue, even though it will not help.

    Go ahead sue the board members, Sue.

    See what good it will do.

    The entire wealth of every member of every school board who ever existed won’t make a dent or a scratch in the edifice of indebted government.

    The debt problem is too big for mere politicians.

    In the US system, this is going to have to be handled by the Fed. For believing politicians’ promises, We now have to look forward to inflation or war (or both, wars are great inflationary machines).

  5. The point is one order removed from the actuality.

    Think of motivating factors for those who make decisions which put the many in jeopardy for the benefit of the few.

    Greed is a motivating factor toward a decision, fear is a motivating factor away from a decision.

    (Let’s give benefit of the doubt that Board members are pure of motive as to personal benefit).

    Fear has not been a factor when Boards make spending decisions without any personal liability for the consequences of their decisions.

    Therefore the path of least resistance is to spend spend spend, because frugality is punished and not rewarded….and there is no punishment for NOT spending.

    If punishment FOR spending is introduced into the decision-making process, decision-making will change.

  6. This metric can be applied at all levels of modern spending-decision-making.


    At the First-Circle-Of-Intimacy to those with spending-decision-making-power (donators/lobbyists/wealthy-recipients-of-public-contracts/those-with-insider-access-to-activities-of-daily-living-of-decision makers)
    there is something to personally gain or lose,


    Those outside the First Circle Of Intimacy do not impact the activities of daily living of the
    decision makers,


    Decisions will be made in the future as in the past

    1. Reward YES spending decisions


    2. Fail to punish spending YES decisions


    1. Do not reward spending YES decisions


    2. Fail to punish spending YES decisions


    1. Punish spending NO decisions


    2. Fail to reward spending NO decisions

  7. A property tax freeze can not and will not stop the Great Exodus of residents and businesses from the once great Land Of Lincoln.

    Every year more and more people are voting with their feet, selling their homes and fleeing the Democrat controlled tax hellhole that Illinois has become.

    Will the last one to leave please turn off the lights.

  8. Sue, part of the problem is what happens when municipalities don’t hire FFs and cops to replace retirees?

    As crime rate increases and rescue/fire calls go unresponded to–there presents a clear public safety issue….Your argument is paralogism at its finest.

    Here’s another twist, public sector pensions are, in large part, a pyramid scheme (surprise), by failing to hire replacements–these pension systems won’t have contributors.

    Sure the system is broke and broken and needs fixing, but simply threatening public bodies with frivolous and inane lawsuits won’t fix it.

  9. The point is to create incentive for logical decision making and disincentive for illogical decision making.

    The argument that changing the factors which motivate decision making in any way will not solve the problem is inane and frivolous.

  10. Fallacious reasoning that leaving a status quo which inordinately benefits a few at the expense of many, and is inequitably administered, because changing any factors involved might end up being scary for public safety in some undefined way, is paralogism easy to dismantle.

    Indicating we must sacrifice the weak and honorable (frugal homeowners who honor debt contracts), and the non-insider-connected, in order to avoid the scary possible boogie man which might ‘get you’ if we change the imperfect status quo.

    The status quo is preferable and superior, no matter how many are ruined and injured, and that those who have and are fostering this selectively destructive environment should be held-harmless from any and all consequences of any and all decisions for all reasons whatsoever? Is THAT logical?

    If you would extends this logic to the medical profession, so that all professions were equally unaccountable for results of negligence, I might agree that society is better served.

    But the neo-Colonial paternalism indicated by choosing to selectively protect and advance the interest of some individuals at the expense of others is illogical as an argument to support either individual OR group survival in the longer term.

    The question (before deviation to an ad hominem tangent) was about pensions, legal entitlement to pensions, and how to afford to fund those legal entitlement.

    Please propose a specific alternative way to fund those legally mandated entitlements as well as going forward creating more legally mandated entitlements, in a property tax rate environment of above 4% of total home value.

    Otherwise, let us strictly adhere to the law: we owe the money, we know or reasonably should know we can’t afford to pay what we owe AND more of the same, therefore we must create to incur more unsustainable obligation.

    If those we elect or appoint will not follow the law, they should be held accountable.

  11. Sue, the logical alternative to raising taxes is bankruptcy.

    Bankruptcy for the cities and if need be for the state as well.

    The US system allows this, indeed relies on this.

    Just like a forest fire allows for new growth.

    There is recent precedent, for instance, in the case of Vallejo, CA (let’s not talk about Detroit)

    The fundamental issue is that various interest groups have been able to hijack the democratic process for their own purposes.

    It is not only the teachers’ union, far from it.

    I do not have a cure for that, I doubt that anybody has a cure for that. The democratic system is supposed to work by having informed involved citizens.

    That has obviously not been the case for a long while.

    Bankruptcy and a new beginning is a pretty good answer as far as I am concerned.

    That will teach everybody that certain promises cannot be kept, try as you may.

  12. Per federal law, States may not go bankrupt.

    Per Illinois law, municipalities (and taxing bodies) cannot go bankrupt.

    Emergency relief may exist for municipalities under 25,000 population:

    “Local Government Financial Planning and Supervision Act.” 50 ILCS 320/1 et seq.

  13. My position is that we should try methods available with the resources immediately at hand.

    What we have at hand is the known certainty of legally mandated pension entitlements.

