Darien Public Schools District #61 - DuPage County

NOVEMBER 15, 2016

Belief, Mission, Vision Statements

Whereas We Believe -

• that learning is a lifelong journey; • that the purpose of education is to prepare people to be responsible, productive and cooperative citizens; • that learning should take place in a safe, healthy and positive environment; • that all have rights, roles, and responsibilities for which they are accountable; • that teachers and good teaching practices are vital to the success of our students and our schools; • that the district is responsible for providing its programs and services in a fiscally responsible manner; • that the success of our schools depends upon a partnership among students, parents, community, staff, board, and local resources.

The Mission of the Darien Public Schools #61 is -

To empower each and every student to learn in a caring and safe environment.

And the Vision of the Darien School District #61 is -

That all students have sufficient skills, understandings, and personal characteristics for learning, working, and living fully including:

• self-motivation and the desire to be life long learners; • the ability to think critically; • respect for selves, others, and the environment; • an understanding and appreciation of the arts as a means of expression and communication; • the ability to use technology effectively; • the ability to participate in and contribute to society. • a sense of responsibility. That all staff are highly qualified and possess:

• the ability to meet the diverse needs of our student population; • the desire to continually improve curriculum development and educational delivery methods; • intrinsic motivation to be life long learners along with their students; • caring and nurturing qualities That facilities are safe, clean, and inviting to students and community.

That the District be financially stable through sound management practices.

That the students, parents, staff, and community experience ownership of, satisfaction with, and responsibility for the District, including:

• participation in open and frank dialogue around expectations; • active parental involvement DARIEN PUBLIC SCHOOLS DISTRICT #61 – DU PAGE COUNTY DARIEN, ILLINOIS

Tuesday, November 15, 2016 Regular Board of Education Meeting – EJH – 7:00 P.M. Tuesday, November 15, 2016 Closed Session during Regular Meeting

Lace School 7414 Cass Avenue Darien, Illinois

Board of Education Janine Kiwiet, President Katherine Fujiura, Vice-President Gregory Leban, Secretary Iranell Spann, Member Melissa Christie, Member Jane Moss, Member Joseph Tortorich, Member

Administration Robert M. Carlo, Superintendent and Clerk of the Board Megan Stoltz, Chief School Business Official and Treasurer

Finance Committee of the Whole Facilities Committee Policy Committee Katie Fujiura, Chairperson Gregory Leban, Chairperson Melissa Christie, Chairperson Iranell Spann Jane Moss Joseph Tortorich Katie Fujiura

IASB Delegate LEND Representative Iranell Spann Janine Kiwiet

Jul-16 Aug-16 Sep-16 Oct-16 S M T W TH F S S M T W TH F S S M T W TH F S S M T W TH F S 1 2 1 2 3 4 5 6 1 2 3 1 3 4 5 6 7 8 9 7 8 9 10 11 12 13 4 5 6 7 8 9 10 2 3 4 5 6 7 8 10 11 12 13 14 15 16 14 15 16 17 18 19 20 11 12 13 14 15 16 17 9 10 11 12 13 14 15 17 18 19 20 21 22 23 21 22 23 24 25 26 27 18 19 20 21 22 23 24 16 17 18 19 20 21 22 24 25 26 27 28 29 30 28 29 30 31 25 26 27 28 29 30 23 24 25 26 27 28 29 31 30 31

Nov-16 Dec-16 Jan-17 Feb-17 S M T W TH F S S M T W TH F S S M T W TH F S S M T W TH F S 1 2 3 4 5 1 2 3 1 2 3 4 5 6 7 1 2 3 4 6 7 8 9 10 11 12 4 5 6 7 8 9 10 8 9 10 11 12 13 14 5 6 7 8 9 10 11 13 14 15 16 17 18 19 11 12 13 14 15 16 17 15 16 17 18 19 20 21 12 13 14 15 16 17 18 20 21 22 23 24 25 26 18 19 20 21 22 23 24 22 23 24 25 26 27 28 19 20 21 22 23 24 25 27 28 29 30 25 26 27 28 29 30 31 29 30 31 26 27 28

Mar-17 Apr-17 May-17 Jun-17 S M T W TH F S S M T W TH F S S M T W TH F S S M T W TH F S 1 2 3 4 1 1 2 3 4 5 6 1 2 3 5 6 7 8 9 10 11 2 3 4 5 6 7 8 7 8 9 10 11 12 13 4 5 6 7 8 9 10 12 13 14 15 16 17 18 9 10 11 12 13 14 15 14 15 16 17 18 19 20 11 12 13 14 15 16 17 19 20 21 22 23 24 25 16 17 18 19 20 21 22 21 22 23 24 25 26 27 18 19 20 21 22 23 24 26 27 28 29 30 31 23 24 25 26 27 28 29 28 29 30 31 25 26 27 28 29 30 30

DARIEN PUBLIC SCHOOLS DISTRICT #61 – DUPAGE COUNTY DARIEN, ILLINOIS

DATES OF FUTURE BOARD MEETINGS/ACTIVITIES

NOVEMBER 15, 2016 AT EISENHOWER JUNIOR HIGH SCHOOL (General Headquarters) 6:00 P.M. COMMITTEE OF THE WHOLE MEETING (Sharing Assessment – How data is used within each building to address student and instructional success)

7:00 P.M. REGULAR BOARD OF EDUCATION MEETING

CLOSED SESSION SESSION during Regular Meeting to discuss the appointment, employment, compensation, discipline, performance, or dismissal of specific employees of the public body.

NOVEMBER 18-20, 2016 AT CHICAGO IASA/IASB/IASBO JOINT CONFERENCE

DECEMBER 20, 2016 AT LACE SCHOOL 7:00 P.M. REGULAR BOARD OF EDUCATION MEETING

Any individual with a disability requiring a reasonable accommodation in order to participate in any Board meeting should contact Dr. Robert M. Carlo or Mrs. Megan Stoltz, ADA Co- Compliance Officers, within a reasonable time before the meeting. Rev. 11/08/16

DARIEN PUBLIC SCHOOLS DISTRICT #61 - DU PAGE COUNTY DARIEN, ILLINOIS

ORDER OF BUSINESS FOR REGULAR MEETING - TUESDAY, NOVEMBER 15, 2016 EISENHOWER JUNIOR HIGH SCHOOL - 7:00 P.M.

I. Call to Order: Melissa Christie, Katie Fujiura, Janine Kiwiet, Gregory Leban, Jane Moss, Iranell Spann, Jospeh Tortorich. II. Additions to the Agenda. III. Audience Participation, Communications, Notices, and Announcements A. National School Board Members Day – November 15, 2016 B. *FOIA request (email dated 10/26/16 and received 11/3/16) from Jared Rutecki, Better Government Association for information related to Collective Bargaining Agreements, Administrator Contracts, Budget, Legal Settlements, and Payroll. (response was sent in a timely manner.) C. *Traffic and congestion around Mark DeLay School IV. Consent Agenda Items A. Approval of Minutes 1. *Regular Board of Education Meeting – October 25, 2016 2. *Closed Session Meeting – October 25, 2016 B. Receipt of Treasurer’s Report C. Receipt of Investment Report D. Education Fund - $101,700.34 E. Operations and Maintenance Fund - $11,218.01 F. Debt Service Fund (Bond & Interest) - $2,411.00 G. Transportation Fund - $1,248.32 H. Construction Fund - $0 I. Approval of Payroll J. Approval of Bills K. Student Activity Reports 1. EJH (Oct.) 2. Lace (Oct.) 3. Mark DeLay (Oct.) 4. KIDS Club (Oct.) L. Safety Inspection Reports 1. EJH (Oct.) 2. Lace (Oct.) 3. Mark DeLay (Oct.) M. Approval of Personnel Report 1. Recommendations of Employment: a. *Patty Lauzon, Secretary to the Superintendent b. *Amy Staubus, substitute for long-term leave at Lace School c. Julia Mendez, rehire to 4th/5th grade classroom aide 2. Terminations/Resignations: a. *Patty Lauzon, Secretary, Lace School 3. Leaves of Absence: a. None 4. Retirements: a. *Luann Keslinke, Secretary, Eisenhower Junior High School. V. Superintendent’s Report A. *School Funding Reform Commission 1. Commission Meeting Schedule (updated)

The Mission of the Darien Public Schools #61 is - To empower each and every student to learn in a caring and safe environment. 2. ISBE – Funding For Special Populations 3. Non-Public Schools In Illinois 4. IAASE – Educational Funding Special Education 5. Good For Business: How Illinois Can Best Support Small Business 6. Opportunity To Provide More Options 7. Summary/Key Takeaways B. *Resolution Authorizing the Superintendent to Draft a Tentative Budget for FY2018 C. *Enrollment Reports D. *Survey Responses for October 31, 2016, SIP Day E. *Superintendent Goals F. Tech Fee G. *Curriculum and Assessment update H. IASB/LEND/Legislative Update 1. Tri-Conference: November 18-20, 2016 2. Report to Membership discussion VI. Report of Committees A. Finance Committee 1. *Tax Levy Presentation a. Discussion of Estimated Amounts to be Levied for Tax Year 2016 Approval of 2016 Tax Levy will occur at the Regular Board Meeting on December 20, 2016 2. *Post-Issuance Tax Compliance Report 3. *Dissemination Agent Agreement 4. Lunch counts B. Facilities Committee 1. *Building 10-Year Survey Documents a. EJH i. Current conditions ii. Violations and Schedule iii. Maps b. Lace i. Current conditions ii. Violations and Schedule iii. Maps c. Mark DeLay i. Current conditions ii. Violations and Schedule iii. Maps C. Policy Committee D. Darien District #61 Educational Foundation. VII. Unfinished Business. VIII. New Business. IX. Audience Participation. X. Closed Session to discuss the appointment, employment, compensation, discipline, performance, dismissal of specific employees of the public body. XI. Adjournment.

The Mission of the Darien Public Schools #61 is - To empower each and every student to learn in a caring and safe environment.

Mary Lang

Fwd: Traffic and congestion around Mark DeLay 1 message

Bob Carlo Thu, Nov 10, 2016 at 4:06 PM To: Mary Lang

Letter for Board packet-under communications.

Bob

Robert M. Carlo, Ed.D. Superintendent of Schools Darien Public Schools-District #61 7414 Cass Avenue Darien, IL 60561

630-968-7505 630-650-7502 (Cell) [email protected]

"To empower each and every student to learn in a caring and safe environment"

------Forwarded message ------From: Claudia Manley Date: Thu, Nov 10, 2016 at 3:53 PM Subject: Traffic and congestion around Mark DeLay To: [email protected], [email protected] Cc: [email protected], [email protected]

Dear Elected Officials:

I am a resident living around the corner from Mark DeLay school on on the north side of 69th St. Before and after school hours bring congestion and ingress and egress issues for residents of 69th St. Specifically, around drop off/pick up time I have been unable to enter or exit my driveway as those waiting for/or dropping off children do not have the decency to not block driveways. Both my daughter and I have both spoken to those blocking the driveway and they refuse to move. Most notably those who do not move are grandparents.

Furthermore, when trying to back out of my driveway where cars block the exit to the on sides of the driveway it is dangerous to exit as the driver is unable to see beyond the cars in either direction to determine whether there is incoming traffic.

I ask the city to install no parking or standing signs on the north side of 69th street on school days between 7 and 9:30 a.m. and 2:30 and 4:00 p.m.

In addition while traveling south on Wilmette near dismissal time today, a parent pulled out from having parked onthe west side of Wilmette and cut a U turn to go north instead of south on Wilmette. Last, the adult crossing guard on Wilmette and 69th St.who was directing traffic and responsible for crossing children safely had earbuds in his ears. I ask, is that safe? I believe I previously made a complaint regarding earphones on a crossing guard at this intersection before. Is this the same individual? I believe it is. If so, whatever corrective action was taken did not have the corrective effect.

I ask the city to send out the police daily to help control this unsafe situation and start ticketing adults who are engaging in unsafe driving and blocking of driveways. Since the District is failing to control the situation the city should bill the district back for having to perform tasks that the school is not providing. It's not a matter of if an accident occurs but when.

Upon installation of no parking or standing signs north side of 69h St. I ask the city to increase patrols and ticket all individuals in violation.

In the meantime I would strongly suggest a flyer be handed out by school personnel to all of those in cars outlining proper etiquette including not blocking driveways leaving adequate room for ingress and egress of driveways as well as enough space to allow people to see traffic from incoming cars during these peak times.

Mark DeLay was a neighborhood school and not a grade level center when I purchased my home. While there has always been an increased level of traffic, it was it was not this unsafe as a neighborhood school, more children walked to and from school. Given the young age of the students attending DeLay and the distances traveled, it is understandable that parents and grandparents would want to pick up. However, it has become a nuisance and unsafe for residents and students as a result of the traffic congestion and configuration.

Claudia Manley Resident on 69th St.

PS: I was blocked today (again) from entering my driveway and the adult refused to pull out go round and go to the end of the line. As I was making a left turn into my driveway, I waited for the driver to move. She did not. I waited. My inability to turn into my driveway backed up traffic down 69th St and Wilmette adding to unsafe conditions for students and residents. DARIEN PUBLIC SCHOOLS DISTRICT #61 – DU PAGE COUNTY DARIEN, IL

BOARD OF EDUCATION REGULAR MEETING MINUTES OCTOBER 25, 2016

______President

______Secretary

______Date

DARIEN PUBLIC SCHOOLS DISTRICT #61 – DU PAGE COUNTY DARIEN, ILLINOIS

OCTOBER 25, 2016

MINUTES

President Janine Kiwiet called the Regular Meeting of the Darien District #61 Board of Education to order at 7:01 P.M. on October 25, 2016 at Lace School.

Board Members Present: Melissa Christie, Katie Fujiura, Janine Kiwiet, Gregory Leban, Jane Moss, Joseph Tortorich.

Board Members Absent: Iranell Spann (arrived at 7:16 P.M.)

Others Present: Bob Carlo, Megan Stoltz, Keith Roberts, Michele Goshko, Jen Pena.

Under Additions to the Agenda, the following items were added: V.J.6. School Board Governance Recognition V.A. Updated technology spreadsheet VI.A.2. Letter from Republic Bank V.K. Update on scheduling at EJH

No one was present for audience participation.

Under Communications, Notices, and Announcements, Dr. Carlo shared a FOIA request from Mary Zellers, Impact Networking, LLC, for lease agreements and invoices for printer and copier equipment. (The response was made in a timely manner.)

Dr. Carlo shared a FOIA request, from Katy Smyser, NBC5Chicago, asking which schools, if any, have in stock, undesignated epinephrine auto-injectors. (The response was made in a timely manner.)

Dr. Carlo shared a thank you note from Diane Whitesides for a floral arrangement she received.

Dr. Carlo announced that Dr. Carol Schultz and Ms. Erin Dwyer will be presenting on November 3, 2016 at the Illinois Council for Exceptional Children Conference – Topic: Co-Teaching Data Collection.

Regular Board of Education Meeting – October 25, 2016 Page 1 of 6

Dr. Carlo announced that Dr. Schultz has been asked to conduct an on-line Administrative Academy: Co-Teaching: Developing, Managing, and Implementing a K-8 Program. This is being offered through the Illinois Principals Association.

Under the Consent Agenda, the following items were presented for approval: A. Approval of Minutes 1. Regular Board of Education Meeting – September 27, 2016 2. Closed Session Meeting – September 27, 2016 B. Receipt of Treasurer’s Report C. Receipt of Investment Report D. Education Fund - $941,452.06 E. Operations and Maintenance Fund - $81,441.60 F. Debt Service Fund (Bond & Interest) - $2,411.00 G. Transportation Fund - $68,501.71 H. Construction Fund - $-0- I. Approval of Payroll J. Approval of Bills K. Student Activity Reports 1. EJH (Sept) 2. Lace (Sept) 3. Mark DeLay (Sept) 4. KIDS Club (Aug/Sept) L. Monthly Safety Inspection Reports 1. EJH (Sept) 2. Lace (Sept) 3. Mark DeLay (Sept) M. Approval of Personnel Report 1. Recommendations of Employment a. None 2. Terminations/Resignations a. None 3. Leaves of Absence a. Sally Burke, request for medical leave b. Jennifer Reyes, request for 12-week leave c. Puja Ramaswamy, request for 12-week leave 4. Retirements a. Mary Lang, Secretary to the Superintendent.

Katie Fujiura moved and it was seconded by Jane Moss to approve the Consent Agenda items as presented.

The roll call vote was: Ayes: Fujiura, Kiwiet, Leban, Moss, Tortorich, Christie. Nays: None.

Regular Board of Education Meeting – October 25, 2016 Page 2 of 6

Absent: Spann

Under the Superintendent’s Report, Keith Roberts, Jen Pena, and Michele Goshko presented an update on the progress they have made and direction for continuing to move forward with the upcoming technology recommendation. Board members were able to ask questions related to the materials presented. Questions centered on the type of hardware being recommended in the plan, purpose, and useful life of the devices. Additionally, there were questions on policy development, device storage, ownership, and insurance. After discussion of plan and questions, the Board members agreed that technology team should continue to refine the recommendation with focus on: • developing policy for technology use in the District in the future • recommend the option of insurance, distribution, and cost of the devices • pricing recommendations related to the technology fee for students

Dr. Carlo shared the survey results from the September 23, 2016, School Improvement Day. The Board members shared that the location of the presentation for School Improvement Day was not the best for hearing, according to survey feedback.

Dr. Carlo shared the current enrollment report.

Dr. Carlo shared the curriculum and assessment update. This update provided the names of those teachers and administrators involved with District and school committees. The Board members asked questions related to the stipend for chairperson and committee members, clarification on how the committees are formed, and chairperson assignment.

Dr. Carlo shared information on LaGrange School District 102’s withdrawal from LADSE. Currently, no action is needed by the District #61 Board of Education. The administration continues to work with LADSE to understand the financial impact on LADSE and District #61 with a withdrawal from LADSE by LaGrange #102. The Board members received information in the Board packet showing the projected financial impact. However, Dr. Carlo cautioned that the numbers may change based on student needs.

Dr. Carlo presented the Annual Assessment and Data feedback with the Board of Education. The same presentation will be posted on the website for the community to access. The Board members were able to ask questions and express opinions on the information shared in the presentation.

Dr. Carlo proposed, and the Board was accepting of, having a meeting before the November meeting. At this time, each school will present how the information is used within their school with students and instruction.

Regular Board of Education Meeting – October 25, 2016 Page 3 of 6

Dr. Carlo shared the following Illinois School Funding Reform Commission information: o Upcoming meetings o Minutes – September 21, 2016 o Meeting 5 Agenda – October 5, 2016 o Funding Formula o 4 Stakeholders o Meeting 6 Agenda – October 19, 2016 o Tom Johnson biography o William Hinrichs vitae o Tax Increment Financing and School Funding Maryland TIF draft o K-12 Funding Formula: Research updates – April 25, 2016 o Is School Funding Fair? A National Report Card

Dr. Carlo encouraged the Board members or interested individuals to check the information out on the Illinois State Board of Education website.

Dr. Carlo shared the final report from Mr. Filas on the District’s 2016 Summer School program.

Under the IASB/LEND/Legislative update, Dr. Carlo provided a Tri- Conference update.

The Board members will review the 2016 Resolutions for the November meeting. Iranell Spann will represent the Board at the Tri-Conference and vote as directed at the next Board meeting.

