Cashed out: school officials across Illinois want the state to narrow the gap in education funding. But no one knows exactly how to do it.

Though few in number and far from wealthy, residents in small, predominantly black, south suburban Phoenix have a long and storied history of fighting to make sure their children get a quality education. And, while the central issue has changed from race to funding equity, the battle continues today.

More than 35 years ago, Phoenix parents and community members filed a lawsuit challenging the practice of isolating their school-children in the town's all-black school. Meanwhile, white students from two neighboring suburbs attended all-white schools in the district.

Not only was the segregation illegal, but the Phoenix parents contended that their children weren't getting as good an education, pointing to the hand-me-down textbooks the black school inherited from the white schools. In 1968, a federal judge handed them a victory: the region's first federal court desegregation order.

In 2003, Phoenix residents earned another victory by overwhelmingly supporting a referendum to increase property taxes to provide more money for schools in South Holland School District 151, which includes all of Phoenix, portions of South Holland, Harvey and Dolton. Nearly 55 percent of district voters outside Phoenix voted against the tax increase, but voters from the three Phoenix precincts approved the referendum by a 3-to-1 margin-with 375 voting in favor of the measure and just 122 voting against it. That cushion was enough to help the referendum pass by 110 votes. "Phoenix put us over the edge," said Superintendent Doug Hamilton.

While District 151 has a higher tax rate, it has less to spend per pupil than many southwest suburban school districts do.

That fact has galvanized Hamilton and District 151 residents to jump in the thick of another divisive issue: Getting the state to provide more money for public education and narrowing the disparity in spending between Illinois' richest and poorest school districts.

Last year, Hamilton campaigned for a school funding reform bill. But that bill, like similar efforts in the past, failed. While Hamilton believes it would have solved some of the problems, others thought the measure would have created even more.

Concerns about school funding come from every corner of the state: Chicago, the suburbs and downstate. Calls for reform come from districts serving the poor, blacks and Latinos as well as those serving mostly whites and the middle class. But the concerns are not always the same, and neither are the suggested solutions. As a result, lawmakers, advocates, parents and teachers will have a hard time resolving the funding issues to the satisfaction of everyone involved.

As part of this year's Chicago Matters series, The Chicago Reporter will take an in-depth look at the way schools are funded in Illinois, what the disparities in spending mean for public education and the political forces that have determined the fate of reform.

One fact not in dispute is that some schools in Illinois have much more to spend on educating students than others. The tiny Rondout School District had $23,799 for each of its 125 students in wealthy north suburban Lake Forest. In downstate Washington, near Peoria, Central School District 51 is at the bottom with $4,438 per student. Prime sources of the inequities are disparities in property values among many school districts in Illinois, which relies heavily on local property taxes to pay for public education. Ultimately, resource-rich districts have resource-rich schools, and districts with low property values have fewer resources.

In terms of education equity, Illinois gets a D-plus and ranks 41 out of 49 states, not including Hawaii, according to Education Week, a national education publication. And school districts with high percentages of poor students and racial minorities suffer disproportionately, concluded the Education Trust, a national education think tank.

Chicago Public Schools, with a student body of mostly poor blacks and Latinos, is an example. Mayor Richard M. Daley, Chicago Public Schools CEO Arne Duncan, and School Board President Michael Scott all are advocating for the state to contribute more money to schools. The trio contends that the state's paltry contribution leaves them struggling to provide a quality education for more than 410,000 school children. The state provides nearly 37 percent of Chicago Public Schools' $4 billion annual budget. The rest comes primarily from property taxes and the federal government.

Duncan sees the way the state funds schools as a social justice and civil rights issue. "We went on a tour of the state and saw the extreme way that children are being hurt," he said during a rally for more school funding on January 17 in the auditorium at William Jones College Prep High School, 606 S. State St. in Chicago. "You can talk about Hurricane Katrina and Rita. But it is not really about broken levees. It is about the disinvestment in children, generation after generation. That is what perpetuates poverty."

Duncan and some education advocates are quick to stress that Chicago and other districts serving poor children aren't the only ones facing financial difficulty. In recent years, many districts serving middle-class children are finding themselves in red ink.

