Sales Tax Possible to Finance New Schools

A friend of McHenry County Blog has noticed a new law that would allow a sales tax to help pay for new schools.

It would have to be approved by referendum, unlike the extra one-half of one percent sales tax the General Assembly just foisted on us to finance the Chicago Transit Authority, Metra and Pace.

Such a referendum could be put on the ballot by the county board or school boards representing at least 51% of the student enrollment within the county.

The ballot would read,

Shall McHenry County be authorized to impose a retailers’ occupation tax and a service occupation tax (commonly referred to as a “sales tax”) at the rate of [not more than ¼ of, ½ of, ¾ of or a maximum of 1%] to be used exclusively for school facility purposes?

The tax would not be on food or drugs, which are not currently taxed by state government, just local governments.

Once passed, it could not be lowered by a referendum initiated by citizens petition.

The McHenry County Board could lower the rate or discontinue it, unless school construction bonds were sold, it could not be lowered if repayment of the bonds would be endangered.

“School construction” is defined about as broadly as anyone could imagine.

The money would flow through regional superintendent of schools. I noticed one very strange provision. The regional supt. can sit on the money up to 30 days.

That reminds me of when all state aid to education used to take that route. School districts lost so much interest while the county superintendent of schools sat on the money that the legislature changed the law to require it to be sent directly to the schools.

The money would be distributed would be distributed on a pro rata basis, according to the percentage of county students in the school district.

I love tax incidence questions.

Who will be the winners and the losers?

My first take is that those areas that are built out will be the losers. They will tend to have paid for their schools.

The winners, if I am correct, will be the fast growth areas, the villages that lust for growth.

I see one intended consequence and one unintended consequence.

Once a flow of money starts and one school district sells bonds based on these sales tax receipts, the tax seems destined to stay forever.

The unintended consequence is that tax money will flow forever (so to speak) and the local school boards will find a way to spend, whether such expenditures are necessary or not.

That’s the problem with “free money.”

Perhaps the law should be changed to allow the money to be spent on operations, as well as building. After all, operations eat up most of the budget and the infusion of new cash could be used to cut the property tax, if all bonds were paid off.

Oh, yes.

This can’t be done in Cook County, even though Senate President Emil Jones jointly sponsored it with chief sponsor Mike Jacobs, both Democrats. House sponsors of Senate Bill 835 were Patrick Verschoore (D-Rock Island), Sandra Pihos (R-Glen Ellyn), Mike Fortner (R-West Chicago) and Roger Eddy (R-Hutsonville), who is also a school superintendent.

Locally, State Senator Pam Althoff and Chris Lauzen voted “No,” while State Senator Bill Peterson voted “Yes” on the final 31-24 vote.

The bill passed the Illinois House 74-41. State Representative Jack Franks and Mike Tryon voted against the bill. Mark Beaubien was listed as not voting. Tim Schmitz voted “Yes.”

As an aside, I see language that originated when I was in the Illinois House in the 1970’s. It requires sales tax to be collected on minerals like gravel and coal at the point of extraction. That was some coalition we put together to pass that bill.

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