The Board members discussed the DuPage Division meeting that was held on October 4, 2016. They were pleased with the new format for the Division Dinner.

Dr. Carlo shared the invitation from LEND for their Annual LEND Breakfast, Saturday, November 19, 2016 and took names of participants.

Dr. Carlo shared information on technology replacement of chrome books for November meeting. iPads were collected from the Board members.

Dr. Carlo shared the names of staff members working on scheduling at Eisenhower Junior High. They are continuing to look at options for scheduling in the future.

Under the Finance Committee Report, Megan Stoltz shared the Lunch Revenue/Expense report.

Regular Board of Education Meeting – October 25, 2016 Page 4 of 6

Dr. Carlo shared the information related to District investments. The Board members discussed the issue related to future District investments. The District administrators shared the procedures in place and collateral level to ensure investments are protected.

The Board agreed to remain with Republic Bank for District investments.

Megan Stoltz shared an update on the Food Service program. The Board members asked for additional information related to lunch sales.

Dr. Carlo shared information on the request to place a communication tower on the water tower at Mark DeLay School. The water tower is owned by the City. The Board asked the administration for more information related to: • health concerns • issues related to use of tower for cellular devices • equipment on land around water tower

The Board members expressed concern that in the past, the Board said no to a similar request based on use of land for cellular tower.

Dr. Carlo shared a proposal from Wight & Company to provide professional services for the Dehumidification Project at Lace School.

Gregory Leban moved and it was seconded by Katie Fujiura to approve the proposal from Wight & Company for professional services for the Dehumidification Project at Lace School.

The roll call vote was: Ayes: Kiwiet, Leban, Moss, Spann, Tortorich, Christie, Fujiura. Nays: None.

Dr. Carlo shared the Lease Agreement the District has with Kingswood Academy. This will extend the lease for the use of Marion Hills School by Kingswood Academy. The lease has been reviewed by the District attorney and the financial information is correct.

Joseph Tortorich moved and it was seconded by Jane Moss to approve the Lease Agreement with Kingswood Academy as presented. The Board asked that lease and funding information be sent to Kingswood Academy for signature. Once signed, the Board will co-sign.

The roll call vote was: Ayes: Leban, Moss, Spann, Tortorich, Christie, Fujiura, Kiwiet.

Regular Board of Education Meeting – October 25, 2016 Page 5 of 6

Nays: None.

There was no Policy Committee report.

Under the Darien District #61 Educational Foundation report, Jane Moss reported the Foundation granted two mini-grants for approximately $500 each. Both mini-grants were at Lace School for a mentor program and STEM activities. Also, the Foundation will be holding a fundraiser on December 17, 2016, at the Hollywood Blvd. Theater in Downers Grove.

Under Unfinished Business, Board members provided feedback on the Board Member Handbook which will be added to the document for a complete draft.

There was no New Business.

At this time, Melissa Christie moved and it was seconded by Joseph Tortorich to move to Closed Session to discuss: 1. the appointment, employment, compensation, discipline, performance, or dismissal of specific employees of the public body; 2. lease of property owned by the public body; 3. litigation.

The roll call vote was: Ayes: Moss, Tortorich, Christie, Fujiura, Kiwiet, Leban, Spann. Nays: None.

The Board moved to Closed Session at 10:05 P.M.

The Board reconvened to the Regular meeting at 10:46 P.M.

Katie Fujiura moved and it was seconded by Melissa Christie to extend Dr. Carlo’s contract to 2020 pending review of financial agreement. The Board President shared with Dr. Carlo discussion of the Board. Board members asked questions and clarified issues to move forward with contract extension.

There being no further business to come before the Board at this time, Iranell Spann moved and it was seconded by Jane Moss to adjourn the meeting.

The roll call vote was: Ayes: Tortorich, Christie, Fujiura, Kiwiet, Leban, Spann, Moss. Nays: None.

The meeting adjourned at 10:56 P.M.

Regular Board of Education Meeting – October 25, 2016 Page 6 of 6

DARIEN PUBLIC SCHOOLS DISTRICT #61 - DU PAGE COUNTY DARIEN, ILLINOIS

CLOSED SESSION

OCTOBER 25, 2016

LACE SCHOOL (During Regular Board of Education Meeting)

MINUTES

President Janine Kiwiet called the Closed Session meeting of the Darien District #61 Board of Education to order at 10:12 P.M.

The iPad recorder was turned on and participants stated their names as attending the meeting.

Board Members Present: Iranell Spann, Gregory Leban, Janine Kiwiet, Katie Fujiura, Melissa Christie, Joseph Tortorich, Jane Moss.

Others Present: Bob Carlo.

The following topics were discussed: • Superintendent’s contract. • Litigation update.

There was no action taken at the end of Closed Session.

There being no further business to come before the Board in Closed Session, Jane Moss moved and it was seconded by Melissa Christie to adjourn the meeting.

The roll call vote was: Ayes: Kiwiet, Fujiura, Christie, Tortorich, Moss, Spann, Leban. Nays: None.

The meeting adjourned at 10:46 P.M.

______President

______Secretary

______Date

Closed Session Meeting – October 25, 2016

DARIEN PUBLIC SCHOOLS

DISTRICT #61

BOARD OF EDUCATION MEETING

NOVEMBER 14, 2016

LIST OF BILLS

Transaction Detail For: EJH Activity Fund

Last Month, Any Type, Any Status

Split Date Action Check # Payee Category Memo/Notes Payment Deposit Balance 10/1/2016 1498 Joel Filas Administrative Title III Family Night -$30.67 $33,428.67 Supplies 10/1/2016 1499 Sue Hogan Sports Booster Club Cross Country Tents -$144.28 $33,284.39 10/4/2016 1471 Sam's Club Vocal Music Pop Show Concession -$234.24 $33,050.15 10/4/2016 DEP Cross Country Pasta Cross Country Pasta Party $80.00 $33,130.15 Party 10/4/2016 DEP Magazine Sale Washington Trip Magazine Sale $138.27 $33,268.42 10/5/2016 1484 Haan Crafts Family&Consumer Fall Sewing Kits -$1,292.97 $31,975.45 Sciences 10/5/2016 1485 Puja Ramaswamy Vocal Music Pop Show Music -$50.00 $31,925.45 10/5/2016 1486 Trophies by George Administrative 6th Grade Awards -$50.00 $31,875.45 Plaque Engraving 10/5/2016 1488 Paula Perisin Springfield Trip Springfield -$50.00 $31,825.45 Chaperone 10/5/2016 1489 Kevin Condon Springfield Trip Springfield -$50.00 $31,775.45 Chaperone 10/5/2016 1490 Veronica Baracaldo Springfield Trip Springfield -$50.00 $31,725.45 Chaperone 10/5/2016 1491 Kevin Condon Springfield Trip Springfield -$50.00 $31,675.45 Chaperone 10/5/2016 1492 Phil Esposito Springfield Trip Springfield -$50.00 $31,625.45 Chaperone 10/5/2016 1493 Dean Jubeh Springfield Trip Springfield -$50.00 $31,575.45 Chaperone 10/5/2016 1494 Roy Wolski Springfield Trip Springfield -$50.00 $31,525.45 Chaperone 10/5/2016 1495 Amy Stefgen Springfield Trip Springfield -$50.00 $31,475.45 Chaperone 10/5/2016 1496 Kristin Filip Springfield Trip Springfield -$50.00 $31,425.45 Chaperone 10/5/2016 1497 Joel Filas Springfield Trip Springfield -$50.00 $31,375.45 Chaperone

10/5/2016 1481 Sam's Club Student Council Dance Concession -$699.55 $30,675.90 10/6/2016 DEP Instrument Rentals … $565.00 $31,240.90 EJH Activity Fund: printed from EJH Activity Fund on 11/7/16 Page 1 S Band Fido Cleaning/Rental $60.00 S Band Novickis $60.00 Cleaning/Rental S Band Giufre $60.00 Cleaning/Rental S Band Davidov $60.00 Cleaning/Rental S Band Bergman security $325.00 deposit 10/6/2016 DEP Cross Country Cross Country Sectional Tee Shirt $397.00 $31,637.90 Orders 10/6/2016 DEP Poe Field Tip 8th Grade Field Trip Poe Trip Payments $20.00 $31,657.90 Payments 10/11/2016 DEP Magazine Sale Washington Trip Magazine Sale $600.00 $32,257.90 10/11/2016 DEP Vocal Music Vocal Music Vocal Music $452.00 $32,709.90 Spiritwear Spiritwear 10/11/2016 DEP Cross Country Cross Country Sectional Tee Shirt $20.00 $32,729.90 Shipping cost 10/14/2016 1482 PAPA PASSERO'S Cross Country Pasta party -$80.00 $32,649.90 PIZZA 10/14/2016 DEP Volleyball Tee Volleyball Volleyball Tee $134.00 $32,783.90 Purchase 10/14/2016 DEP Pop & Water & Cofee/Pop/Water Machine Deposits $122.00 $32,905.90 Cofee 10/14/2016 DEP PE Uniform Rentals Physical Education Rentals $116.73 $33,022.63 10/14/2016 DEP NSF Check Vocal Music NSF Reimbursement - $23.00 $33,045.63 Reimbursement Cookie Dough 10/18/2016 DEP Papa Passero's cheerleading Papa Passero's $168.23 $33,213.86 Fundraiser Fundraiser 10/20/2016 DEP Choir Trip Payments Vocal Music Choir Trip Payments $5,980.00 $39,193.86 10/24/2016 1500 Sam's Club Administrative Title III After-School -$133.28 $39,060.58 Supplies - 10-1800- 410-07 10/24/2016 1501 Aramark Cofee/Pop/Water Water Filter Service -$72.88 $38,987.70 10/24/2016 1502 Image Market Vocal Music Choir Hoodies -$452.35 $38,535.35 10/24/2016 1503 Bob Rodgers Travel Vocal Music Choir Trip deposit -$6,500.00 $32,035.35 2016 choir trip 10/24/2016 1504 Puja Ramaswamy Vocal Music Choir Uniform -$265.36 $31,769.99 Reimbursements 10/24/2016 1505 HHS Dance Team cheerleading Pom Competition -$70.00 $31,699.99 10/24/2016 1506 Bureau Valley High cheerleading IDTA Regional -$70.00 $31,629.99 EJH Activity Fund: printed from EJH Activity Fund on 11/7/16 Page 2 School Contest 10/24/2016 1507 Julie Kowalski Administrative Spelling Bee -$254.00 $31,375.99 Registration for EJH anad Lace 10/24/2016 1508 Diane Nelson Administrative Book Club Book -$71.90 $31,304.09 Purchase 10/24/2016 1509 Great American Washington Trip Student Magazine -$457.80 $30,846.29 Opportuniites Orders 10/24/2016 1510 Sportdecals Sport Wrestling Wrestler of the Week -$304.28 $30,542.01 and Spirit Products T-Shirts 10/24/2016 1511 Haan Crafts Family&Consumer Fall Sewing Kit Re- -$5.80 $30,536.21 Sciences Order 10/25/2016 1483 American Vocal Music Pop Show T-Shirts -$600.00 $29,936.21 Sportswear, Inc. 10/25/2016 1487 Cubby Hole Cross Country Cross Country -$397.00 $29,539.21 Sectional T-Shirts 10/25/2016 DEP Dessert Days Sale Student Council Dessert Days $3,963.00 $33,502.21 10/25/2016 DEP Phanotm of the Vocal Music Phanotm of the $2,835.00 $36,337.21 Opera Trip Payments Opera Trip Payments 10/25/2016 DEP On-Line Sales Profit Washington Trip Magazine Deposit $443.44 $36,780.65 10/25/2016 DEP Pop Show Pre-Sale Vocal Music Pop Show Pre-Sale $388.00 $37,168.65 Tickets Tickets 10/25/2016 DEP Activity Ticket Student Council Activity Ticket $1,876.00 $39,044.65 Receipts/Friday Receipts/Friday Night Night Live Live Concessions Concessions

10/27/2016 Deposit return Item Student Council Dessert Days -$61.00 $38,983.65 Fundraiser 10/27/2016 DEP Darien 61 Spring Field Trip Springfield $500.00 $39,483.65 Springfield Chaperone Expense Chaperone Expense Reimbursement Reimbursement 10/31/2016 DEP Interest Earned Administrative October Interest $21.52 $39,505.17 earned

Total Account Inflows: $18,843.19

Total Account Outflows: -$12,797.36

Net Account Total: $6,045.83

EJH Activity Fund: printed from EJH Activity Fund on 11/7/16 Page 3 Transaction Detail For: Lace School Checking

Last Month, Any Type, Any Status

Scheduled Split Date Payee Category Tags Transfer Payment Reconcile Deposit Balance Memo/Notes 10/6/2016 Amy Hearts & Hearts & -$45.00 R $20,547.26 Boss' Day Mordaunt Flowers Flowers 10/6/2016 Colant Liability Liability -$750.00 R $19,797.26 Outdoor Landscapting Classroom Rock Laying 10/6/2016 PBC Pop Fund Pop Fund -$358.89 R $19,438.37 Pop Order 10/18/2016 General Fund Hearts & Hearts & R $485.00 $19,923.37 Staf Donation Flowers Flowers for Hearts and Flowers 10/18/2016 General Fund General General R $500.00 $20,423.37 District Ofce Fund Fund Reimbursement 10/18/2016 General Fund Pop Fund Pop Fund R $98.40 $20,521.77 District Ofce Reimbursement 10/18/2016 General Fund General General R $854.20 $21,375.97 Recorders Fund Fund 10/31/2016 General Fund General General R $11.60 $21,387.57 Interest Fund Fund

Total Account Inflows: $1,949.20

Total Account Outflows: -$1,153.89

Net Account Total: $795.31

Lace School Checking: printed from Erin's Finances on 11/8/16 Page 1 Transaction Detail For: DeLay Activity Account

Last Month, Any Type, Any Status

Scheduled Split Reconcile Date Check # Payee Category Transfer Payment Deposit Balance Memo/Notes R 10/14/2016 7009 Culligan Pop & Pop & -$71.00 $3,102.35 Invoice: Cofee Cofee 201408647824 R 10/14/2016 7010 Brittany Hearts & Hearts & -$100.00 $3,002.35 Wedding Polly Flowers Flowers Shower reimbursement R 10/14/2016 7008 Brigid Hearts & Hearts & -$23.89 $2,978.46 shower supplies Riley Flowers Flowers R 10/17/2016 7011 Zazzo's General General -$60.00 $2,918.46 Oct. Lunch Pizza Fund Fund w/Principal 10/18/2016 7012 Papa General General -$125.00 $2,793.46 Parent Passero's Fund Fund University R 10/19/2016 7013 Garden General General -$1,270.00 $1,523.46 2nd grade field Patch Fund Fund trip Farms R 10/19/2016 Deposit Deposit General General $444.00 $1,967.46 kdg. journal Fund Fund R 10/19/2016 Deposit Deposit Library Library $12.00 $1,979.46 lost library books R 10/19/2016 Deposit Deposit General General $1,323.00 $3,302.46 kdg. field trip Fund Fund R 10/20/2016 7014 Konow's General General -$1,349.00 $1,953.46 Kindergarten Corn Fund Fund field trip Maze R 10/26/2016 7015 Zazzo's General General -$110.67 $1,842.79 Kdg Literacy Pizza Fund Fund Night R 10/27/2016 Deposit Deposit General General $902.05 $2,744.84 2nd grade Fund Fund scholastic news R 10/27/2016 Deposit Deposit Maureen Maureen $161.76 $2,906.60 Coin Drive for Kelly Kelly Holidays Fund Fund R 10/27/2016 Deposit Deposit General General $1,450.00 $4,356.60 2nd grade field Fund Fund trip R 10/31/2016 INTEREST General General $1.88 $4,358.48 INTEREST CREDIT Fund Fund earned

[Check #0

Page 1 DeLay Activity Account: printed from Lisa's Finances on 11/9/16 Republic Checking]