Ben Martindale, superintendent of Gurnee School District 56, said his district has had trouble keeping up for the past six years because property tax caps were imposed. Under a cap, local governments can increase their property tax collections by no more than 5 percent or the rate of inflation in the national Consumer Price Index--whichever is less. Since 1991, 37 counties, representing 52 percent of the state's school districts, have implemented property tax caps, according to the Illinois State Board of Education.

Martindale said the problem is that inflation is a little over 3 percent annually, while District 56's expenses go up by at least 5 percent each year. "Tax caps squeeze school districts," he said. Yet, the caps have become popular because many homeowners already feel as though their property taxes are too high, Martindale said.

While Duncan and Martindale agree that the over-reliance on property taxes is a problem, other school leaders and lawmakers have not reached a consensus on how to fix it. There's also disagreement about whether more money equals a better education and whether schools are making the most with the money they have.

State Sen. Steven J. Rauschenberger, an Elgin Republican running for lieutenant governor on Chicago businessman Ron Gidwitz's gubernatorial ticket, said that, in addition to looking at school funding, the entire education system needs to be examined. He said more money will not necessarily mean that children will get a better education. "You can't just pour more money [into schools]. You need to enact reforms and provide for accountability," he said.

"One thing that is abundantly clear from the research is that more school funding does not improve outcomes," he added. "Those who are talking about increasing school funding are really talking about paying teachers more. That is an easy way out."

Hamilton sighs at the argument that more money wouldn't mean a better education for his students. He rattles off a list of the things he would add if his district was flush with cash. To name a few: more bilingual teachers, more reading specialists, more attention to gifted students, a better funded music and arts program.

Right now, Hamilton said classes in his district average about 25 students, not the 15 to 18 students most educators would like to see in the first-, second- and third-grades. The district's buildings are old and crowded with no air conditioning. And, at two of the district's four schools, some classes are held in "modular units"--temporary classroom units that resemble fancy mobile homes-to accommodate a steady influx of students.

District 151 serves as a prime example of the complexities of school funding in Illinois and the challenges facing many school administrators with growing needs and few ways to generate more income. In some instances, measures to increase funding, like raising property taxes, could make things more difficult in other ways.

Hamilton said the passage of the 2003 tax referendum gave him stability; he doesn't foresee having to lay off teachers in the near future.

But the district's higher property tax rate may make the area less attractive to developers looking to build pricey homes and condominiums. In District 151, the tax rate is $3.32 per $100 of equalized assessed valuation, compared with $2.64 in Orland School District 135. The higher rate might also deter business growth that could add to the district's tax base and relieve some of the property tax burden on residents. Hamilton's school district is in Cook County, the only county in Illinois that taxes businesses at double the rate of homeowners. In Indiana, just a few miles to the east, businesses are taxed at the same rate as residents.

To attract businesses, local officials have designated most industrial parks and retail areas as tax increment finance districts, or TIFs, which means that property tax revenue available to District 151 and other taxing bodies can be frozen for 23 years. In a TIF, any growth in property tax revenue is withheld and invested back into the area, usually in infrastructure improvements such as roads and sewer replacements.

TIFs have become popular for many Illinois cities looking to spur commercial development. There are eight TIFs in Hamilton's school district, he said.

As Hamilton drives down 162nd Street, one of the main commercial strips in his district, he points out car dealerships, grocery stores and banks--all established as part of TIF districts. "Forget about all of this," he said. "Don't see what is there now. See what used to be there. Instead of a Saturn dealership, think a currency exchange, a restaurant and a little motel. That is what used to be there and that is what we are still getting taxes from."

Hamilton said he doesn't blame officials, because without tax incentives, the area probably would be a ghost town. But the TIFs prevent the school district from collecting about $1.8 million in taxes each year, according to Hamilton.

And a shift in the demographics in Hamilton's district has meant that teachers are dealing with a more needy population. Just in the past decade, low-income students and those with limited English proficiency tripled. Today, 70 percent of the district's students are poor, and 11 percent do not speak English well.

The state does provide extra grants to districts with these populations, but most school officials agree that it is not enough. Even with that additional grant money, District 151 gets $7,155 per student, less than the state average of $8,786. In nearby Orland School District 135, per-pupil funding is 30 percent higher ,or $9,403 per student.

