Why Illinois still isn't fully funding its schools: Breaking down the 'evidence-based formula'

Last week, CPS adopted a $9.9 billion budget for the coming year. Among other things, the budget closes what was a $505 million projected deficit, primarily by using its last $233 million of federal pandemic relief money, reducing administrative staff, reorganizing debt and leaving many current vacancies unfilled.

CPS didn’t delineate which positions would be left open, but it has a 5% overall teacher vacancy rate. So it’s safe to assume at least some of the cost savings will come from leaving faculty positions unfilled.

More cuts can be expected since the projected deficit didn’t include the $175 million CPS owes to the city’s municipal pension fund, or the bump in pay teachers and principals will likely receive once their current contract negotiations are final.

So in reality, CPS still faces a deficit likely to exceed $250 million this upcoming year. The following year, it will be decidedly worse, with no federal pandemic dollars left to bail CPS out.

Whether you agree with CPS utilizing cuts to at least partly deal with its current fiscal shortcomings, one core issue goes beyond this upcoming budget — and beyond CPS.

The real question is: Why should any school district in Illinois, which has a state GDP in excess of $1 trillion, have to make resource allocation decisions driven by fiscal challenges rather than educational best practices?

The short answer is simple: Illinois’ school finance formula, the Evidence-Based Funding for Student Success Act, or “EBF,” is presently underfunded by $2.6 billion. The EBF represents best practice in school funding because it ties the dollar amount taxpayers invest in schools to educational practices that research shows will enhance student achievement.

The EBF adjusts these costs to account for each district’s unique student demographics. So once the EBF is fully funded, the public can expect to see better test scores, lower dropout and discipline rates, and higher college enrollment rates from all students, irrespective of income, race or ethnicity.

Fully funding the EBF will also stimulate the private sector economy. Indeed, research shows states that do a better job of investing in public education have greater personal income growth than other states. That’s primarily because a worker’s economic viability is more closely associated with educational attainment today than ever before. According to the Bureau of Labor Statistics, in 1979, workers with a college degree earned 38% more on average than high school grads. By 2022, that wage differential had ballooned to 85%.

Adequate school funding is years away

As a result, public schools have to provide an education of sufficient quality to allow students to develop the numeracy and literacy skills needed to graduate college. Otherwise, they’ll be left behind economically after completing high school.

The good news is the EBF is designed to build the capacity of every public school to provide the high-quality education needed in the modern economy.

Unfortunately, the EBF is underfunded. Illinois won’t realize improved academic outcomes for a while. In fact, according to the National Bureau of Economic Research, meaningful improvement in academic outcomes occurs only after educational reforms are fully funded for all 12 years a student attends school.

That makes complete sense. A kid in ninth grade who’s attended an underfunded school every year won’t magically make up for all those prior shortcomings just because his or her school is finally adequately funded for grades 10-12.

Under current law, the state increases its investment in the EBF by $300 million annually. At that rate, it will take at least nine years to eliminate the $2.6 billion funding shortfall, in real, inflation-adjusted terms. But in reality it’ll take significantly longer.

Another K-12 revenue source, the Corporate Personal Property Replacement Tax or “CPPRT,” increased at historically high levels between FY 2020 and FY 2023, jumping by 212.5% or $3.088 billion. This revenue spike was due to unique economic factors that manifested after the pandemic.

Because those economic factors no longer exist, the Illinois Department of Revenue projects CPPRT revenue will decline, reverting back to historic levels in the coming years. That decline will worsen the EBF shortfall by $1.6 billion or 61.5%, increasing the funding gap from $2.6 to $4.2 billion. It’ll also push the date for fully funding the EBF out 17 years — meaning another generation of Illinois children will get an inadequate education.

Illinois hasn’t fully funded the EBF because it lacks the fiscal wherewithal to do so. That’s because Illinois’ tax policy is so flawed that historically revenue growth doesn’t keep pace with cost growth. Fixing tax policy to raise the revenue needed to fully fund education would take only 0.42% of the state’s economy — an incredibly small cost to ensure every kid gets a quality education.

Ralph Martire is executive director of the Center for Tax and Budget Accountability, a nonpartisan fiscal policy think tank, and the Arthur Rubloff Professor of Public Policy at Roosevelt University.

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