Total Account Inflows: $4,294.69

Total Account Outflows: -$3,109.56

Net Account Total: $1,185.13

Page 2 DeLay Activity Account: printed from Lisa's Finances on 11/9/16

DARIEN PUBLIC SCHOOLS 2016-2017 NOVEMBER 11, 2016 DISTRICT #61 MONTHLY EMPLOYMENT REPORT

MARK DELAY SCHOOL (Kdg.-1-2) Lisa Kompare, Principal LACE SCHOOL (3-4-5) Erin Dwyer, Principal EISENHOWER JUNIOR HIGH SCHOOL (6-7-8) Jacob Buck, Principal Joel Filas, Assistant Principal KINDERGARTEN Anabel Dominguez (Bilingual) THIRD Erin Kasanders 6th (6 sections) 7th (6 sections) 8th (7 sections) Kristie Lupella GRADE Bonnie Bucholz LANGUAGE ARTS/ Donna Pidde-Serpico Sera Bocian Melissa McGannon Julie Vallo Michelle Greco READING Sue Tullar Kristen Filip Nikki Alessi Susie Stachnik Mike Moyer Jen Taake Whitney Baker Jada Gilleylen Shannon Toland / Ashley Frye Kathryn Ballard MATH Jen McKnight Amy Steffgen Amy Steffgen FIRST Monica Molina (Bilingual) Jessica Johnson (Bilingual) Kevin Condon Kevin Condon Julia Polasek GRADE Rebecca Knapp FOURTH Marion Nyhoff Julia Polasek Julia Polasek (HS) Gail Stocchero GRADE Nicole deVerdier Amy Steffgen (DGS) Kerri Montague Janet Boslett Kevin Condon Michelle Bossy LeeAnne Lewis SCIENCE Roy Wolski Paula Perisin Joe Polasek Amy Whitt Caroline Kolodziej Jessica Hess Kelly Glennon (Amy Staubus, sub) SECOND Rhonda Esposito Joy O'Reilly (Transition) SOCIAL STUDIES Donna Pidde-Serpico Robert Cabrera Stu Stallings GRADE Melissa Winter FIFTH Bob Johnson Sue Tullar Brittany Polly GRADE Sally Burke Jen Taake Michelle Skweres Kathy Atwood Kim McShea Rebecca Berry STUDY SKILLS Magdalena Barajas (Bilingual) Janel Glines Kerry Senesac Haley Nelson RtI MATH/READING ART Liese Hearth ART Sally Misiora GUIDANCE COUNSELOR Sarah Willmert P.E. David Nash P.E. Cami Nicol ELL Anne Breck-Meyer / Fay Lolos VOCAL MUSIC Sarah Kenealy VOCAL MUSIC Andrea Behegan P.E./HEALTH Jennifer Crum / Phil Esposito BAND BAND Joey Bonanotte Heather Petersen (Paul Mutschler,sub) GIFTED (ENRICHMENT) Mary Andersen GIFTED (ENRICHMENT) Amy Mordaunt Zachary Holtzman LIBRARY Diane Nelson LIBRARY MUSIC Puja Ramaswamy TECH. EDUCATOR Jen Pena / Michele Goshko TECH. EDUCATOR Michele Goshko BAND Matthew Janus READING Kristin Shell /Cheryl Halla READING Jennifer Reyes TECHNOLOGY Renee Brennan (6) Michelle Sleboda Kim Schultz FAMILY/CONSUMER SCI. Diane Ferrando ELL/BILINGUAL Janice Brooks / Emily Heise (Gerry Vivas, sub) Ashley Koney ART Erica Hochleutner SOCIAL WORKER Stephanie Nash ELL/BILINGUAL Hollie Hickey / Ashley Grabowski SPANISH Veronica Baracaldo Veronica Baracaldo RESOURCE Linda Pritchard/Amanda Bowers TBD SOCIAL WORKER Kathy Spencer Ashley Daly/Delena Valadez SOCIAL WORKER Donna Murphy TECH. EDUCATOR Jen Pena Vanessa Hallums RESOURCE Kim Granback MULTINEEDS (LADSE) Tricia Bradley/TBA CROSS-CATEGORY Karen Pudil Ann Centers RESOURCE Keith Bartelmey / Deana Jubeh Julie Neary / Becky Collins Jorie Klip / Alyssia Evans SPEECH Lisa Massanisso (LADSE) Lauren Zembruski EXTENDED RESOURCE Debbie Kostal EMPLOY MULTI-NEEDS (LADSE) Amy Danaher Jimmy Ramsden Patty Lauzon, Secretary to the Superintendent ECE Brigid Riley CROSS-CATEGORY Terry Whaley SPEECH Bob Heelan (LADSE) Julia Mendez, rehire to 4th/5th grade aide position at Lace School PRE-KDG. BLENDED Kara Macropulos SPEECH Cheryl Buhrke (LADSE) SOC. BEHAV. LEARNING Michelle Pacini Amy Staubus, sub for long-term leave at Lace School ECE BILINGUAL Mandy Olson MULTI-NEEDS (LADSE) Sandra Wheeler READING Julie Kowalski-Schmidt RESIGNATIONS/TERMINATIONS ECE/BLENDED Jetty Sizemore / Eva Rzeszutko/ INT. RESOURCE Julia Mendez (4th/5th) MULTINEEDS (LADSE) Meagan Meneou / Tricia Brawley Patty Lauzon, Secretary, Lace School Lisa Martinelli /Julie Hawks / RESOURCE Anne Walsh (8) Renata Cunningham / Sarah Mijares (7) LEAVES OF ABSENCE Joelle Pigors (1/2) ELL TBA Kris Karsa (6) ECE BILINGUAL Diana Lopez RESOURCE/SBL Jennifer Blaa KDG. Lourdes Rosete / Carlie Serritella Jean Schroeder PMN (LADSE) LADSE READING Cynthia Andino PRIM. EXT. RESOURCE Debbie Errandi EXT. RESOURCE Anna Pescatore (W)) EXT. RESOURCE Kanita Kolodziej RETIREMENT PRIM. RESOURCE Deb Uhlar (K) Susan Anderson (W) Luann Keslinke, Secretary, EJH Anna Hobbs (1) Joelle Pigors (1/2) (K) ELL ELL/BILINGUAL Marcela Buhrke INT. MN. (LADSE) LADSE STUDY HALL ASSISTANT COMPUTER Susan Bolton COMPUTER Julie Nally (2-1/2 days) COMPUTER Julie Nally (2-1/2 days) LIBRARY LIBRARY Joanna Petersen LIBRARY Valerie Slover DARIEN PUBLIC SCHOOLS 2016-2017 NOVEMBER 11, 2016 DISTRICT #61 MONTHLY EMPLOYMENT REPORT

EDUCATIONAL SUPPORT PERSONNEL MARK DELAY LACE EISENHOWER SECRETARIES Joelle Siki /Jeaneth Mazzocco Patty Lauzon SECRETARIES LuAnn Keslinke HEALTH ASSISTANTS (AIDES) Brooke Helms Ginger Ladd Sue Horton LUNCH PROGRAM (P-T) Antoinette Saunders (P-T) (M-F) Carol Berning (P-T) (M-F) HEALTH ASSISTANT (AIDE) Bonnie Rink (P-T) Rosalinda Szutowicz (P-T) (M-F) Jean McCaffrey-Brooks LUNCH Lillie M. Lillie, Director TBD (P-T) Breakfast program Roger Meyer, Food Service Supervisor CUSTODIANS Dave Muenzing (8) José Zambrano (8) Judy Piscitiello Chidel Hayden (8) Marcelo Dominguez (8) Cathy Needham Larry Veronica (8) Jesus Chagoya (8) June Bieda Jaleel White (6) Luis Topete (8) Susan Winters Ciro DeChiara (3) LUNCH SUBSTITUTES Frances Ryan, (sub)

ADMINISTRATION CENTRAL OFFICE BUSINESS OFFICE TRANSPORTATION/MAINTENANCE Bob Carlo, Superintendent Mary Lang Charlene Cotuno Kurt Stadtler Megan Stoltz,Chief School Business Official Aja Johnson Carol Schultz, Special Education Suzanne Bialas CUSTODIANS Ray Butscher (8) BUS DRIVERS (9 ROUTES) Diane Whitesides (8) LADSE PERSONNEL Roberta Hall Cesar Mejia (8) DISTRICT Karen Ochoa, Psychologist (EJH/Lace) Dave Muenzing Angel Melesio (8) Keith Roberts (Network Coordinator) Lynn Kerby, Psychologist (MD) Shelley Yang Arturo Garay (6) Teresa Shiley, Nurse Speech Matt Mostowik RETIRING Jennifer Stansbury, SST Coordinator (Lace) Cheryl Buhrke (Lace) Thomas Bowler Lindsay Schwarz, Cross-Cat (MD)(Priv. Sch.)Nicole Kushta-Pelc Donna Pidde-Serpico (end of 2016-17 school yr.) DAY CARE/K.I.D.S. CLUB Mary Kaminski, Resource (Lace) Christopher Gobber Kim Granback (end of 2016-17 school yr.) Mary Andersen, Director Shari Holt, Multineeds (MD/EJH) Danilo Reyes Marion Nyhoff (end of 2016-17 school yr.) (D) (Site Coord. AM) Lisa Martinelli Lisa Massanisso (MD) Tyesha Bell Janet Boslett (end of 2016-17 school yr.) (D) Site Coordinator (PM) Eva Rzeszutko Katie Smart (EJH) Janice Brooks (end of 2016-17 school yr.) (D) (AM) Jetty Sizemore Kelly Smith-Novak (MD) Kurt Stadtler (sub) Gail Stocchero (end of 2017-18 school yr.) (D) (AM/PM) Debbie Errandi Kelly Stover-Krupske, ECSE (MD) Mary Lang (effective January 14, 2017) (D) (PM) Deb Uhlar Robert Heelan, ER (MD/EJH) MESSENGER Luann Keslinke (effective January 3, 2017) (L) (Site Coord. AM/PM) Anna Pescatore Andrea Trowbridge, EC (MD) Kenneth Brooks (L) (AM) Anna Pescatore Physical Therapists (L)(AM) Carrie Serritella (M-W-F) Heidi Athas, Inclusion (MD/Lace) (L) Mary Andersen (Prog. Dir.) Terry Seifert ECSE (MD) (L) (PM) Anna Pescatore Valerie Kramer (ECE) (L) (PM) Robbi Romanoff Hermie Morales, Multineeds (MD) LEAVES OF ABSENCE (L) (PM) Jetty Sizemore Wendy Brunswick, Multineeds - EJH/Lace) Kelly Glennon ( (L) (PM) Jennie Van Norman (M-F) Occupational Therapists Emily Heise Kim Hagar, ECE & Blended (MD) Heather Petersen ADMINISTRATIVE ASSISTANTS/TRAINEES Michelle Mannix-Richards, Blend. & Biling. (MD) Jennifer Reyes Trainees Gail Trainor, Inclusion (District) Puja Ramaswamy Mary Andersen - DeLay Jen Manescalshi - EJH Gina Ortiz-Anderson, Multineeds (Lace/MD) Joey Bonanotte - Lace Jen Crum - EJH Laurie Gacki, Multineeds (EJH) Monique Attal, Multineeds (EJH) Assistants ECE Program Supports EXTENDED ILLNESS Michelle Sleboda - DeLay Jennifer Stansbury - District Kelly Rathbun-Hunt, Program Coord. Jada Gilleylen - Lace Vanessa Hallums - DeLay Dena Walter, Psych/Social Worker Erin Kasanders - Lace Brigid Riley - DeLay Adaptive P.E. Teacher Trish McDonough, All Multi-Needs (District) SUMMER

Updated 11.01.16

Upcoming Illinois School Funding Reform Commission meetings

Changes from previous iterations are underlined.

• Please note that the ISBE videoconference rooms are located in Springfield (100 N. First St., 3rd Floor) and Chicago (100 W. Randolph, Suite 14-300). The ISBE Board Room is located in Springfield (100 N. First St., 4th Floor).

o Nov. 2 § Commission meeting: 12-3pm in ISBE videoconference rooms § Stakeholder meeting/call: 10-11am in the ISBE videoconference rooms and via conference call-in 888-494-4032; passcode 1457694099#

o Nov. 17 § Commission meeting: one half-hour following adjournment of session in ISBE Board Room • E.g., Commission begins at 2pm if session adjourns at 1:30pm • If session is canceled on Nov. 17, Commission will meet 12-3pm on Nov. 17 in the ISBE videoconference rooms § Stakeholder meeting/call: 4-5pm on Nov. 16 in the ISBE videoconference rooms and via conference call-in 888-494-4032; passcode 1457694099#

o Dec. 1 § Commission meeting: one half-hour following adjournment of session in ISBE Board Room • E.g., Commission begins at 2pm if session adjourns at 1:30pm • If session is canceled on Dec. 1, Commission will meet 12-3pm on Dec. 1 in the ISBE videoconference rooms § Stakeholder meeting/call: 4-5pm on Nov. 30 in the ISBE videoconference rooms and via conference call-in 888-494-4032; passcode 1457694099#

o Dec. 14 § Commission meeting: 12-3pm in ISBE videoconference rooms § Stakeholder meeting/call: 10-11am in the ISBE videoconference rooms and via conference call-in 888-494-4032; passcode 1457694099#

Illinois School Funding Reform Commission

Overview of Funding for Special Populations

November 2, 2016

Special Education Funding

Sp Ed – Personnel $442,400,000 99.8% Sp Ed – Funding for Children Requiring Sp Ed Services $303,829,700 99.6% Sp Ed – Orphanage Tuition $95,000,000 100% Sp Ed – Private Facility Tuition $233,000,000 91.2% Sp Ed – Summer School $11,700,000 80.1% Sp Ed – Transportation $450,500,000 93.8% Special Education Mandated Categorical Subtotal $1,536,429,700 Major State Programs (GSA, MCATs, Early Childhood and Career Technical Education) Total $7,273,124.7 Special Education Mandated Categorical Percentage to Major 21% State Programs

2 Special Education Funding

Chicago District 299 Educational Services Block Grant – P.A. 89-15, effective May 30, 1995. District 299 receives an amount from each state program multiplied by a percentage computed from the FY95 appropriation for that program.

Sp Ed - Personnel $442,400,000 19.1% $84,498,400 Sp Ed – Funding for Children Requiring Sp Ed $303,829,700 29.2% $88,718,300 Services Sp Ed – Orphanage Tuition $95,000,000 35.8% $34,010,000

Sp Ed – Private Facility Tuition $233,000,000 48.4% $112,772,000

Sp Ed – Summer School $11,700,000 54.4% $6,364,800 Sp Ed – Transportation $450,500,000 30.7% $138,303,500 Totals $1,536,429,700 $464,667,000 Total Ed Services Block Amount (Special Education) 30% to Appropriation

3 Special Education Funding

Special Education Personnel Reimbursement Provides reimbursement to local education agencies for a portion of salary costs for certified and non- certified employees who provide services to students with disabilities. Funding is reimbursed quarterly for prior year expenses.

Reimbursement Formula Lesser of: Certified 1) Local Salary or 2) Employed Days : 180 x $9,000 Lesser of: Non-certified 1) Local Salary 2) One-half of total salary or 3) Employed Days : 180 x $3,500

FY 17 Approp CPS Block % CPS Amt Outside CPS $442,400,000 19.1% $84,498,400 $357,901,600

4 Special Education Funding

Funding for Children Requiring Special Education Services Provides local education agencies flexible, supplemental special education funding to support the delivery of services to students with disabilities. Funding is reimbursed quarterly.

Reimbursement Formula

District GSA Average Daily Attendance * 85% of Appropriation + District GSA Low-Income Population * 15% of Appropriation

FY 17 Approp CPS Block % CPS Amt Outside CPS $303,829,700 29.2% $88,718,300 $215,111,400

5 Special Education Funding

Special Education Private Facility Tuition Reimbursement Provides funding to districts for the tuition paid to nonpublic special education private facilities for students with disabilities. Funding is reimbursed quarterly for prior year expenses.

Reimbursement Formula District Tuition Paid = $25,000 District Per Capita Charge = $5,000 District Financial Obligation (2 Per Capita Charges) - $5,000 * 2 = $10,000 Tuition $25,000 minus District Obligation $10,000 = $15,000 Reimbursement

FY 17 Approp CPS Block % CPS Amt Outside CPS $233,000,000 48.4% $112,772,000 $120,228,000

6 Special Education Funding

Special Education Summer School Reimbursement Provides funding to districts for students with disabilities beyond the normal school year in accordance with their individualized education program. Funding is provided for the most recent summer expenses.

Reimbursement Formula Dist Summer ADA * by weight of 1.25 (0.24 X 1.25 = 0.30) Dist GSA divided by GSA ADA ($2,000,000 / 630.00 = $3,174.60) Dist GSA ADA per pupil X Summer ADA ($3,174.60 * 0.30 = $952.38)

FY 17 Approp CPS Block % CPS Amt Outside CPS $11,700,000 54.4% $6,364,800 $5,335,200

7 Special Education Funding

Special Education Orphanage Reimbursement Provides full funding to districts for educating students with disabilities who reside in foster family homes or state-owned facilities. Funding is provided for current year expenses.

Reimbursement Formula Education Costs + Required Transportation = Reimbursement

FY 17 Approp CPS Block % CPS Amt Outside CPS $95,000,000 35.8% $34,010,000 $60,990,000

8 Special Education Funding

Special Education Transportation Reimbursement Provides funding to local education agencies that transport students with disabilities who have special transportation needs stated in their individualized education program. Funding is reimbursed quarterly for prior year expenses.

Reimbursement Formula Eligible Costs * 80% = Reimbursement

FY 17 Approp CPS Block % CPS Amt Outside CPS $450,500,000 30.7% $138,303,500 $312,196,500

9 Special Education Funding

Special Education Expenditure and Receipt Report P.A. 95-555 $6.0 $ in Billions

$4.9 $5.0 $5.0 $4.6 $4.8 $4.4 $4.5 $4.0 $4.0 $3.8 $3.3 $3.4 $3.4 $3.1 $3.2 $3.2 Est. Expenditure $3.0 $2.7 $2.7 Receipts Net Special Education Expenditures $2.0 $1.5 $1.5 $1.6 $1.3 $1.3 $1.3 $1.4 $1.1 $1.0

$- 2008 2009 2010 2011 2012 2013 2014 2015 10

Early Childhood Block Grant Preschool for All 3-5 Prevention Initiative 0-3

11 Early Childhood Block Grant (ECBG)

• AUTHORITY: Authorized by Section 1C-2 of the School Code [105 ILCS 5/1C-2] and implementing Sections 2-3.71 (Preschool for All) and 2-3.89 (Prevention Initiative) of the School Code [105 ILCS 5/2-3.71 and 2-3.89]. • 23 Illinois Administrative Code Part 235 • Establishes the procedures and criteria for the approval of proposals through a competitive Request for Proposals process and continuation applications • Eligible applicants include public school districts, university laboratory schools approved by the Illinois State Board of Education (ISBE), charter schools, area vocational centers, and public or private not-for-profit or for-profit entities with experience in providing educational, health, social and/or child development services to young children and their families

12 Evaluation of ECBG Proposals

• Evaluation Criteria • Population to be Served (30 points) • Quality of Proposed Program (40 points) • Experience and Qualifications (20 points) • The program is cost-effective as evidenced by the cost of proposed services in relation to the numbers to be served and the services to be provided. (10 points) • Additional Considerations • The selection of proposals for funding may be based in part on geographic distribution and/or the need to provide resources to school districts and communities with varying demographic characteristics. • The State Superintendent of Education shall determine the amount of individual grant awards. The final award amounts shall be based upon: • Total amount of funds available for the Early Childhood Block Grant; and • Resources requested in the top-ranked proposals • Evaluation Process follows the Grants Accountability and Transparency Act (GATA)

13 ECBG Funding

FY 12 FY 13 FY 14 FY 15 FY 16 FY 17**

Total ECBG State Funding $325,123,500 $300,192,400 $300,192,400 $293,438,071 $314,238,100 $393,738,100

Chicago Public Schools (37%) $120,295,700 $111,071,188 $111,071,188 $108,572,087 $116,268,100 $145,683,100 Preschool for All (PFA) 3-5 $90,045,700 $83,087,460 $76,302,336 $83,218,931 $80,846,714 $114,661,714 Prevention Initiative (PI) 0-3 $30,250,000 $27,983,728 $34,768,852 $25,353,156 $35,421,386 $31,021,386

Downstate $204,827,800 $189,121,212 $189,121,212 $184,865,984 $197,970,000 $248,055,000 (Outside City of Chicago) Preschool for All (PFA) 3-5 $169,725,192 $156,985,627 $156,951,413 $153,277,087 $165,229,196 $186,472,944 PFA Expansion Model 3-5 NA NA NA NA NA $12,596,516

Prevention Initiative (PI) 0-3 $27,591,868 $25,521,404 $25,415,743 $24,588,422 $27,896,752 $39,795,538

Infrastructure/Administration $7,510,740 $6,614,181 $6,754,056 $7,000,475 $4,844,052* $9,190,002***

*Does not include Administrative and Infrastructure costs reimbursed from FY17 **Estimated ***Includes Administrative and Infrastructure costs from FY 16 14 ECBG Service Level

FY 12 FY 13 FY 14 FY 15 FY 16 FY 17*

Preschool for All (PFA)3-5 Grantees 463 463 463 457 455 451*

Total PFA 3-5 Served 78,607 75,447 75,231 75,154 73,118 74,422* Chicago Public Schools 23,316 19,141 20,882 19,667 18,428 21,191* Downstate PFA 55,291 56,306 54,349 55,487 54,690 51,171* Downstate PFA Expansion Model NA NA NA NA NA 2,060*

Prevention Initiative (PI) 0-3 Grantees 159 156 154 148 148 148*

PI 0-3 Served 13,579 14,770 14,264 14,852 14,147* 18,419*

Chicago Public Schools 4,175 5,392 5,831 6,330 6,922* 6,538*

Downstate 9,404 9,378 8,433 8,522 7,225* 11,881*

*Estimated 15 16 Map from the Prevention Initiative Biennial Report for Fiscal Years 2014 and 2015

● Prevention Initiative

17 Bilingual Education

18 Bilingual Education

• AUTHORITY: 105 ILCS 5/14C et seq. and 23 Illinois Administrative Code, Part 228 • To provide for the establishment of transitional bilingual education programs in the public schools, and to provide supplemental financial assistance to help local school districts meet the extra costs of such programs. • To provide funding for programs that fulfill the linguistic and academic needs of English learners and meet IL Learning Standards. Each district's grant is determined by the size of the student population, amount and intensity of bilingual services received by students, and the grade levels of eligible students. • Eligible applicants include all public school districts as well as state charter schools that are serving English learners (ELs).

