CRAFT

There's been a lot of talk from school districts about how harmful PTELL (the tax cap) is to their budgets. It has been claimed that school districts "lose" money because of the tax cap, or that the tax cap prevents districts from collecting money already approved by voters.

These statements simply aren't true. Using Enron-like accounting, the tax cap is vilified by its opponents. A simple explanation of the basic elements of PTELL reveals the truth.

The essence of PTELL is that school districts may not increase property taxes faster than the Consumer Price Index (CPI) or 5% annually, whichever is lower, plus taxes for new construction. In recent years, the CPI has been below 5%.

The tax rate for every year is determined by an assessment of all taxable property in the district. These assessments amount to a guess by the county as to the total property value within the district. If this estimate increases faster than the CPI, the tax rate will decrease, even if every taxpayer experiences a tax hike. A simple example shows this:

Example

In 2003, the property in Taxville is assessed at $100 million. The school receives $1 million, setting the tax rate at $1 per $100 assessed valuation. Next year, the school receives $1.02 million because the CPI grew by 2%. The county assesses the property at $105 million. Because of the 5% increase in assessed valuation is larger than the increase in the CPI, the tax rate is lowered to $0.9714 per $100. ($105 million x 0.9714 per $100=$1.02 million).

This is not an actual reduction. The typical homeowner's taxes will increase by 2%. As many homeowners know, property assessments are variable and often inaccurate. Had the county chosen to leave the assessment unchanged, the tax rate would have increased to $1.02 per $100. Either way, property taxes increase by 2%.

Myths Shattered

The tax cap allows districts to increase taxes for existing construction up to the rate of the CPI without a referendum. School districts do not "lose" money just because the county happens to increase property assessments faster than the CPI.

Voter approval of a tax rate does not give a school district license to increase taxes at the same rate as property assessments. The occasional decrease in the school tax rate is a result of large assessment increases, not due to a decrease in taxes. Voters have little knowledge of what the future holds for property assessments.

Without referenda, PTELL allows the cost of education to increase at up to the CPI. A valid question of any taxpayer facing a referendum is "Why is the cost of education increasing faster than the Consumer Price Index?"

A picture is worth 1,000 words

The graph below shows the amount of money collected by McHenry County on behalf of District 50 between 1990 and 2002. No education fund referenda were passed during this time, yet there has been a 157% increase in taxes!

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