At the same time experts say the cost to educate a child from a poor family is about two and a half times more than the amount to educate a child from a wealthy family. "We know that poor students come to us with about one-third the language and reading skills as those from affluent families," Hamilton said. "We are talking about playing catch up. We would like to do everything and anything to help our students, but we only can do what is fiscally prudent."

Many school leaders insist that Illinois needs to provide more money for education, but they don't necessarily agree where that money should come from or how best to distribute it among the state's 881 school districts. "Education should not have to compete with other important things like human services," Daley said at the January rally at Jones High School. "There is no competition."

But speakers at the rally never mentioned exactly how the state should find all this extra cash.

In a report to the Illinois General Assembly in April 2005, the Education Funding Advisory Board, which recommends school funding levels, said the minimum amount needed to provide basic education for each pupil is $6,405. The board also said that an additional amount-ranging from $367 to $3,096--should be provided to districts with high percentages of low-income children. Reaching those levels would require an additional $2.2 billion in funding, the board said.

In his 2006 State of the State Address, Gov. Rod Blagojevich said he has responded to the call for more money. Under his administration, state education funding has increased by $2.3 billion, more than any other state in the Midwest and 43 states in the nation, he said. One way Blagojevich found money for schools is by not contributing the state's share of the state employee pension plan.

Some suggest other relatively small changes would help. For example, Max McGee, former state superintendent and current superintendent of Wilmette School District 39, said he could find at least $100 million in the state's current education budget that could be reallocated to the neediest districts--a move that would lessen inequities.

One way the state could reallocate funds is to stop helping rich school districts, like his, pay for textbooks and other necessities.

McGee said some budget problems could also be solved by letting middle-income and wealthy districts make minor modifications to tax caps. He said that school districts should be able to raise taxes to the same percentage as the Employment Cost Index, a measure of labor cost increases, instead of the Consumer Price Index.

A bigger, more overarching change that has generated attention is to increase the state income tax and provide some property tax relief.

Last spring, state Sen. James T. Meeks and state Rep. David Miller, who both represent the southeast suburbs, introduce--d a so-called tax swap bill that would increase the state income tax from 3 percent to 5 percent and decrease property taxes by various amounts throughout the state, with wealthier areas getting the highest discounts.

Their bill received significant support among the state's most powerful lawmakers, including state Senate President Emil Jones and Assistant Majority Leader Miguel del Valle, co-chairman of the Illinois Senate Education Funding Reform Committee.

However, the governor and even most school leaders were hesitant to support the bill. While it would have resulted in lower property taxes statewide, the reduction would have been negated by a larger income tax increase for many. And Blagojevich had pledged not to raise taxes.

Some superintendents also worried about the legislation. For one thing, the people who would see the largest tax increases--those with the highest incomes--would not necessarily see a comparable benefit. Residents in wealthy districts feared they'd shoulder more of the tax increase and receive less of income generated than poorer districts. Also, crafters of the legislation put in a tax credit for the bottom 60 percent of all taxpayers.

In addition to providing schools with more resources, the bill sought to adjust some of the structural problems that currently exist in the state's entire funding structure, said Chrissy A. Mancini, director of budget and policy analysis for the Center for Tax and Budget Accountability. One of these problems is that the state has too little revenue to keep up with the costs of inflation, she said.

When Randolph Tinder served as superintendent of three rural downstate school districts with low property values, he was a strong supporter of the state contributing more money to education. He still is. But now he works in the wealthier west suburban Forest Park school district. He said anything to help contribute more money is great, but the children in his district probably wouldn't gain from a tax swap bill. That's why Tinder says he's been less vocal about the proposal. "It is a turf thing," he said. "No one wants to see their kids lose out."

The switch to a higher state income tax to pay for schools would also make the state responsible for doling out more money to districts. And Martindale said he wouldn't want to see a loss of local control.

Given all the caution, especially in an election year, it's unlikely that such a tax swap bill will be successful during the current legislative session. However, proponents have promised to push candidates to commit to a position on the issue and reintroduce the bill in 2007. "It is just the right, compassionate thing to do," said state Rep. David Miller, whose 29th district includes South Holland, Calumet City and a sliver of Phoenix.

This article is the first installment in a four-part series focusing on school funding. Chicago Matters is an annual public information series initiated and funded by The Chicago Community Trust, with programming by 11, Chicago Public Radio, the Chicago Public Library and The Chicago Reporter.