19 Bilingual Education Funding and Number of ELs

FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Total Bilingual Education $62,381,200 $63,381,200 $63,381,200 $62,248,400 $63,681,200 $63,681,200 Appropriation Number of English Learners 69,355 69,704 70,855 73,874 72,419 62,242* (ELs) Number of English Learners 134,815 138,061 136,970 148,794 152,914 142,367* (ELs) Total Funding Allocation $86,052,752 $87,057,708 $92,322,000 $92,031,375 $100,343,764 $100,966,144** Approved

*Number of ELs reported as of October 2016– final count is expected to be higher ** estimate

20 Transitional Bilingual Education

Transitional Bilingual Education and Transitional Program of Instruction Formula Funding Elementary (Pre-K – 8th grade)

Level of Service Per Pupil Allocaon TBE TPI Grades 1-8 with 5 or more, but fewer than 10 class periods per week $304 $304 Grade 1-8 with 10 or more class periods per week $607 $607 PreK-K with 5 or more class periods per week $607 $607

High School (grades 9-12)

Per Pupil Allocaon Level of Service TBE TPI 5 or more, but fewer than 10 class periods per week $380 $354 10 or more class periods per week $759 $707

21 Bilingual Education Funding

FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Total Bilingual Education $62,381,200 $63,381,200 $63,381,200 $62,248,400 $63,681,200 $63,681,200 Appropriation* Chicago Public Schools $31,630,038 $31,823,399 $35,146,214 $34,454,911 $37,601,581 $35,600,449 Funding Allocation Downstate Funding Allocation $54,422,714 $55,234,309 $57,175,786 $57,576,464 $62,742,183 $65,365,695*** (Outside City of Chicago) Total Funding Allocation $86,052,752 $87,057,708 $92,322,000 $92,031,375 $100,343,764 $100,966,144*** Approved Total Expended $84,768,110 $85,603,070 $90,720,192 $90,493,402 $97,841,304 TBD

Pro-rated Reimbursement Level** 73% 81% 67% 67% 63% 62%***

Actual Reimbursement to Districts $62,416,088 $61,516,510 $61,493,509 $60,447,633 $61,681,150 TBD

*Total appropriation includes funds used for professional development service and district reimbursement ** In the event that funds appropriated by the General Assembly are insufficient to cover the district’s excess costs, the fund will be distributed on a pro rata basis *** estimate 22 NONPUBLIC SCHOOLS IN ILLINOIS: LEADERS IN SPECIALIZED EDUCATION PRESENTATION*BY: ILLINOIS*ASSOCIATION*OF*PRIVATE*SPECIAL*EDUCATION* CENTERS*(IAPSEC) NOVEMBER*2,*2016 Nonpublic*special*educa/on*programs*are*an*integral*part* of*Illinois’*sophis/cated*special*educa/on*service*delivery* system.*** As#defined#by#ISBE,#nonpublic#special#educa6on#programs#provide#educa6onal,#therapeu6c#and/or# residen6al#services#to#students#with#disabili6es.#In#the#con6nuum#of#services#for#eligible#students,#federal# and#state#laws#allow#programma6c#op6ons#for#students#who#may#require#excep6onal#educa6onal#and/ or#clinical#interven6on#to#meet#their#needs.##Typically,#students#placed#in#14F7#.02#programs#have#such# severe#and#perhaps#complicated#clinical#and#educa6onal#needs#that#school#districts#opt#to#refer#their# students#to#outside#district#placements#aJer#exploring#other#least#restric6ve#op6ons.# Approximately#500#programs#have#the#following#characteris6cs:" • Con&nue"to"be"innovators"in"best"prac&ce" • Expand"and"contract"based"on"urgent"community"needs" • Provide"an"array"of"clinical"and"educa&onal"services"that"cannot"be"provided"by"local"public"schools" • Provide"services"mandated"in"the"development"of"the"Individualized"Educa&on"Plan"(IEP)."In"the"IEP," choices"regarding"which"program"best"meets"the"needs"of"the"children"are"made,"including" nonpublic"school"programs."" • Receive"targeted"funding"provided"by"Sec&on"14G7.02"of"the"Illinois"School"Code""to"ensure"these" services"are"available."This"funding"complies"with"Federal"law"because"Illinois"has"the"required" policies"and"procedures"to"ensure"that"children"are"placed"based"on"need"without"regard"to" funding."

2" It*is*essen/al*in*understanding*the*role*of*nonpublic* special*educa/on*programs,*as*part*of*the*Illinois*service* delivery*system,*to*provide*informa/on*about*the* students*who*are*served*by*these*schools.** * Many#of#these#students#have#the#following#characteris6cs#:# " • Have"been"psychiatrically"hospitalized." • Live"in"residen&al"treatment"centers"or"group"homes." • Were"not"aQending"school"at"all"" • Had"been"removed"from"public"school"for"the"safety"of"other"children"" • Have"emo&onal"and"behaviorGdisorders"so"severe"that"they"need"clinical" programs"in"order"to"educate"them"properly"and"to"keep"nonGinvolved"children" safe." • Are"students"with"Au&sm" • Are"students"who"have"experienced"trauma"or"severe"mental"health"issues" • Are"involved"with"DCFS"or"Department"of"Juvenile"Jus&ce" ! 3" ! ! ! ! ! ! ! (Child!Care!Associa/on/!IAPSEC!2014!Outcomes!Study)* " Now*that*we*know*who*goes*to*these*schools,*it*is* important*to*understand*how*the*schools*fit*into*the* broader*educa/on*picture.* " • General"educa&on"teachers,"school"administrators,"school"counselors,"and" social"workers"work"to"address"the"needs"of"approximately"80%"of"the"children" • Special"educa&on"teachers"and"school"psychologists"are"employed"and"licensed" to"meet"the"needs"of"an"addi&onal"18%"of"students" • Individuals"who"work"in"nonpublic"therapeu&c"centers"have"highly"specialized" training"to"work"with"the"2%*of*low*incidence*students" • Just"as"specialized"services"are"needed"in"medical"treatment, they"are"needed" in"educa&on" • Nonpublic"special"educa&on"programs"are"an"important"part"of"a"sophis&cated" delivery"system" • Nonpublic"special"educa&on"programs"are"a"crucial"point"on"the"con&nuum" ensuring"students"get"&mely"and"effec&ve"services" • The"students"in"nonpublic"special"educa&on"programs"need"more"specialized" treatment"and"educa&on"

4" THESE*PROGRAMS*WORK*M** *EVEN*WITH*THE*DIFFICULT* POPULATION*THEY*SERVE!* " • Over"70%*"of"the"graduates"from"emo&onal/behavioral"disorders"educa&on" programs"le_"with"plans"to"pursue"adult"roles"in"the"mainstream" • Close"to"50%*"of"these"students"had"plans"to"aQend"4Gyear/2Gyear"colleges"or" trade/technical"schools." • Placements"are"stabilized,"99%*"of"students"were"maintained"in"school"without" a"significant"break"in"services." • AQendance"is"improved."Nonpublic"special"educa&on"program"aQendance" averaged"84%*" • Average"length"of"placement"is"one"year*" • Drop"out"rate"is"less"than"2%*"of"enrolled"high"school"students" • Public"school"districts’"are"highly"sa&sfied"with"the"outcomes"of"their" placements"and"have"very"strong"rela&onships"with"their"nonpublic"school" "*Child!Care!Associa/on/!IAPSEC!2014!Outcomes!Study)* " 5" " !!!* * HOW*ARE*THESE*SCHOOLS*PAID*FOR?" " The"funding"formula"is"specific"to"follow"an"individual"child"with"intensive"and"high"cost"needs."Current"law""ensures"that" more"money"will"go"to"districts"with"greater"poverty.""The"funding"formal"has"built"in"equity"ensuring"a"propor&onate" share"of"local"and"state"resources.""The"formula"was"wriQen"in"a"manner"which"has"stood"the"test"of"&me.""With"the" excep&on"of"the"Chicago"block"grant,"funds"are"reimbursed"to"school"districts"only"a_er"the"specific"service"has"been" provided.""The"dollars"follow"the"child.""In"addi&on,"there"is"a"combina&on"of"local"school"district"resources"and"state" general"revenue"funds"that"pay"for"the"services.""The"line"item"in"the"ISBE"budget"that"contains"the"GRF"funds"is"en&tled" “Private"Tui&on,”"and"can"be"found"in"the"“mandated"categoricals,”"special"educa&on"sec&on"of"the"budget.""" " Tes/mony*from*the*Senate*Educa/on*Reform*Hearings*strongly*recommended* that*catastrophic*students*be*held*out*of*any*general*funding*formulas.* * COST*–*EFFECTIVE** To#provide#rigorous#cost#containment,#the#State#of#Illinois#has#a#rateFseNng#agency,#the#Illinois#Purchased# Care#Review#Board,#established#to#ensure#these#programs#are#as#costFeffec6ve#as#possible."" "" • The"rates"set"by"this"Agency"are"the"sum"total"of"what"is"available"to"nonpublic"schools.""Nonpublic" school"staff"do"not"par&cipate"in"the"Teacher"Re&rement"System,"nor"do"these"schools"have"access"to" the"32"different"educa&on"sources"that"help"fund"public"school"district"programs" " • Rates"are"set"based"on"2"yearGold"audited"costs,"and"these"reported"costs"have"caps"in"three"different" areas."

6" GEOGRAPHIC*LOCATIONS*OF* Illinois!State!Board!of!Educa/on!B!2015" STUDENTS*SERVED* "

7" PUBLIC*POLICY*101:*DO*NOT*CHANGE*WHAT*WORKS* " AQempts"have"been"made"over"the"years"to"change"this" service"delivery"system.""Each"aQempt"has"failed"because" members"of"the"Illinois"General"Assembly"and"the" administra&on"are"aware"of"how"cri&cal"this"educa&on" safety"net"is"to"their"cons&tuents.""AQempts"have"been" made"to"add"more"line"items"to"this"appropria&on"which" would"cause"prora&on"to"reduce"state"funding"to"poverty" impacted"districts.""In"this"current"environment"where" every"dollar"counts,"we"need"to"maintain"appropria&ons" which"are"cost"contained,"equitable"and"have"excellent" outcomes.""We"have"to"ensure"that"all"children"are"able"to" receive"cri&cal"services"they"so"desperately"need.* * 8" * SUMMARY* " " • Nonpublic"special"educa&on"programs"provide"a"highly" specialized"service"to"the"students"with"the"greatest"needs" throughout"the"state" • Nonpublic"special"educa&on"programs"currently"serve"about" 8,000"students" • Nonpublic"special"educa&on"programs"provide"specialized"service" that"is"costGeffec&ve"resul&ng"in"posi&ve"outcomes"for"their" students" • Nonpublic"special"educa&on"programs"are"mandated"by"Federal" rule"

" 9" " " * * Educational Funding – Special Education Educational Funding – Special Education

Purpose

Address: (1) the most significant issues regarding special education funding in Illinois; (2) service delivery within the context of school districts and special education cooperatives and; (3) the challenges related to private placements Educational Funding – Special Education

Special Education Data

• During past 10 years approximately 290,000 – 326,000 students per year receiving special education • For high incidence, in general, students with intellectual disability, specific learning disability, speech/ language, and emotional disability has decreased over time • In general, other health impaired, developmental delay, and autism has increased over time Educational Funding – Special Education

Special Education Data

• During the past ten years for low incidence, in general, students with orthopedic impairment and hearing impairment has decreased over time • In general, students with visual impairment, deafness, deaf-blind, and traumatic brain injury has remained stable over time • In general, students with multiple impairments has increased over time Educational Funding – Special Education

Funding

In Illinois, local school districts’ sources of funds to expend on special education:

- Federal: approximately 1-5% - State: approximately 16-75% - Local: approximately 20-85%

Township High School District 211

IDEA Grant IDEA PrivateRoom & Facility Funding for 7% BoardTuition Reimbursement1% Children Requiring 2% Special Education Services Personnel 6% Reimbursement 8% Orphanage 2% Local Sources Summer School 74% 0% Pontiac High School District 90

Funding for Personnel Children Reimbursement Requiring Special 11% Education Services 5%

Private Facility Tuition Reimbursement 2% Local Sources 82% Westchester School District 92.5

IDEA Grant Private Facility 1% Tuition Reimbursement 12%

Funding for Children Requiring Special Education Services 13%

Local Sources Personnel 60% Reimbursement 8%

Orphanage 6% Summer School 0% Taylorville CUSD 3

IDEA Grant 4% Local Sources Private Facility 24% Tuition Reimbursement 19%

Summer School 0%

Orphanage Funding for 5% Children Requiring Special Personnel Education Reimbursement Services 26% 22% Educational Funding – Special Education

Funding from Federal Sources

Flow Through Pre-School FY16 $514,696,307 $17,118,363 FY15 $500,249,065 $16,488,219 FY14 $499,269,921 $16,488,219 FY13 $479,681,039 $16,488,199 FY12 $505,828,941 $17,308,047 FY11 $501,248,821 $17,337,847 Educational Funding – Special Education

Funding: State - Personnel

• Special education personnel reimbursement is intended to provide funding for school districts and special education cooperatives employing the necessary staff to serve children and youth with disabilities, ages 3-21 years old. • Staff that are employed for these specialized purposes include teachers, school social workers, school nurses, school psychologists, school counselors, physical and occupational therapists, individual or classroom aides, readers, administrators, and other staff assigned to work in the area of special education. • The State reimburses local school districts and special education cooperatives $9,000 per qualified worker and $3,500 per non- certified staff employed on a full-time basis for the school year, depending on the final reimbursement level.

Educational Funding – Special Education

School District & Cooperative

- Approximately 90% of school districts are in a special education joint agreement cooperative - There is no standard method of governance for cooperatives - District & cooperative relationship, function and governance determined locally

Educational Funding – Special Education

Special Education Continuum of Placements

Less No special education or related services Restrictive General Education for 80% or more of the school day

General Education for 40-79% of the school day

General Education for less than 39% of the school day

Special Education Public Placement

Special Education Private Placement

Residential Placement More Restrictive Home/ Hospital Placement Educational Funding – Special Education

Private Placements & Equalization

- Programming & Services have evolved - Reimbursement system has not evolved - Reimbursement system disincentive for LRE

Educational Funding – Special Education

Private Placements & Equalization

The current rules allow for schools to be reimbursed for services provided to students placed in the public seing when their costs exceed four times the per capita spent in that school district. This money is available only in certain years.

The current rules allow for schools to be reimbursed for services provided to students placed in the private seing when their costs exceed two times the per capita spent in that school district. This money is appropriated every year.

Educational Funding – Special Education

Private Placements & Equalization

Educational Placement Services Included Education Cost for State Reimbursement to Net Cost to Student District District Speech/language; Public Home School Occupational Therapy; $58,532 $31 $58,501 Physical Therapy; Adapted PE; Health; Assistive Device; Transportation; Aide in Class Speech/language; Public Separate School Occupational Therapy; $61,068 $82 $60,986 Physical Therapy; Adapted PE; Health; Assistive Device; Transportation; Aide in Class Speech/language; Private School Occupational Therapy; $66,666 $38,170 $28,496 Physical Therapy; Adapted PE; Health; Assistive Device; Transportation; Aide in Class Educational Funding – Special Education

Private Placements & Equalization

Why should the state of Illinois reimburse school districts at a higher rate for students placed in a more restrictive placement than for students placed in a less restrictive placement receiving the same services?

Illinois should reimburse school districts at the same rate, especially for the students with the greatest needs, regardless of placement. Meet W.T. Program: Public Therapeutic Day School

Services Include:

• 1-1 Aide • Special • Adapted Transporta Physical tion Education • Occupation • Health Services • al Therapy • Assistive • Physical Therapy Technology • Transition • Speech- Language Services

Excess Cost Private Tuition

Funding Source: Excess Cost Funding Source: Private Tuition Reimbursement (which is defined as (which is in most cases reimburses educational costs in excess of two educational costs in excess of four district per capita tuition charges). district per capita tuition charges) Private tuition has its own funding funded from unused Federal IDEA source. Room and Board Funds

Funding level proration: Funding level proration: − FY16 – 39.5% − FY16 – 94% − FY15 – 0% − FY15 – 94% − FY14 – 0% − FY14 – 94% − FY13 – 0% − FY13 – 92% − FY12 – 2.30% − FY12 – 87% − FY11 – 8.87% − FY11 – 100% − FY10 – 8.13% − FY10 – 99% Actual Example Public Therapeutic Private Day School Day School Placement

2015/2016 2015/2016 • Education cost: $81,596 • Education cost: $94,518 • State Reimbursement: $15,008 • State Reimbursement: $61,224 • Prorated Reimbursement: • Prorated Reimbursement: $57,551 $5,928 • Education Cost to District: $36,967 • Education Cost to District: $75,668 2014/2015 • Education cost: $98,627 2014/2015 • State Reimbursement: $65,947 • Education cost: $74,826 • Prorated Reimbursement: $61,990 • Education Cost to District: $36,637 • State Reimbursement: $0 • Education Cost to District: $74,826 Summary

Special education funding reform needs to be effective, efficient, flexible and equitable. There needs to be funding assurances that learners with the greatest challenges will have their educational needs met.

Special education programming, services and funding for Districts, Special Education Cooperatives and Private Schools need to continue evolving to reflect progressive educational changes. Leaders and stakeholders need to work collaboratively on behalf of students with exceptional needs.

70 East 70 East Lake Street, Suite 1700 Chicago, IL • 60601 www.ctbaonline.org

GOOD FOR BUSINESS: HOW ILLINOIS CAN BEST SUPPORT SMALL BUSINESS

April 7, 2014

GOOD FOR BUSINESS: HOW ILLINOIS CAN BEST SUPPORT SMALL BUSINESS

APRIL 7, 2014

Good for Business: How Illinois Can Best Support Small Business Research Team:

Ralph M. Martire, Executive Director (312) 332-1049; [email protected]

Amanda Kass, Budget Director and Pension Specialist (312) 332-1103; [email protected]

Robert Otter, Education and Fiscal Policy Analyst (312) 332-2151; [email protected]

Jennifer Lozano, Research Associate (312) 332-1348; [email protected]

ACKNOWLEDGEMENTS

The Center for Tax and Budget Accountability sincerely thanks the following (listed in alphabetical order) for their time, knowledge and expertise in peer reviewing this report:

Peter A. Creticos, Ph.D., President and Executive Director, Institute for Work and the Economy Michael Mazerov, Senior Fellow, State Fiscal Project, Center on Budget and Policy Priorities Robert Rich, Former Director, Institute of Government and Public Affairs, University of Illinois Robert T. Starks, Professor Emeritus, Inner City Studies and Political Science, Jacob H. Carruthers Center for Inner City Studies, Northeastern Illinois University The Illinois Department of Revenue

About CTBA

Founded in 2000, the Center for Tax and Budget Accountability is a non-profit, bi-partisan research and advocacy think tank committed to ensuring that tax, spending and economic policies are fair and just, and promote opportunities for everyone, regardless of economic or social status.

CTBA uses a data-focused, bipartisan approach to work in partnership with legislators, community groups and other organizations to help change both public policy and perceptions.