    Enforcing the law, and ensuring that those entitlements are paid at ANY cost may have the effect of shifting entrenched political will. ( Those inside the system who have the power to,effect changes may finally agree conditions are untenable.

    rather than fighting any suggestions of compromise, these insiders may initiate compromise themselves).

    How can we enforce the law when it has been ignored by decision makers in the past? Introduce uncomfortable
    consequences for poor decisions.

    We have the available resources under the law to,pierce civil immunity granted to public officials for decisions made in bad faith.

  14. I was wrong about the ease of municipal bankruptcy in IL.

    Whereas U S law does and has allowed the bankruptcy of an IL town, apparently it must be done with a state’s permission.

    The bankruptcy of a state on the other hand, would have to be officiated by a US judge, which apparently goes against the idea of the US and IL being equally “sovereign”

    So much for orderly bankruptcy.

    It will have to be chaotic mess.

  15. The way it’s going now, with a Democratic Supermajority (obtained arguably in large part through redistricting), we may not seem much reform until the pension funds run out of funds to cut pension checks.

    Chicago is now saying that when the pension funds run out of money, Chicago is not liable to fund the pensions over and above annual contributions.

    The pension systems are so broken with so many games played, maybe constant chaos is and was one of the objectives, because if there’s a crisis, special interests wanting to solve the crisis will contribute money to politicians to solve the crisis to their advantage.

    So probably our best hope.

    1. Get the redistricting amendment on the ballot.

    2. Pass the redistricting amendment.

    3. Get an amendment on the ballot to repeal the pension sentence in its entirety (not modification but full repeal, that will be very difficult).

    4. Pass the amendment to repeal the 1970 pension sentence.

    5. Rauner’s various Turnaround agenda items. It does not seem the Democrats are very serious in negotiating with Rauner, although it’s hard to tell the real objectives of Madigan and Cullerton.

    The pension systems are a House of cards.

    First of all an unfunded liability is how much money should be in the pension fund today but is not, and one of the biggest problems with that, is the largest “contributor” to the mature Illinois pension funds which have often overly generous benefits should be investment return (not employee or employer contributions).

    So if your investment return is less, there could become a time when there is not enough money in the pension fund to make the payments, it’s not as if the pension funds can survive perpetually underfunded, there are scenarios where that is not possible, contrary to what the unions lead their members to believe.

    Taking the unfunded liabilities of the 18 pension funds in the Illinois Pension Code, adding retiree healthcare unfunded liabilities, adding on bond debt service (principal and interest payments outstanding) of all taxing districts and the State and other government units, including the state’s past due backlog, considering that 90% of the approximately $35 Billion raised over 4 year (2011 – 2014) “temporary” income tax hike that expired in 2015, there’s no way to pay that.

    There never was a way to pay all that since at least 1970.

    The pension sentence added in 1970 actually doomed pensions being paid as they are codified into law, because the pension sentence allowed pension benefit hikes, which once hiked, could not be diminished or impaired, and the pension sentence furthermore allowed pension benefit hikes to underfunded pensions, and the pension sentence furthermore allowed pension benefit hikes in the very same years the annual pension contribution was shorted.

    That scenario happened almost every year 1971 – 2011, over 40 years, 4 decades.

    It is complete pension insanity, it made no sense.

    The idiot legislators and Governors during that timeframe ruined the pensions.

    Bill Zettler wrote a 300 page book on the subject, and that just scratches the surface.

    To go through all the scenarios in all the pension funds with evidence would require a series of books like an encyclopedia set.

    It’s a money grab with people grabbing as much money for as long as they can, long term sustainability not being the primary goal.

    There is no serious legislation in play now to “fix” the pensions, everything is a pothole patch.

    The people who created the problem are in complete denial, they have not accepted they created the problem through legislative pension benefit hikes to underfunded pensions while shorting the current year’s annual contribution.

    So a tax freeze sends the message taxpayers are not willing to keep playing this game of more money for hiked pensions, rather, reform the pensions.

    When you hear the manipulate sentence, “A pension is a promise” what they are really saying, but don’t say, and won’t admit, is, “A pension benefit hike is a promise that cannot be diminished or impaired, pension benefit hikes occurred while pensions were underfunded, and pension benefit hikes occurred while the current year’s pension contribution was skipped or shorted.”

    The truth is being distorted and manipulated by those wanting hiked pensions at property and income taxpayer expense, not to mention all the other fees and taxes which come into play to fund government.

  16. Technically the Supreme Court basically said the State must pay the pensions.

    But here is what could happen.

    Tax hikes and service cuts become so painful people are voted into office who will enact reforms, for example the Illinois General Assembly passing a resolution to put an amendment on the ballot to repeal the pension sentence added to the State Constitution in 1970, which the Governor signs and voters pass.

    It’s still a Democracy.

    A lot of times the people feel powerless, but if they become educated and organized, they in fact can develop power.

  17. The power still lies with elected/appointed officials.

    There is no ‘fear’ motivation for their poor decision-making; they feel they are indemnified.

    Introduce fear into the equation (personal liability for proposing budgets which cannot reasonably be assumed to be affordable or sustainable given the super-priority first lien on all revenues by pension obligations), and perhaps public -funded budget proposals will look radically different.

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