Center for Tax and Budget Accountability 70 E. Lake Street, Suite 1700 Chicago, Illinois 60601 Fax: (312) 578-9258 www.ctbaonline.org

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GOOD FOR BUSINESS: HOW ILLINOIS CAN BEST SUPPORT SMALL BUSINESS

Table of Contents

1. INTRODUCTION ...... 1

2. KEY FINDINGS ...... 1

3. WHY SMALL BUSINESS MATTERS...... 3

4. WHICH STATE POLICIES MOST SUPPORT SMALL BUSINESSES OVER THE LONG TERM? ...... 4

5. BUSINESS TAXATION IN ILLINOIS...... 7

6. ALLOWING THE STATE’S CORPORATE INCOME TAX RATE TO PHASE DOWN UNDER TABSA WILL SIGNIFICANTLY DIMINISH ILLINOIS’ CAPACITY TO FUND CORE SERVICES AND INFRASTRUCTURE, WITHOUT BENEFITING MOST BUSINESSES GENERALLY OR SMALL BUSINESSES SPECIFICALLY...... 9

7. CURRENT NATIONAL TRENDS REINFORCE THE CONCLUSION THAT CUTTING STATE LEVEL CORPORATE INCOME TAXES WILL NEITHER INCENTIVIZE BUSINESSES OF ANY SIZE TO CREATE JOBS NOR STIMULATE THE ECONOMY...... 12

8. GETTING TAX POLICY RIGHT WILL HELP SUPPORT SMALL BUSINESSES SPECIFICALLY AND THE STATE ECONOMY GENERALLY...... 14

9. THE TIE BETWEEN ILLINOIS’ OVER-RELIANCE ON PROPERTY TAXES AND EDUCATION FUNDING...... 15

10. FLAWED TAX POLICY IS THE PRIMARY CAUSE OF ILLINOIS’ FISCAL PROBLEMS THAT HURT SMALL BUSINESS...... 18

11. CREATING A FAIR INCOME TAX STRUCTURE WILL BENEFIT SMALL BUSINESS...... 22

Table of Figures Figure 1 ...... 3 Figure 2 ...... 5 Figure 3 ...... 5 Figure 4 ...... 7 Figure 5 ...... 9 Figure 6 ...... 9 Figure 7 ...... 10 Figure 8 ...... 11 Figure 9 ...... 11 Figure 10 ...... 12 Figure 11 ...... 12 Figure 12 ...... 14 Figure 13 ...... 15 Figure 14 ...... 16 Figure 15 ...... 16 iii | Page

©2014 , Center for Tax and Budget Accountability

Figure 16 ...... 17 Figure 17 ...... 18 Figure 18 ...... 19 Figure 19 ...... 20 Figure 20 ...... 21 Figure 21 ...... 21 Figure 22 ...... 22 Figure 23 ...... 23 Figure 24 ...... 24

Table of Acronyms ARRA American Recovery and Reinvestment Act BLS Bureau of Labor Statistics CBO Congressional Budget Office C-CORP C-Corporation Commission on Government Forecasting and COGFA Accountability CEPR Center for Economic and Policy Research CBPP Center on Budget and Policy Priorities CPI Consumer Price Index DCEO Department of Commerce and Economic Opportunity EARN Economic Analysis and Research Network ECI Employment Cost Index EFAB Education Funding Advisory Board FY Fiscal Year GDP Gross Domestic Product GOMB Governor’s Office of Management and Budget IDOR Illinois Department of Revenue LLC Limited Liability Company ITEP Institute on Taxation and Economic Policy PA Public Act PPRT Personal Property Replacement Tax SBA Small Business Administration S-CORP S-Corporation TABSA Taxpayer Accountability and Budget Stabilization Act

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1. INTRODUCTION.

Given the sluggish job growth during the recovery that has followed the Great Recession,1 decision makers both nationally and here in Illinois have indicated an interest in pursuing policy initiatives that will help spur the economy. Many have identified supporting small businesses and entrepreneurship as key to this effort. While various regulatory, spending and other policies (e.g. grants, technical assistance, incubators, and technology transfers) can directly and/or indirectly impact small businesses, the primary policy tools available fall into two distinct categories. On the one hand, policymakers can opt to reduce business and/or individual taxes in the hope that the tax relief will incentivize hiring and business expansion. Indeed, the Speaker of the House recently introduced a bill to reduce the state’s corporate income tax to stimulate job growth.2

On the other hand, policymakers can make adequate investments in core public services and goods that businesses need to thrive, like education and infrastructure. Of the two primary policy tools available, the evidence overwhelmingly indicates that the latter approach is the best choice for supporting small businesses.

Knowing that the evidence shows business tax relief is not the best approach to stimulating the economy is one thing. What is crucial is that policymakers actually use this knowledge to craft effective, long-term solutions to one of the most challenging problems facing Illinois today—effectively stimulating the economy while dealing with the state’s fiscal shortcomings. After all, the state has an accumulated deficit of at least $7.6 billion in its General Fund budget for FY2014, the current fiscal year.3 This accumulated deficit is a very real problem that constrains the state’s ability to make the very investments in education and infrastructure that are so crucial to small businesses. 2. KEY FINDINGS.

It is legitimate for state government to pursue policies that support small business, given how important small businesses are to both the state’s economy and labor markets. o According to the Small Business Administration, in 2011, fully 99.9 percent of all businesses nationally and 99.6 percent of the businesses in Illinois qualified as “small businesses,” meaning they employed fewer than 500 workers.4 o Truly small businesses, those “mom and pop” shops with 20 or fewer employees, make up the vast majority of small business in Illinois, representing roughly 97 percent of all businesses in the state. o In 2011, those truly small “mom and pop” businesses in Illinois employed 836,750 workers or 16.6 percent of all private-sector workers in the state.5 Implementing business tax cuts is not the best way for Illinois state government to support small businesses specifically or economic growth generally. Indeed, while business taxes play a role in explaining differences in economic activity among states, that “effect is fairly small and easily outweighed by other factors.”6 o Research conducted across a broad ideological spectrum confirms that there is no statistically meaningful relationship between state tax policy on the one hand and small business/entrepreneurial activity on the other.7 o In fact, according to researchers Noah Berger and Peter Fisher at the Economic Analysis and Research Network, simply cutting business taxes and paying for those tax cuts with service cuts has been both “inefficient and ineffective at stimulating growth in the long haul.”8 o The Harry S Truman Institute at the University of Missouri found that when the economic benefits a business tax break may generate are netted against the economic costs stemming from concomitant cuts to state spending on services—there is a net loss in economic activity.9

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The reasons business tax cuts are not particularly effective at stimulating small business growth, hiring or the economy are easy to understand. o State income taxes constitute a relatively minor portion of overall business tax burden to begin with, representing just 8 percent of the taxes businesses pay in Illinois,10 and a particularly immaterial burden for most small businesses which are formed as “pass-through” entities (i.e., S-Corporations, partnerships, Limited Liability Companies or sole proprietorships),11 which by law are exempt from paying the corporate income tax assessed by Illinois and most of the 43 other states that assess corporate income taxes.12 o According to the most recent data published by the Illinois Department of Revenue, of those businesses actually liable to pay the state’s corporate income taxes (i.e., traditional C-Corporations), fully 92.67 percent that filed an Illinois corporate income tax return in 2010 paid $5,000 or less in income taxes, with almost 70 percent having no state corporate income tax liability whatsoever.13 o In the current economy, there is little reason to believe business income tax relief will stimulate job growth in any event, given that businesses are already highly profitable, and still not creating jobs. Since the end of the Great Recession through the third quarter of 2013, corporate profits grew by 35.3 percent nationally, while wages grew by just 5.9 percent and gross domestic product growth was just 8.4 percent. Meanwhile, private sector job growth has lagged prior recovery periods, and has yet to replace all the jobs lost during the Great Recession, much less grown at the rate necessary to keep pace with new entrants into the labor market.14 In fact, although owners of small businesses organized as flow-through entities (S-Corps, LLCs, partnerships and sole proprietorships) do pay the state’s personal income tax on their share of the profits earned by the businesses they own, even reducing the state’s personal income tax rate should not be expected to spur small business hiring or growth.15 o According to a recent study conducted by Michael Mazerov at the Center on Budget and Policy Priorities, substantial evidence shows that “cutting state personal income taxes not only won’t promote small business growth and job creation, it is likely over time to threaten the success of entrepreneurs by taking away from critical services like education.”16 o The Mazerov study, citing research conducted by the nonpartisan Congressional Budget Office, noted that even cutting federal income taxes does not spur significant hiring by businesses, because— as the Congressional Budget Office specifically found— the real reason businesses hire more workers is to meet growing demand for the products or services they produce—not tax policy.17 On the other hand, ensuring Illinois has the fiscal capacity to invest adequately in education, infrastructure,18 and other core services can be expected to support small businesses and stimulate economic growth.19 o The evidence shows that providing access to a high quality public education is more likely than tax incentives to improve a state’s economy over time.20 o Indeed, an exhaustive academic study recently found that from 1963-1997, making real increases in public education funding at the state level had a statistically significant correlation to a state increasing personal income growth at a rate greater than other states.21 o These findings were echoed by Jeffrey Thompson, who concluded that education spending has been found to raise state GDP, increase employment in metropolitan areas, and raise personal income at the state level.22 Even if the desire is to reduce taxes paid by small businesses, focusing on corporate income taxes actually misses the primary tax paid by businesses generally and small businesses specifically—the local property tax. Here, the data are clear: o Property taxes represent almost 40 percent of the taxes businesses pay in Illinois, while corporate income taxes come in at just 8 percent and flow through personal income taxes just 4.9 percent of overall business taxes.23

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o Illinois is a tax outlier compared to other states in over-relying on property taxes to fund public services. Fully 51 percent of the business taxes paid in Illinois go to local governments, not the state, whereas nationally on average just 46 percent of business taxes go to local governments.24 The primary driver of Illinois’ over-reliance on local property taxes is education funding. Illinois currently ranks last in the nation in the portion of education funding covered by state rather than local revenue, and first in the nation in reliance on local property taxes to fund schools.25 o This not only creates an unfair education funding system—because it ties school quality to local property wealth—but also creates a burdensome tax system for both businesses and people. o Over-relying on local property taxes to fund services is not the best way to tax businesses generally or small businesses in particular, because property taxes are a cost businesses must pay whether or not they are profitable. This approach to taxation takes needed sales revenue away from a business’s ability to invest in operations or capital enhancements. o Over-relying on local property taxes is also an unfair way to tax families, because over time the rate of growth in state property taxes in Illinois has significantly outpaced the rate of growth in income for most people.26 o Indeed, after inflation, property taxes in Illinois grew by over 48 percent, while median income grew by just 2.7 percent over the 1990-2005 sequence.27 From 2005-2011, Illinois property taxes grew by just over eight percent in real, inflation-adjusted terms, while median income declined by -9.2 percent.28 o So, if the goal is to reduce small business taxation while growing the economy, then the evidence strongly indicates that state tax policy should be reformed in a manner that builds the state’s fiscal capacity to invest in core services—while lessoning reliance on the local property tax—rather than cutting state level corporate or personal income taxes. 3. WHY SMALL BUSINESS MATTERS.

Few would question the important role small businesses play in our nation’s and state’s respective economies. After all, of the more than 28 million businesses that existed nationwide in 2011, fully 99.9 percent were “small businesses” according to the federal Small Business Administration (SBA).29 The SBA defines a small business as a company with less than 500 employees.30 In 2011, Illinois had nearly 1.2 million businesses, of which 99.6 percent qualified as small businesses under the SBA definition.

Figure 1 Number of Businesses in Illinois by Firm Size, as of 2011 Number of Employment Size Percent of Total Firms Non-Employers 920,076 78.5% 0-4 154,671 13.2% 5-9 39,988 3.4% 10-19 24,727 2.1% <20 1,139,462 97.2% 20-99 22,208 1.9% 100-499 5,818 0.5% <500 1,167,488 99.6% 500+ 4,438 0.4% Total 1,171,926 100% Sources: United States Census, Statistic of U.S. Businesses, “U.S. & states, totals” (December 2013), http://www.census.gov/econ/susb; Non-employer from United States Census, Nonemployer Statistics, “U.S., States, and Counties (2002-2011),” http://www.census.gov/econ/nonemployer.

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Now, it is certainly understandable if you believe that the SBA definition of a small business is somewhat overbroad, given that a company employing over 400 workers does not fit the classic portrayal of the “mom and pop” shop down the street. However, truly small businesses, those which have 20 employees or less, constitute the vast majority of businesses in Illinois. This is shown clearly in Figure 1, which provides a more detailed breakdown of small businesses in Illinois by number of workers employed.

In fact, as Figure 1 shows, most small businesses in Illinois (78.5 percent) are characterized as “non-employers,” meaning that the only people working in those businesses are their respective owners. So, while the SBA definition may be overbroad, as it turns out the vast majority of small businesses, both nationally (97.9 percent) and in Illinois (97.2 percent) are truly small “mom and pop” type operations with 20 or fewer employees.31

Excluding non-employers, those truly small businesses in Illinois—the “mom and pop” shops with between 1 and 19 employees, are crucial to the state’s labor market, having employed 836,750 workers in 2011, or 16.6 percent of all private-sector workers in Illinois that year.32 Taken collectively, small businesses of all sizes employed 2.38 million Illinoisans in 2011, or 47.3 percent of the 5.04 million full-time workers employed in the state’s private sector workforce.33

In addition to employing a significant number of Illinois workers, small businesses also contribute to the growth and vitality of the state by creating jobs. While job creation can be found in both small and large firms, the majority of net new jobs are created by small businesses.34 Using its definition of a small business, the SBA estimated that 64 percent of new jobs created nationally between 1993 and 2011 were attributable to small businesses.35 Using the most recent Business Employment Dynamics produced by the Bureau of Labor Statistics (BLS), Brookings Institute researchers—William Gale and Samuel Brown—found that employers with less than 20 employees, which is the size of the vast majority of small businesses in Illinois, accounted for approximately 20 percent of historic net job gains nationally from 1992 through the first quarter of 2012.36 In fact, small businesses with less than 250 employees have historically accounted for 55 percent of net job gains.37 Recent research indicates that young businesses—which are also typically small businesses—are the most dynamic drivers of job growth, representing fully 76 percent of all high growth businesses nationally in 2012.38 4. WHICH STATE POLICIES MOST SUPPORT SMALL BUSINESSES OVER THE LONG TERM?

In General, Tax Cuts and Incentives Have Little Impact on Improving a State’s Economy—Investments in Core Public Services and Infrastructure, On the Other Hand, Better Promotes Growth Over the Long- Term.

Given their demonstrable importance to the state’s economy, it is a legitimate public policy objective to support small businesses. The question then becomes, how best to do so? On the one hand, state government invests in providing core public services and goods—like education and infrastructure for instance—which small businesses need to thrive. On the other hand, to pay for those services and that infrastructure, taxes are imposed on businesses and people alike. Getting the balance right between making investments in core public services and raising adequate tax revenue in a sustainable, fair manner is crucial if small businesses specifically and the state’s economy generally are to grow.

For Illinois, determining how to get that balance right is no academic inquiry. In fact, at some point over the next two years, Illinois decision makers will be forced to deal with the politically difficult issue of state tax policy generally – and how best to ensure Illinois has the ongoing fiscal capacity to fund core services small businesses rely on specifically. The reason for this is both simple and compelling: the temporary tax increases that became law in January of 2011 will begin to phase out over the FY2015-FY2016 sequence,39 which creates the fiscal cliff pictured in Figure 2.

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Figure 2 Illinois’ Fiscal Cliff $40

$38

$36

$34 $ Billions $32

$30 2014 2015 2016 2017

Revenue Appropriations

Source: GOMB, Three Year Budget Projection: FY2015-FY2017 (Springfield, IL: January 1, 2014).

The net loss of revenue resulting from that phase out—estimated to be $3 to $4 billion annually (after accounting for other natural revenue growth)40—will literally be impossible for the state fiscal system to absorb. That is because Illinois already has an accumulated deficit of at least $7.6 billion in its General Fund for the current fiscal year, FY2014, as shown in Figure 3.41

Figure 3 Illinois’ Projected Deficits $5

$0

-$5

-$10 -$7.6 $ Billions -$9.5 -$15 -$13.6

-$20 -$18.2 2014 2015 2016 2017 Fiscal Year

GF Surplus/Deficit Backlog of Unpaid Bills GOMB

Source: CTBA analysis of FY2014 budget: spending from CTBA, Analysis of the FY2014 Illinois General Fund Budget (Chicago: October 2013) and revenue from COGFA, Monthly Briefing for the Month Ended: October 2013 (Springfield, IL: October 2013), 9; GOMB, Three Year Budget Projection: FY2015-FY2017 (Springfield, IL: January 1, 2014).

That accumulated FY2014 deficit represents 31 percent of the scheduled appropriations for current services over the course of the year.42 The state is in this precarious fiscal position despite both the new revenue from the aforesaid temporary tax increase, and having cut service spending by $4.7 billion in nominal dollars (that is, not adjusted for inflation or population growth) over the FY2009 through FY2014 sequence.43 Since $9 out of every $10 spent on services funded through the General Fund go to education, healthcare, social services, and public safety, and the state’s existing debt service repayment obligations are scheduled to continue increasing over time, decision makers will either have to replace the revenue being lost from the phase-out of the temporary tax increase, or implement significant spending cuts to the aforesaid core public services.

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Some maintain the answer to the state’s fiscal dilemma is relatively simple and straight forward from a small business standpoint—cut service spending and allow the temporary tax increases to expire, particularly the corporate income tax increase—and watch small businesses grow. While the populist appeal of relying on tax and spending cuts to stimulate private sector growth certainly exists, the data clearly indicate that taking such an approach not only wouldn’t work, but would in all likelihood harm the state’s economy.44 Indeed, according to researchers Noah Berger and Peter Fisher at the Economic Analysis and Research Network (EARN), “the preponderance of evidence has shown” that simply reducing business taxes—and paying for those tax reductions with service cuts—has been both “inefficient and ineffective at stimulating growth” in the long run.45

That conclusion is consistent with recent meta-analyses of both business tax incentives specifically and business/individual income taxation generally. The extant research showing the lack of a meaningful correlation between individual and/or business income taxes on the one hand, and economic growth, hiring incentives or small business/entrepreneurial growth on the other, is abundant, compelling and spans the ideological spectrum.46 A literature review completed by the Institute of Public Policy of the Harry S. Truman School of Public Affairs at the University of Missouri (the “Truman Report”) found that, overall, “tax cuts do not stimulate economic growth and/or development in a state because the other side of the tax cut coin is cuts in public services.”47 This conclusion was echoed during a recent joint hearing of the Illinois House State Government Administrative Committee and Revenue and Finance Committee, by the Illinois Department of Commerce and Economic Opportunity, which testified that, “while incentives provide a critical set of tools for economic development, it is important to note that the core drivers for economic growth are investments in human capital, physical infrastructure, and technological innovation.”48

In a similar vein, a recent study that focused on the stimulative impact on small business growth that flowed from cutting individual income taxes was conducted by Michael Mazerov at the respected Center on Budget and Policy Priorities. In that study, Mazarov concluded that the evidence shows “cutting state personal income taxes not only won’t promote small business growth and job creation, [but] is likely over time to threaten the success of entrepreneurs by taking away from critical services like education.”49 Meanwhile, as concerns business incentives specifically, a meta-analysis published by the Lincoln Institute of Land Policy in 2012 specifically found that, while business taxes can play a role in explaining differences in economic activity among states, “this effect is fairly small and easily outweighed by differences in other factors.”50

So what are these “other factors” within the domain of the public sector that actually help spur economic growth in the private sector? The answers are pretty clear from the research, with investments in core public services like education and core public goods like infrastructure leading the way.51 As it turns out, entrepreneurs agree with the research about what really matters for small business. A recent survey of entrepreneurs who founded some of the fastest growing companies in the U.S. found that low tax rates were rarely cited as a factor in their site-selection decision making.52 Instead, the entrepreneurs surveyed responded that the most important factors to them in choosing a site were, first and foremost, access to a talented local employee pool, and second, proximity to customers and suppliers.53

Creating the highly skilled labor force entrepreneurs desire requires a quality public education system, a subject that will be dealt with at length in Section 9 of this Report. As for the importance of infrastructure to businesses, well there is not much argument over the issue of whether infrastructure investments spur economic growth, but rather the degree to which they do so. “[E]conomists have long recognized the value of infrastructure. Roads, bridges, airports, and canals are conduits through which goods are exchanged.”54 According to a researcher at Wesleyan University, “The argument is simple. Infrastructure is a public good that produces positive externalities for production. The provision of adequate infrastructure is a necessary condition for private firms to be productive.”55 On the other hand, when needed investments in core services or infrastructure are cut, the economy is harmed. According to the Truman Report, “the preponderance of studies find evidence that cuts to some public services [e.g. education, police/fire] and infrastructure are detrimental to economic growth.”56

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One of the best summaries of what really matters to business came from Eric Spiegel, president and CEO of the German based engineering company, Siemens AG. When explaining Siemens’ decision to build a new manufacturing facility in the U.S., rather than overseas, Spiegel made it clear that public sector investments are paramount. According to Spiegel, “A lot of things that were offshored in the past were offshored because of lower-cost labor, but that’s no longer the most important factor. The reasons you bring a plant like this to the United States are higher-skilled labor, access to the world’s best research and development, and good, sound infrastructure. All those things together make the U.S. a good place to invest.”57 5. BUSINESS TAXATION IN ILLINOIS.

Understanding how businesses are taxed at the state level helps explain why the evidence shows that cutting corporate income taxes is not the best way to stimulate the economy or support small businesses. Illinois is one of 44 states that imposes a corporate income tax. Currently, the corporate income tax rate in Illinois is seven percent, however, under The Taxpayer Accountability and Budget Stabilization Act (TABSA), that corporate income tax rate is scheduled to phase down from seven percent to 5.25 percent within the next two fiscal years.58 As is the case in most other states, the corporate income tax in Illinois is only paid by businesses organized as a “C” corporation (“C-Corp”). Businesses that are organized as S-Corporations (S-Corp), Limited Liability Companies (LLC), partnerships or sole proprietorships are exempt from Illinois’ corporate level income tax, no matter how profitable.

As shown in Figure 4, the corporate income tax is relatively less important in Illinois than other state and local taxes businesses pay, accounting for just 8 percent of total business tax burden. Meanwhile local property taxes account for nearly 40 percent of all taxes businesses pay in Illinois.

Figure 4 FY2012 State and Local Fees Paid by Businesses in Illinois

45% 39.3% 40% 35% 30% 25% 20% 15.9% 13.6% 15% 9.4% 8.0% 10% 5.5% 4.9% 3.4% 5% 0%

Sources: Andrew Phillips, Robert Cline, Caroline Sallee, Michelle Klassen, and Daniel Sufranski, Total State and Local Business Taxes: State-by-state estimates for fiscal year 2012 (Washington, DC: Ernst & Young and Council on State Taxation, July 2013), 10; Illinois Department of Revenue, Annual Report of Collections and Distributions: Fiscal Years 2011 and 2012 (Springfield, IL).59

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In fact, in 2011 businesses paid approximately 31 percent of all property taxes in Illinois.60 This means businesses are paying just over one-third of the primary revenue used by the nearly 7,000 local governments in Illinois.61 One reason Illinois businesses pay so much in local property taxes is clear, the state over-relies on property taxes as a revenue source to fund services. In fact, despite ranking relatively low in overall tax burden as a percentage of income—39th among all states according to the Federation of Tax Administrators,62 Illinois ranks quite high—sixth nationally—in property tax reliance.

One unique tax that businesses pay in Illinois is the Personal Property Replacement Tax (PPRT), which is levied purely for the benefit of local governments. From an administrative standpoint, the PPRT is technically collected by the state— but then disbursed in full to local governments across Illinois. The PPRT was established in 1979 by Public Act (PA) 81SS1-1 during a special session of the 81st Illinois General Assembly. As the name suggests, the PPRT replaced the personal property tax local governments formerly assessed against businesses. The former personal property tax was based on the value of items utilized in the production of a business’s products or services. Forty states and the District of Columbia still assess a local personal property tax against business.63

Unlike the Illinois state income tax, which exempts most businesses from taxation irrespective of profitability, partnerships, trusts, LLCs, S-Corps, and C-Corps alike are all subject to the PPRT. The PPRT assessed varies by business type, however, with C-Corps paying 2.5 percent of profits; and partnerships, trusts, most LLC’s and S-Corps paying 1.5 percent of profits.*64

For reporting purposes, the Illinois Department of Revenue refers to the state’s corporate *IN ILLINOIS, LIMITED LIABILITY COMPANIES ARE NOT income tax and the local-only PPRT 65 ASSIGNED A SPECIFIC TAX RATE FOR THE PERSONAL collectively as “business income taxes.” PROPERTY REPLACEMENT TAX. INSTEAD, LLCs CAN While on the one hand this is accurate, since CHOOSE TO BE TAXED AT EITHER THE HIGHER C-CORP both taxes are based on business profits, on RATE OR LOWER S-CORP/PARTNERSHIP RATE, AND ARE the other it is quite misleading, because the REPORTED UNDER THE CATEGORY THEY SELF-SELECT. IT PPRT does not benefit state government. CAN REASONABLY BE ASSUMED THAT THE VAST MAJORITY Instead, it is a purely local revenue source— OF THESE BUSINESSES WOULD SELF-SELECT THE LOWER like the property tax is now, and the former RATES APPLICABLE TO PARTNERSHIPS AND S- personal property tax was before being CORPORATIONS, AND HENCE PRELIMINARILY BE INCLUDED replaced by the PPRT. Because of IDOR’S reporting, however, the local PPRT tax rate is IN THOSE CATEGORIES. often incorrectly combined with the state’s corporate income tax rate when comparisons of state-level corporate income taxes are made. This leads many to overstate the state corporate income tax rate in Illinois as this combined rate, which in turn skews national comparisons, as the combined local PPRT/state corporate income tax rate in Illinois is contrasted with state level only corporate income tax rates applicable elsewhere. Such comparisons artificially inflate the Illinois state rate vis-à-vis other states. These comparisons also mislead the public because they neither account for the personal property taxes that are still assessed in the vast majority of other states, nor acknowledge that the PPRT generates purely local rather than state level revenues.

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Figure 5 Sampling of Tax Year 2013 State Level Corporate Income Tax Rates66 Illinois: 7% until 2015, then 5.25%

Midwest Other Big States Iowa: 6% – 12% (12% @ $250,000) Pennsylvania: 9.99% Indiana: 8% New Jersey: 9% Wisconsin: 7.9% California: 8.84% Missouri: 6.25% New York: 7.1% Kentucky: 4% – 6% (6% @ $100,000) Florida: 5.5% Michigan: 6% Source: Federation of Tax Administrators, State Corporate Income Tax Rates Table – as of January 1, 2013, http://www.taxadmin.org/fta/rate/corp_inc.pdf

From the perspective of a business owner, the PPRT is far preferable to the personal property tax that still pertains in 40 other states. The reason for this is simple. Because the PPRT is based on profits, it is a variable tax that is paid only after a business is making money. That is better than a charge on personal property which a business would have to pay irrespective of profitability.

As illustrated in Figure 6, in 2010—the most recent data available—nearly 185,000 businesses had a PPRT tax liability, 82 percent of which were S-Corps and partnerships.67 The vast majority of the PPRT tax liability—approximately $634 million or 66 percent, however—was paid by C-Corps.68

Figure 6 2010 Illinois PPRT Liability Number of Filers with Total PPRT Liability Business Total Number of Filers Tax Liability ($ millions)

C-Corp 110,577 33,359 $633.6

S-Corp 236,425 124,082 $238.8

Partnership 112,702 27,141 $92.4

Total 459,704 184,582 $964.8

Source: Communication with the Illinois Department of Revenue in May 2013 6. ALLOWING THE STATE’S CORPORATE INCOME TAX RATE TO PHASE DOWN UNDER TABSA WILL SIGNIFICANTLY DIMINISH ILLINOIS’ CAPACITY TO FUND CORE SERVICES AND INFRASTRUCTURE, WITHOUT BENEFITING MOST BUSINESSES GENERALLY OR SMALL BUSINESSES SPECIFICALLY.

As indicated previously, the evidence overwhelmingly shows that reducing corporate and individual income taxes are not effective ways to support small businesses or spur the economy. Yet, that is precisely what is about to occur in Illinois. TABSA, which became law in January of 2011, temporarily increased the Illinois corporate income tax rate from 4.8 percent to seven percent.69 Under TABSA, that corporate income tax rate is scheduled to phase down from seven percent to 5.25 percent by FY2016. Although, as shown previously in Figure 2, the loss of General Fund revenue this phase down 9 | Page

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will cost the state is dramatic, from a business perspective the scheduled corporate income tax rate reduction can reasonably be expected to have, at best, a minimal financial impact. The reason for this is simple. As shown in Figure 4, the pending corporate income tax reduction applies to a relatively minor percentage (8 percent) of the Illinois taxes businesses actually pay.

Not only will the overall financial impact on businesses be relatively insignificant, but this pending rate reduction can be expected to reach very few businesses in Illinois overall, and particularly few small businesses. That is because most small businesses are exempt from ever paying the corporate income tax in Illinois—no matter how profitable—since they are organized as S-Corps, LLCs, sole proprietorships, or partnerships. Instead of paying corporate income taxes, the owners of these pass-through entities pay personal income taxes on the profits of the businesses they own, in accordance with their respective ownership interests in the applicable business. As shown previously in Figure 4, those individual income tax payments made by owners of pass-through entities accounted for just 4.9 percent of all business taxes paid in the most recent year for which there are data. It is only generally larger businesses which are organized as C-Corps that by law are ever liable to pay the Illinois corporate income tax. Hence, even very broad corporate income tax relief in Illinois would reach few small businesses.

Moreover, given recent trends in how businesses are being structured, it is highly likely that broad-based corporate income tax relief in Illinois will reach even fewer small businesses—or businesses of any size for that matter—in the future. That is because, as shown in Figure 7, over time the vast majority of new businesses are being organized as flow- through S-Corps rather than traditional C-Corps.

Figure 7 Trends In Corporate Organization, 1984-2010 250,000

200,000

150,000

C-Corporations 100,000 S-Corporaitons Number of Filers 50,000

0

Source: Illinois Department of Revenue, Supplement to Analysis of Selected Illinois Business Tax Incentives (Springfield, IL; February 2011), 1 and CTBA analysis of data provided by the Illinois Department of Revenue for years 2009-2010 (May 2013).

That said, not even very many large businesses pay the Illinois state corporate income tax. As shown in Figure 8, according to the most recent IDOR data, fully 92.8 percent of all businesses that filed an Illinois corporate income tax return in 2010 paid $5,000 or less in income taxes to the state that year, with almost 70 percent of corporate filers having no income tax liability whatsoever. This is not due to some weird quirk in Illinois corporate income tax law. In fact, most businesses that do not have corporate income tax liability in Illinois, also do not have any federal income tax liability.70

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Figure 8 Illinois Corporate Income Tax Liability: Tax Year 2010 Percent of Liability Range Total Filers Percent of Filers Liabilities $0 77,900 69.90% 0.00% $0 ≤ $5,000 25,591 22.9% 1.50% >$5,000 ≤ $10,000 2,512 2.30% 1.00% >$10,000 ≤ $50,000 3,071 2.80% 4.00% >$50,000 ≤ $100,000 794 0.70% 3.20% >$100,000 ≤ $500,000 1,122 1.00% 14.40% >$500,000 ≤ $1,000,000 226 0.20% 8.90% >$1,000,000 or More 303 0.30% 67.00% Totals 111,519 100.00% 100.00%

Corporations with any tax 33,619 30.10% 100.00% liability Source: Tax Incentives in Illinois: Hearing on Illinois Tax Incentives and Policy Before the H.R. J. Comm. On State Government Administration and Revenue and Finance, 2014 Leg., 98th Sess. Slide 14 (IL. 2014) (Illinois Department of Revenue data presented by COGFA).

On the flip side, only 5 percent of all corporate filers had Illinois state income tax liability that exceeded $10,000 in 2010. The fact that very few businesses have anything that resembles a significant state-based corporate income tax liability is not unique to Illinois. As it turns out, the data make it quite clear that state income tax liability is relatively insignificant for businesses nationwide.

Figure 9 shows how much corporations paid in corporate income taxes to all 44 states that impose such a tax nationally, as a percentage of their aggregate net income before taxes, as reported to the Internal Revenue Service. The resulting percentage represents the overall effective state corporate income tax rate paid by all businesses in America to all states that impose a corporate income tax. Note that in 2010, the last year for which there are data, businesses paid just 2 percent of their total net income in aggregate, state-level corporate income taxes nationwide, with just 3.7 percent of the national total attributable to Illinois.71 This means that if Illinois eliminated its corporate income tax all together, the overall effective state corporate income tax rate would decline by just 0.07 percent.

Figure 9 Corporate Tax Liability Nationally ($ Millions) 1998 2003 2007 2008 2009 201072 Total state corporate income taxes $31,089 $28,384 $52,915 $49,860 $39,278 $36,646 paid nationwide* Net Income (before payment of income taxes) of corporations $1,091,150 $1,175,609 $2,252,874 $1,806,890 $1,614,867 $1,836,377 nationwide** Effective Total State Income Tax 2.85% 2.41% 2.35% 2.76% 2.43% 2.00% Rate*** *Annual Survey of State Government Tax Collections—U.S. Census Bureau **SOI Tax Stats—Returns of Active Corporations – Table 1 – IRS ***Simple math—line 1 divided by line 2

So the belief that allowing Illinois’ corporate income tax rate to phase down as scheduled under current law will somehow stimulate small business growth is simply not supported by the data. On the one hand, very few small businesses pay the Illinois state corporate income tax to begin with and on the other, the Illinois corporate income tax is a relatively small portion of the total business tax burden in the state—and a very small portion of the aggregate corporate income tax burden imposed by all states.

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7. CURRENT NATIONAL TRENDS REINFORCE THE CONCLUSION THAT CUTTING STATE LEVEL CORPORATE INCOME TAXES WILL NEITHER INCENTIVIZE BUSINESSES OF ANY SIZE TO CREATE JOBS NOR STIMULATE THE ECONOMY.

It is especially questionable that reducing corporate income tax burden at this point in time will have any stimulative effect on the economy overall or job creation specifically. In theory, when business tax burden is reduced, it frees up earnings to invest in, among other things, job creation. However, as it is corporations are already highly profitable, with the rate of growth in corporate profits vastly outstripping both gross domestic product (GDP) and wage growth since the Great Recession ended. Figure 10 shows the percentage growth in corporate profits versus wages and GDP, from the end of the Great Recession through the third quarter of 2013.

Figure 10 Percentage GDP, Profit and Wage Growth since the End of the Great Recession 2009 (3rd quarter) thru 2013 (3rd quarter) 40% 35.3% 35% 30% 25% 20% 15% 8.4% 10% 5.9% 5% 0% Wages & Salaries Corporate Profits GDP

Source: Bureau of Economic Analysis; Inflation Adjusted to CPI

Figure 11 U.S. Corporate Profits v. Tax Revenue Collected Meanwhile, corporate profits 35% 12.00% as a share of the nation’s 30% 10.00% total GDP is approaching an 25% 8.00% 20% all-time high. On the flip 6.00% side, the share of federal 15% 10% 4.00% taxes paid by businesses is 5% 2.00% approaching an all-time low, 0% 0.00% as shown in Figure 11.

1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Corporate Profits as a Share of GDP Corporate Tax Share of Total Revenue

Source: Federal Reserve, Historical Tables: Receipts by Source 1934-2018; Federal Reserve Economic Data obtained using FRED, Corporate Profits/GDP.

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The relatively low combined state and federal income tax burden of businesses in America is nothing new. After all, when compared to other OECD nations, the overall tax burden in the U.S. of 24.3 percent of GDP that pertained in 2012, the last year for which complete data for comparison are available, is significantly less than the OECD average of 34.6 percent.73

Yet, despite the strong rebound in profitability for corporate America, job growth since the end of the Great Recession has been disappointing. In fact, according to the Bureau of Labor Statistics, the U.S. economy has produced about 6.3 million new jobs.74 This is still less than the 7.5 million jobs lost during the Great Recession75—which ended almost five years ago in June of 2009. After factoring in the millions of people who have dropped out of the labor market, as of September 2013, 8.3 million new jobs were still needed to recover fully from the Great Recession.76 That confluence of factors, high corporate profitability combined with low job growth, makes it unreasonable to believe that a state-level corporate income tax reduction can effectively function as a tool for encouraging hiring at this time.

In fact, according to the Congressional Budget Office (CBO), even federal tax policy—which is far more monetarily significant than state-level tax policy—plays a statistically inconsequential role in encouraging businesses to hire additional employees. Indeed, the CBO found that private sector demand for a business’s products or services is what really motivates a business to hire more workers.77 This finding by the CBO is consistent with recent meta-analyses of both business tax incentives specifically and income taxation generally. The extant research showing the lack of any meaningful correlation between business income taxes on the one hand, and economic growth, hiring incentives, or small business/entrepreneurial growth on the other, is abundant, compelling and spans the ideological spectrum.78

The bottom line here is clear. Considering all these factors together, it is simply not reasonable to conclude that allowing a very small number of businesses in Illinois—few of which if any will be small—to keep even more of their profits will stimulate job growth at this juncture in time given that: (i) corporate profits are already quite high, growing by over 35 percent post Great Recession; (ii) so few businesses pay any state corporate income taxes in Illinois; (iii) the overall state corporate income tax liability of businesses to all states that impose an income tax constitutes such a low cost (2.0 percent of net profit before taxes) to businesses nationally; (iv) despite the resurgence in corporate profitability, job growth has been disappointing; and (v) the primary factor that motivates a business to hire more workers is growing demand for that business’s products or services—not tax policy.

Of course, while overall the research conducted across a broad ideological spectrum confirms that there is no statistically meaningful relationship between state tax policy on the one hand and small business growth or entrepreneurial activity on the other,79 there are always outliers.

The Tax Foundation, which issued a report in 2012 that purported to be a review of the research on the subject, found that state-level tax increases harm economic growth.80 The Tax Foundation based its state tax conclusion on seven, separate studies completed by groups or academics unaffiliated with the Tax Foundation. However, an objective analysis of that 2012 Tax Foundation report by the Center on Budget and Policy Priorities (CBPP) found that:

“The Tax Foundation mischaracterized or exaggerated the findings of three of the seven articles it cited, and the conclusions of a fourth article it cited are contradicted by a much more recent paper by the exact same author (which the Tax Foundation failed to include in its review.)”81

Indeed, the CBPP analysis of the Tax Foundation’s study concluded that:

“The Tax Foundation’s statement that ‘empirical economic literature speak[s]… strongly in unison’ on this topic is simply false. To the contrary, there is no clear research evidence that lower taxes help state economies grow.”82

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8. GETTING TAX POLICY RIGHT WILL HELP SUPPORT SMALL BUSINESSES SPECIFICALLY AND THE STATE ECONOMY GENERALLY.

This is not to suggest that tax policy is entirely irrelevant to small business. It is just that what is truly important is getting tax policy right, and thereby ensuring the public sector has the capacity to make the investments in core public services and infrastructure small business needs. Getting tax policy right in very general terms means taxes should be assessed fairly, at the lowest rates with the broadest bases practicable, and in a manner that both responds to the modern economy and generates adequate revenue to sustain public investments in core services and infrastructure over time—the very investments which the research shows support small businesses and spur the economy.

As it turns out, the most significant tax small businesses pay is the property tax—which is not levied by the state of Illinois but instead by local governments. As referenced previously, although overall Illinois is relatively low-tax compared to the rest of the nation, ranking 39th in total state and local tax burden as a percentage of income,83 Illinois’ property tax reliance is relatively high compared to the rest of the country, ranking sixth overall.84 The net result is Illinois is very much a tax outlier in its business tax mix, as shown in Figure 12.

Figure 12 FY2012 Taxes/Fees Paid by Businesses Breakdown of Distribution to State and Local Governments85 56% 54% 54%

52% 51%

50% 48% 48% Illinois 46% National 46%

44%

42%

40% State Local

Sources: Andrew Phillips, Robert Cline, Caroline Sallee, Michelle Klassen, and Daniel Sufranski, Total State and Local Business Taxes: State-by-state estimates for fiscal year 2012 (Washington, DC: Ernst & Young and Council on State Taxation, July 2013).86

So, while nationally 54 percent of state and local taxes businesses pay go to state governments, with 46 percent going to local governments, it is nearly reversed in Illinois, with just 48 percent of business taxes going to the state while 51 percent go to local governments.87 Over-relying on local property taxes to fund services is not the best way to tax businesses generally or small businesses in particular. That is because property taxes are a cost businesses must pay whether or not they are profitable. This approach to taxation takes needed sales revenue away from a business’s ability to decide how best to invest in its operations.

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From an individual’s standpoint, moving from over-reliance on local property taxes to more state-based revenue sources to fund public services is desirable as well. This is because Illinois is so over-reliant on property taxes in its state and local revenue mix, that property tax growth is far outstripping growth in income for the vast majority of Illinois residents, as shown in Figure 13.

Figure 13 Illinois Total Property Tax Revenue Growth vs. State Median Income Growth 60% 48.7% Total Property Tax Revenue 40% Growth

State Median Income 20% Growth 8.0% 2.70% 0%

-9.20% -20% 1990-2005 2005-2011

Source: All data inflation adjusted to 2011 by CPI; Income Data: US Department of Census Property Tax Data: Illinois Department of Revenue

Which begs two important questions. First, why is Illinois so over-reliant on property taxes? Second, does Illinois otherwise have tax policy right at the state level? 9. THE TIE BETWEEN ILLINOIS’ OVER-RELIANCE ON PROPERTY TAXES AND EDUCATION FUNDING.

Reforming state tax policy in a manner that maintains the public sector’s capacity to invest adequately in core services— while lessening reliance on the local property tax—would be a more meaningful way to reduce small business tax burden than cutting corporate income taxes, because it would lower a business’s hard costs, making more of its sales revenue available for operational or capital uses. The corollary benefit is that shifting from over-relying on property taxes to more state-based revenue generated from income and sales taxes is a better way to tax people as well. Which makes it essential to determine why Illinois is a national tax outlier in its over-reliance on local property taxes in its overall mix of state versus local taxes businesses pay. Again, the data here are clear and compelling. Illinois over-relies on property taxes because the state fails to pay its fair share of the cost of public education.

Since FY2010, the last year in which additional federal funding for K-12 was available under the American Recovery and Reinvestment Act (ARRA), overall state spending on K-12 education in Illinois has declined by some $578 million.88 According to the U.S. Census Bureau, the funding cuts to K-12 Illinois implemented in FY2011 represented the largest year-to-year percentage cut in education funding made by any state.89 The net result is that today state-level funding will cover less than the 28.3 percent of K-12 education costs Illinois state-level funding covered back in FY2011, when Illinois already ranked 50th—dead last in the country—in the portion of education funding covered by state rather than local tax revenue. It also means local funding—read as property tax revenue—will be covering more than the 61 percent of K-12 education costs it covered in FY2011. Overall, Illinois relies more on local property taxes to fund schools than any other state.

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Figure 14 Local and State Share of Education Funding Spending 70% 61.0% 60%

50% 43.9% 43.7% 40% 28.3% 30% 20% 10% 0% State % Share Local % Share

U.S. Average Illinois

Source: CTBA analysis of U.S. Department of Education, National Center for Education Statistics, Revenues and Expenditures for Public Elementary and Secondary Education: School Year 2010- 2011 (Fiscal Year 2011) (Washington, DC: September 2013), 7.90

Figure 15 shows how Illinois stacks up with other large states and the Midwest states in the portion of education funding that comes from state-based resources.

Figure 15 State Share of Education Funding State % Share State % Share

60% 55.1% 70% 62.1% 60% 55.0% 50% 43.9% 40.3% 39.6% 50% 45.8% 44.3% 43.9% 40% 28.3% 40% 30% 28.3% 30% 20% 20% 10% 10% 0% 0% California U.S. New York Texas Illinois Indiana Michigan Wisconsin Ohio U.S. Illinois Average Average

Source: U.S. Department of Education, National Center for Education Statistics, Revenues and Expenditures for Public Elementary and Secondary Education: School Year 2010-2011 (Fiscal Year 2011), (Washington, DC: September 2013).91

So, to lessen the over-reliance on local property taxes used to fund education, more state-based resources from income and sales taxes are needed.

From a small business perspective, it would be quite beneficial for the state to enhance its investment in public education. That is because there is one, key policy initiative state government can pursue that—according to researchers Noah Berger and Peter Fisher—the evidence shows is more likely to “strengthen the overall state economy than anything else”: provide access to a high quality public education.92 This finding was echoed by Jeffrey Thompson, who concluded that education spending has been found to raise state GDP, increase employment in metropolitan areas, and raise personal income at the state level.93 The reasons for this are simple enough to understand. Higher levels of educational attainment strongly correlate to lower levels of unemployment and higher wages.94 In essence, a quality public education helps build a labor force that has the numeracy and literacy skills required for good jobs in the modern economy.

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From the small business perspective, a quality K-12 system is especially crucial, since the local labor force is the primary pool from which most small businesses tend to hire. From an individual’s viewpoint, while having a high quality K-12 education may not guarantee a bright economic future, not receiving a quality K-12 education almost certainly guarantees long-term economic struggles, from both wage and employability perspectives.95 Hence, it is no wonder a study which analyzed state economic competitiveness from 1963-1997 found that increased real, inflation-adjusted funding of public education had a statistically significant correlation to that state increasing personal income growth at a rate greater than other states.96

Figure 16 Unemployment Highest Among Least Education (2010)

25% 21.9% 20.7%

20% 18.8% 13.1%

15% 12.9% 12.0% Nation 9.4% 9.3% 10% 9.1% Midwest 5.2% 5.7%

4.9% Illinois 5% Percent UnemployedPercent

0% Less than High High School Grad Some College Bachelor's Degree School or Higher

Source: Economic Policy Institute Analysis of Current Population Survey Data

Unfortunately, Illinois is not making the investments needed to create the high quality public education system so essential to state and small business competitiveness in a modern economy. Consider that, despite having the fifth largest population and economy in the nation,97 Illinois ranks 29th in per-capita education spending.98 Illinois’ education funding levels not only make it a national laggard, but also fall well short of the state’s own standards.

The nonpartisan Education Funding Advisory Board (EFAB) is required by law to recommend a “Foundation Level” of per pupil spending that is sufficient to cover the cost of an adequate K-12 education. The Foundation Level is supposed to include most of the basic costs of educating a “non-at-risk” child, that is, a child with a reasonable likelihood of academic success. The Foundation Level does not include the cost of significant items, like transportation, special education, and educating children who are English language learners or live in poverty.

In FY2003, the state’s enacted Foundation Level was $120 less per child than the EFAB recommendation tied to the actual, base cost of educating a non-at-risk child. If the FY2014 Foundation Level were to be funded fully (it will not be, as the state will prorate funding for the Foundation Level at 89 percent of the amount appropriated in the budget)99, the state’s Foundation Level would nonetheless still be at least $2,553 less per child than the EFAB recommendation, as shown in Figure 17.

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Figure 17 Dollar Shortfall in State Per-Pupil K-12 Education Funding to Meet EFAB Adequate Education Standard by Fiscal Year

Sources: CTBA analysis of January 2013 EFAB data. Education Funding Advisory Board, Illinois Education Funding Recommendations, (Springfield, IL: January, 2013), p. 9. Appropriations adjusted using ECI and Midwest Medical Care CPI (for Healthcare) from the BLS as of January 2013, and population growth from the Census Bureau as of January 2013.

According to the Illinois State Board of Education, the cost of filling the gap between the state’s actual Foundation Level and the EFAB recommendation is some $4.7 billion.100 Given that Illinois has an accumulated General Fund deficit of at least $7.6 billion in FY2014, the state simply does not have the current fiscal capacity to invest more in K-12 education. With the loss of another $3-$4 billion in annual revenue the state will absorb under the scheduled decrease in the Illinois individual and corporate income tax rates under TABSA, there is no reasonable likelihood that Illinois will have the capacity to invest more in K-12 education at the state level. 10. FLAWED TAX POLICY IS THE PRIMARY CAUSE OF ILLINOIS’ FISCAL PROBLEMS THAT HURT SMALL BUSINESS.

The reason Illinois does such a poor job of funding schools from state resources—and hence the reason for high property taxes—turns out to be poor overall tax policy. Illinois’ tax policy is so flawed that it has resulted in the state running a General Fund deficit in each of the last 23 years.101

The General Fund Budget passed for the current fiscal year—FY2014—authorizes $36.2 billion in FY2014 spending. Of that amount, $50 million was dedicated to covering some of the unpaid bills left over from FY2013, while another $11.12 billion or 31 percent represents nondiscretionary spending on hard costs over which decision makers have no discretion, like debt repayment, pension contributions, and statutory transfers out.102

That leaves $25.02 billion appropriated to fund current services—however—the budget indicates that $500 million of this aggregate service appropriation will not be spent, leaving a net service appropriation for FY2014 of $24.52 billion. Of that $24.52 billion, $9 out of $10 will go to the four core service areas of: Education (PreK-Higher Ed, 35 percent); Healthcare (29 percent); Human Services (20 percent) and Public Safety (6 percent).

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It should be noted that, continuing a long-term trend, net spending on services in FY2014 is scheduled to be $173 million less in nominal and $755 million less in real, inflation-adjusted dollars than last year in FY2013.103 In fact, General Fund expenditures for services in FY2014 are scheduled to be $4.7 billion less in nominal dollars than they were in FY2009, a mere five years ago.104

Yet, despite the revenue raised by the temporary tax increases under TABSA and the aforesaid significant cuts to service spending over the last five years, the state will not have enough revenue to cover the $24.52 billion appropriated for services in FY2014. In fact, the General Fund will end FY2014 with an accumulated deficit that will range from $7.96 billion (based on the revenue estimates contained in House Resolution 389), to $7.59 billion (using the revenue estimates of the state Commission on Government Forecasting and Accountability or “COGFA”). That means anywhere from 32.46 percent to 30.96 percent of the net $24.52 billion in scheduled spending on services in FY2014 will be deficit spending.

Figure 18 FY2014 Estimated Accumulated Deficit ($ Billions) Category HR 389 COGFA (i) Projected FY2014 Revenue $35.45 $35.82

(ii) Projected FY2014 Hard Costs $11.12 $11.12

(iii) Projected Deficit Carry Forward from FY2013 $7.76 $7.76

Projected Net FY2014 General Fund Revenue (iv) $16.56 $16.93 Available for Services

Projected Net General Fund Service (v) $24.52 $24.52 Appropriations

Estimated Minimum FY2014 General Fund (vi) ($7.96) ($7.59) Deficit

Estimated Deficit as a Percentage of General (vii) -32.46% -30.96% Fund Service Appropriations

Source: Appropriations for FY2014 from CTBA analysis PA 98-34, PA 98-35, PA 98-17, PA 98-33, PA 98-27, PA 98- 64, PA 98-50, passed by the 98th General Assembly; and hard costs COGFA, State of Illinois Budget Summary: Fiscal Year 2014 (Springfield, IL: August 1, 2013), 26. Revenue estimates from COGFA, Monthly Briefing for the Month Ended: October 2013 (Springfield, IL: October 2013), 9 and HR 389 of the 98th Illinois General Assembly.

That is a significant deficit—but one that was not caused by overspending on services. Consider that irrespective of the inflation metric used, the Consumer Price Index (CPI) or Employment Cost Index (ECI), real General Fund spending on services will be significantly less in FY2014 than in FY2000, as shown in Figure 19. While in nominal dollars, spending on services increased over the FY2000-2014 sequence by 15.5 percent, in real, inflation-adjusted terms, state spending declined by 23.9 percent (CPI) or 28.2 percent (ECI) depending on the inflation metric used.

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Figure 19 FY2014 General Fund Services Appropriations Relative to FY2000, in Nominal Dollars and Adjusted for Inflation and Population Growth (excluding Group Health) 20% 15.5%

10%

0%

-10%

-20%

-30% -23.9% -28.2% -40% State Spending Change (Nominal) State Spending Change (CPI and Population Growth) State Spending Change (ECI and Population Growth)

Sources: FY2000 unadjusted appropriations from Governor’s final budget summary for FY2000; and FY2014 CTBA analysis SB 2555, SB 2556, HB 206, HB 208, HB 213, HB 214, HB 215, passed by the 98th General Assembly. Inflation for healthcare inflated by Midwest Medical Care CPI; all other appropriations adjusted using ECI-C and Midwest CPI from the BLS as of January 2014, and population growth from the Census Bureau as of January 2014.

Moreover, there really is not much left to cut that would not result in lowering service quality. In fact, compared to the rest of the nation, Illinois is a very low spending and small government state. Consider that:

o In calendar year 2012, Illinois had the fifth largest population, fifth highest overall state GDP, and 12th highest state GDP per capita in the nation.105 o Despite that, in FY2012 Illinois ranked 28th in General Fund spending on services per capita,106 and 36th in General Fund spending on services as a share of GDP.107 o In 2011, (the most recent year for which there are data) Illinois ranked 49th, next to last among all 50 states, in number of state workers per 1,000 residents.108

For over a decade, CTBA has pointed out that the Illinois tax system consistently does not generate enough General Fund revenue to maintain delivery of the same level of public services from year-to-year after adjusting for inflation. This remains the case in FY2014. The ongoing mismatch in the state’s General Fund between the lower rates of growth for revenue on the one hand, and the pace of increase in the cost of maintaining service levels, and covering the scheduled growth in payments under a state’s extant debt service on the other, is commonly called a “structural deficit.” Illinois’ structural deficit is shown in Figure 20.109

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Figure 20 Illinois State General Fund Structural Deficit $55,000

$50,000

$45,000

$40,000 $ Millions $35,000

$30,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Fiscal Year

Appropriations Revenue

The structural deficit depicted above: (i) assumes the final appropriations for FY2014 and uses GOMB’s appropriation projections for FY2015-FY2017;110 (ii) uses COGFA’s FY2014 revenue estimate;111 and (iii) uses GOMB’s revenue estimates for FY2015-FY2017.112 It also assumes that the state maintains constant spending on services in real terms from FY2018 through FY2025, meaning that no programs are expanded or added, and that revenue will grow at historic annual rates.113 It should also be noted that the revenue declines that occur in FY2015 and FY2025 are due to the expiration of the temporary income tax increases currently scheduled under TABSA.

Figure 21 depicts Illinois’ structural deficit assuming two important changes. First, spending is projected using the reduced pension contributions that pertain under the new pension law, PA 98-599.114 That law is currently being contested and may be found unconstitutional.

Second, it estimates how Figure 21 revenue growth would Illinois State General Fund Structural Deficit develop if there were no with Tax Increase Kept and Reduced Pension Payments phase-out of the temporary $55,000 tax increases under TABSA, and the current income tax $50,000 rates (corporate and individual) were made $45,000 permanent. $40,000

$ Millions $35,000

$30,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Fiscal Year

Spending (Prior Pension Law) Spending (New Pension Law) Revenue (Tax Increases Kept) Revenue (Tax Increases Expire)

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Figure 21 shows that even with after accounting for savings from the reduced pension contributions, and even if the temporary tax rate increases under TABSA are not phased out, the Illinois structural deficit would remain. This means eliminating the structural deficit will require fundamental changes to Illinois state-level tax policy, so that revenue growth can keep pace with service cost growth in the modern economy. It also means state funding for education cannot be increased under current tax law, leaving the state over-reliant on local property taxes to fund education—a situation that is not conducive for small or frankly large businesses. Finally, it means the scheduled phase-out of the temporary tax increases under TABSA is counter-productive and not in the best interests of businesses or the economy. 11. CREATING A FAIR INCOME TAX STRUCTURE WILL BENEFIT SMALL BUSINESS.

Due to its structural deficit, the state does not have the capacity to invest in creating the type of high quality public education system so necessary for economic competitiveness generally and so important to small businesses specifically. That lack of capacity has in turn forced Illinois to over-rely on local property taxes to fund schools. This has driven property taxes up in Illinois, placing a very significant burden on small businesses. As shown in Figure 20, the structural deficit in Illinois will soon worsen significantly, due to the fiscal cliff created by the phase-out of the temporary corporate and individual income tax rate increases scheduled under TABSA over the next two years.

One important reform that could simultaneously take some pressure off of property taxes while enhancing state fiscal capacity to fund schools to desirable levels would be the creation of a fair income tax structure in Illinois. It is textbook tax policy that a “fair” income tax is an income tax that imposes a greater burden on affluent than on middle and low income earners, when tax burden is measured as a percentage of income.115

The most direct and efficient way to have a fair income tax is through the utilization of a graduated rate structure, which assesses higher tax rates on higher levels of income and lower tax rates on lower levels of income. This type of fair rate structure allows income tax burden to adjust automatically in accordance with ability to pay. Tracking ability to pay is particularly important to creating tax fairness in the modern economy, given the significant growth in income inequality over the last 30 years as shown in Figure 22.

Figure 22 Change in Average US Income Accounted For By Income Group Income Group 1979 — 2011 Top 10% 139.8% Bottom 90% -39.8% Source: Economic Policy Institute's website: http://stateofworkingamerica.org/who-gains/ Data used is from Piketty and Saez, "Income Inequality in the United States, 1913-1998", Quarterly Journal of Economics, 118(1), 2003, 1-39 (Tables and Figures Updated to 2011 in Excel format, January 2013), http://elsa.berkeley.edu/~saez/

Far from being fair by tracking ability to pay, Illinois’ current tax policy is regressive, assessing much higher overall tax burdens as a percentage of income on low and middle-income families than on affluent families, as shown in Figure 23. Indeed, Illinois has the second highest tax burden on low income families in the nation.116 Implementing a fair income tax reform is one of the best ways to offset at least some of the inherent regressivity of all the other taxes (property, sales and excise) imposed by state and local governments.

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Figure 23 Illinois State & Local Taxes Paid as a Share of Family Income For Non-Elderly Taxpayers (Total Tax Burden as a Percentage of Income) Top 20% Lowest Second Middle Fourth Next Next Top Income Group 20% 20% 20% 20% 15% 4% 1% Less $18,000 $36,000 $57,000 $93,000 $182,000– $445,000 Income than – – – – $445,000 $18,000 $36,000 $57,000 $93,000 $182,000 or more Average Income $10,100 $26,900 $46,800 $73,500 $124,100 $273,800 $1,489,200 in Group Sales & Excise 7.40% 5.80% 4.60% 3.70% 2.70% 1.80% 0.90% Taxes Property Taxes 5.20% 4.20% 4.00% 4.30% 4.50% 3.80% 2.10% Income Taxes 1.20% 2.20% 2.80% 2.90% 2.90% 2.90% 3.10% TOTAL TAXES 13.80% 12.10% 11.30% 11.00% 10.10% 8.50% 6.00% Federal Deduction –0.0% –0.1% –0.5% –0.7% –1.2% –1.0% –1.1% Offset TOTAL AFTER 13.80% 12.10% 10.90% 10.3.% 9.00% 7.60% 4.90% OFFSET Source: Institute on Taxation and Economic Policy, Who Pays? A Distributional Analysis of Tax Systems in All 50 States Fourth Edition January 2013), 52. Includes all State and local Sales, Excise, Property, and Income Taxes.

A fair, graduated rate structure would likely not have an adverse impact on small businesses for several reasons. First, as shown in Figure 4, flow-through, individual income taxes only account for 4.9 percent of all taxes and fees paid by businesses. And there is a reason that flow-through tax amount is so low. Most small business owners do not have high incomes from those small businesses. But to realize a meaningful tax increase under a fair, graduated income tax rate structure, a small business owner would have to have a high income from his or her firm. That in turn means, from a tax accounting standpoint, his or her small business would have to be highly profitable. Nationally, however, small business income accounts for less than 4 percent of the income for households with annual earnings in excess of $100,000.117 In other words, the very high-income households, who would have their higher levels of income taxed at higher rates under a fair income tax, simply do not derive most of their earnings from small businesses. Indeed, out of the small business owners that derive at least one-fourth of their net income from their small business, fully 64.5 percent have federally adjusted gross incomes of $50,000 or less.118

A study commissioned by the SBA further confirms that changing to a fair, graduated rate structure will not adversely impact entrepreneurial activity in Illinois. In that study, researchers found that: (i) higher top individual income tax rates in a state had no statistically significant impact on entrepreneurial activity; and (ii) having a graduated individual income tax rate structure did not reduce the share of taxpayers engaged in entrepreneurial activity.119 Rather, it actually had a small positive impact.120

In addition to being unfair to taxpayers, Illinois’ regressive tax policy also hurts the state’s private sector economic growth in two key ways. First, the structural deficit in part created by regressive tax policy prevents the state from making investments in infrastructure, education, and other priorities that are crucial for small business and essential for Illinois to remain competitive in a global economy.

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Second, regressive tax policy directly reduces consumer spending in Illinois. That is a problem, since roughly 68 percent of all economic activity is consumer spending.121 The best consumers are low and middle income families because they don’t earn enough to save. In economic terms, this means they have a high “marginal propensity to consume.” That simply means they are much more likely to spend rather than save every additional dollar received. Hence, as low and middle-income families gain more income, they spend it, largely in the local economy.122 That is why tax relief targeted to low and middle-income families gets spent, which in turn creates jobs.123 Modestly increasing taxes on the affluent, on the other hand, does not materially reduce their spending, at least according to Nobel Prize winning economist Joseph Stiglitz.124 That is because affluent families enjoy such a significant portion of all income growth over time that they have a very low marginal propensity to consume. Hence, modest increases in their overall tax liability do not significantly reduce their spending. Yet, contrary to this basic principle, Illinois imposes a significant tax burden on low and middle income families, thereby hurting the economy by reducing the amount of money these families, our best consumers, actually have to spend.

Moreover, the evidence shows that assessing higher marginal state income tax rates on higher income levels does not impede state economic growth over the long-term. Currently, 41 states in America have an income tax, while nine do not.125 A recent study by the Institute on Taxation and Economic Policy (ITEP), reviewed how the nine states with the highest marginal individual income tax rates compared in economic growth to the nine states in America with no individual income tax at all over the last 10 years, from 2002-2011. The ITEP study focused on the following three, core economic indicators: real gross state product growth per capita; real median household income growth; and average annual unemployment rate.126 The high individual income tax states covered in the study are California, Hawaii, Maine, Maryland, New Jersey, New York, Ohio, Oregon, and Vermont. The states without a broad-based individual income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

As shown in Figure 24, over the period studied, the high individual income tax states realized greater growth in real, per capita gross state product than their non-tax peers (8.2 percent to 5.2 percent), slightly lower loss in real median household income (a decline of -4.2 percent to -4.5 percent), and nearly identical average annual unemployment rates (6.1 percent to 6 percent).127 These data make it clear that higher marginal income tax rates in and of themselves do not create an economic growth disadvantage. Indeed, the factors that comingle to drive economic growth are far more nuanced than that, and include everything from investments made in education to availability of natural resources, climate, tourism, and quality of infrastructure.

Figure 24 High v. No Income Tax States 10% 8.2% 8% 6.1% 6.0% 6% 5.2%

4%

2%

0%

-2%

-4% -4.2% -6% -4.5% Average Unemployment Change in Real Median Growth in Per Capita Real Rate 02-11 Household Income 02-11 GSP 02-11

High Rate Personal Income Tax Rate States No-Personal Income Tax States

Source: Institute on Taxation and Economic Policy, States with “High Rate” Taxes are Still Outperforming No-Tax States (Washington, DC: February 2013). Figures 2, 3 & 4

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At this juncture in time, Illinois’ refusal to change its unfair tax policy that both diminishes consumer spending and forces state budget cuts is particularly problematic. As of December 2013, Illinois still had not come close to replacing the over 346,200 non-farm jobs it lost during the Great Recession.128 Truth be told, the state never recovered all the jobs it lost during the much milder recession of 2001.129 Cutting state General Fund spending on core services like education can be expected to harm the private sector’s ability to replace those lost jobs for two reasons. In the short term, state spending cuts reduce consumer spending, because the most significant portion of state spending is the wages of the teachers, social workers, health care workers, and correctional officers who provide public services. So when the state cuts spending it is cutting jobs and or wages which has a negative multiplier on the private sector economy.

Indeed, the Center for Economic and Policy Research (CEPR) devised a method to determine the potential job losses that could result from addressing a states’ budget deficit through spending cuts. The CEPR study showed that every $1 billion in cuts to Illinois’ budget could result in over 14,000 lost jobs.130 Put simply, people have less to spend patronizing local, small businesses which means less demand for the products and services businesses sell, which, of course, leads to job cuts. Over the long term, failure to invest in infrastructure and education have been shown to reduce a state’s economic competitiveness—and thereby make it difficult for small and even large businesses to thrive.

The primary reason the state cannot implement a fair tax is simple: the Illinois Constitution prohibits lawmakers from setting marginal rates at different amounts for different levels of income because it mandates a flat tax rate across all income brackets.131 Hence, to create a fair rate structure for the individual income tax which has lower rates for lower levels of income and higher rates for higher levels of income, Illinois must amend its constitution. Passing such an amendment will not only create a fairer tax system for people, but also be good for (small) businesses.

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ENDNOTES

1 The National Bureau of Economic Research defines the Great Recession as starting in December 2007 and ending in June 2009. 2 House Bill 4479. 3 CTBA analysis of: FY2014 appropriations from CTBA analysis PA 98-34, PA 98-35, PA 98-17, PA 98-33, PA 98-27, PA 98-64, PA 98- 50, passed by the 98th General Assembly; hard costs from COGFA, State of Illinois Budget Summary: Fiscal Year 2014 (Springfield, IL: August 1, 2013), 26; and revenue estimates from COGFA, Monthly Briefing for the Month Ended: October 2013 (Springfield, IL: October 2013), 9. 4 United States Census, Statistic of U.S. Businesses, “U.S. & states, totals” (December 2013), http://www.census.gov/econ/susb; Non- employer from United States Census, Nonemployer Statistics, “U.S., States, and Counties (2002-2011),” http://www.census.gov/econ/nonemployer. 5 United States Census, Statistic of U.S. Businesses, “U.S. & states, totals” (December 2013), http://www.census.gov/econ/susb; Non- employer from United States Census. 6 Daphne A. Kenyon, Adam H. Langley, and Bethan P. Paquin, Rethinking Property Tax Incentives for Business (Cambridge, MA: Lincoln Land Institute of Policy), 29. This study specifically focused on the effect of property tax incentives on business location decisions, but a meta-analysis on all business tax incentives generally was included. 7 Donald Bruce and John Deskins, Can State Tax Policies Be Used to Promote Entrepreneurial Activity? (Springer Publishing: Small Business Economics, 2012); Thomas A. Garrett and Howard J. Wall, Creating a Policy Environment for Entrepreneurs, (Washington, DC: Cato Journal, Fall 2006). 8 Noah Berger and Peter Fisher, A Well-Educated Workforce is Key to State Prosperity (Washington, DC: Economic Policy Institute, August 22, 2013), http://www.epi.org/publication/states-education-productivity-growth-foundations/. 9 Judith Stallman, David Valentine, and Andrew Wesemann, Policy Brief: Public Expenditures and Economic Growth (Columbia, MO: University of Missouri, Institute of Public Policy, Harry S. Truman School of Public Affairs, August 2013). 10 Andrew Phillips, Robert Cline, Caroline Sallee, Michelle Klassen, and Daniel Sufranski, Total State and Local Business Taxes: State- by-state estimates for fiscal year 2012 (Washington, DC: Ernst & Young and Council on State Taxation, July 2013), 10; Illinois Department of Revenue, Annual Report of Collections and Distributions 2012 (Springfield, IL: December 31, 2012). ). Ernst & Young’s data included both the corporate income tax and PPRT in its corporate income tax category. Ernst & Young’s corporate income tax figure is $3.5 billion. CTBA used Illinois Department of Revenue, Annual Report of Collections and Distributions: Fiscal Years 2011 and 2012 to determine that actual corporate income tax revenue for FY2012 was approximately $2.5 billion, which was calculated by subtracting corporate income tax refunds (shown on page 20 of the cited IDOR report) from the total corporate income tax collection (shown on page 19 of the cited IDOR report). The PPRT revenue was then calculated by subtracting that $2.5 billion from Ernst & Young’s reported $3.5 billion. 11 In general, businesses structure themselves into one of five different legal forms: S-Corporation (“S-Corp”), C-Corporation (“C- Corp”), partnership, sole proprietorship, and limited liability company (LLC). Most small businesses are structured as an S-Corp, partnership, sole proprietorship or LLC. A key distinction between those classifications is that at the federal level, C-Corps pay the corporate income tax, while S-Corps, partnerships, and sole proprietorships pay the individual income tax. Depending how an LLC is structured it pays either the personal or corporate income tax. 12 Federation of Tax Administrators, Range of State Corporate Income Tax Rates (January 1, 2013). http://www.taxadmin.org/fta/rate/corp_inc.pdf. 13 CTBA analysis of data provided by the Illinois Department of Revenue (May 2013). 14 Bureau of Economic Analysis; Inflation Adjusted to CPI. 15 Thomas A. Garrett and Howard J. Wall, Creating a Policy Environment for Entrepreneurs, (Washington, DC: Cato Journal, Fall 2006); Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: Center on Budget and Policy Priorities, February 19,2013), 1; Douglas Elmendorf, Director, Congressional Budget Office, Policies for Increasing Economic Growth and Employment in 2012, and 2013, Testimony to the Senate Budget Committee, (Washington, DC: November 15, 2011); Matthew Knittel, Susan Nelson, Jason DeBacker, John Kitchen, James Pearce, and Richard Prisinzano, Methodology to Identify Small Businesses and Their Owners, (Office of Tax Analysis, U.S. Department of Treasury: August 2011). 16 Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: February 19, 2013), 1. 17 Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: February 19, 2013), 7.

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18 For the purposes of this paper, CTBA focuses on creating a healthy General Fund to invest in services such as education. Most infrastructure in the state is funded through various other funds and capital projects which do not come out of the General Fund. However, a healthy General Fund budget is key to an overall healthy state budget. 19 Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: February 19, 2013), 14-15. 20 Noah Berger and Peter Fisher, A Well-Educated Workforce is Key to State Prosperity (Washington, DC: Economic Policy Institute, August 22, 2013), http://www.epi.org/publication/states-education-productivity-growth-foundations/. 21 Michelle T. Bensi, David C. Black, and Michael R. Dowd. “The Education/Growth Relationship: Evidence from Real State Panel Data.” Contemporary Economic Policy 22, no. 2 (April 22, 2004): 281-298. 22 Jeffrey Thompson, Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives (Amherst, MA: University of Massachusetts Amherst, Political Economy Research Institute, August 18, 2010). 23 Andrew Phillips, Robert Cline, Caroline Sallee, Michelle Klassen, and Daniel Sufranski, Total State and Local Business Taxes: State- by-state estimates for fiscal year 2012 (Washington, DC: Ernst & Young and Council on State Taxation, July 2013). Ernst & Young’s data included both the corporate income tax and PPRT in its corporate income tax category. Ernst & Young’s corporate income tax figure is $3.5 billion. CTBA used Illinois Department of Revenue, Annual Report of Collections and Distributions: Fiscal Years 2011 and 2012 to determine that actual corporate income tax revenue for FY2012 was approximately $2.5 billion, which was calculated by subtracting corporate income tax refunds (shown on page 20 of the cited IDOR report) from the total corporate income tax collection (shown on page 19 of the cited IDOR report). The PPRT revenue was then calculated by subtracting that $2.5 billion from Ernst & Young’s reported $3.5 billion. 24 Andrew Phillips, Robert Cline, Caroline Sallee, Michelle Klassen, and Daniel Sufranski, Total State and Local Business Taxes: State- by-state estimates for fiscal year 2012 (Washington, DC: Ernst & Young and Council on State Taxation, July 2013). Ernst & Young’s data included both the corporate income tax and PPRT in its corporate income tax category. Ernst & Young’s corporate income tax figure is $3.5 billion. CTBA used Illinois Department of Revenue, Annual Report of Collections and Distributions: Fiscal Years 2011 and 2012 to determine that actual corporate income tax revenue for FY2012 was approximately $2.5 billion, which was calculated by subtracting corporate income tax refunds (shown on page 20 of the cited IDOR report) from the total corporate income tax collection (shown on page 19 of the cited IDOR report). The PPRT revenue was then calculated by subtracting that $2.5 billion from Ernst & Young’s reported $3.5 billion. 25 Illinois State Board of Education, Fact Sheet: Illinois Ranks Last in State Contribution to P-12 Funding; EFAB “Foundation Level” Not Approved since FY02 (Springfield, IL: February 2013), http://www.isbe.state.il.us/budget/FY14/fact-sheet4-efab.pdf. 26 All data inflation adjusted to 2011 by CPI; Income Data: US Department of Census Property Tax Data: Illinois Department of Revenue. 27 All data inflation adjusted to 2011 by CPI; Income Data: US Department of Census Property Tax Data: Illinois Department of Revenue. 28 All data inflation adjusted to 2011 by CPI; Income Data: US Department of Census Property Tax Data: Illinois Department of Revenue. 29 United States Census, Statistic of U.S. Businesses, “U.S. & states, totals” (December 2013), http://www.census.gov/econ/susb; Non- employer from United States Census, Nonemployer Statistics, “U.S., States, and Counties (2002-2011),” http://www.census.gov/econ/nonemployer. 30 U.S. Small Business Administration, Small Business Size Standards, http://www.sba.gov/content/summary-size-standards-industry. 31 United States Census, Statistic of U.S. Businesses, “U.S. & states, totals” (December 2013), http://www.census.gov/econ/susb; Non- employer from United States Census, Nonemployer Statistics, “U.S., States, and Counties (2002-2011),” http://www.census.gov/econ/nonemployer. 32 United States Census, Statistic of U.S. Businesses, “U.S. & states, totals” (December 2013), http://www.census.gov/econ/susb. 33 United States Census, Statistic of U.S. Businesses, “U.S. & states, totals” (December 2013), http://www.census.gov/econ/susb. 34 SBA Brian Headd, An Analysis of Small Business and Jobs (Washington, DC: March 2010), 3. 35 Small Business Administration. “Frequently Asked Questions – Advocacy: the voice of small business in government.” 2012. Cited in William Gale and Samuel Brown, Small Business, Innovation and Tax Policy (Tax Policy Center, April 8, 2013) http://www.brookings.edu/research/papers/2013/04/small-business-tax-policy-gale, 12. 36 William Gale and Samuel Brown, Small Business, Innovation and Tax Policy (Tax Policy Center; April 8, 2013) http://www.brookings.edu/research/papers/2013/04/small-business-tax-policy-gale, 12.

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37 William Gale and Samuel Brown, Small Business, Innovation and Tax Policy (Tax Policy Center; April 8, 2013) http://www.brookings.edu/research/papers/2013/04/small-business-tax-policy-gale, 12. 38 Brookings Institute, Testimony of Martin Neil Baily, The State of American Small Business (Washington, DC: February 1, 2012), 4. 39 PA 96-1496. 40 FY2017 and FY2016 revenue projections compared to FY2014 revenue projection. Source: GOMB, Three Year Budget Projection: FY2015-FY2017 (Springfield, IL: January 1, 2014). 41 CTBA analysis of : FY2014 appropriations from CTBA analysis PA 98-34, PA 98-35, PA 98-17, PA 98-33, PA 98-27, PA 98-64, PA 98-50, passed by the 98th General Assembly; hard costs from COGFA, State of Illinois Budget Summary: Fiscal Year 2014 (Springfield, IL: August 1, 2013), 26; and revenue estimates from COGFA, Monthly Briefing for the Month Ended: October 2013 (Springfield, IL: October 2013), 9. 42 Appropriations for FY2014 from CTBA analysis PA 98-34, PA 98-35, PA 98-17, PA 98-33, PA 98-27, PA 98-64, PA 98-50, passed by the 98th General Assembly; and hard costs COGFA, State of Illinois Budget Summary: Fiscal Year 2014 (Springfield, IL: August 1, 2013), 26. Revenue estimates from COGFA, Monthly Briefing for the Month Ended: October 2013 (Springfield, IL: October 2013), 9. 43 FY2009 net appropriations were $29.20 billion, as reported in GOMB, FY2010 Proposed Operating Budget (Springfield, IL: March 2009), Ch. 2-12. 44 Michael Mazerov, Academic Research Lacks Consensus on the Impact of State Tax Cuts on Economic Growth: A Reply to the Tax Foundation (Washington, DC: June 17, 2013). 45 Noah Berger and Peter Fisher, A Well-Educated Workforce is Key to State Prosperity, (Washington, DC: Economic Policy Institute, August 22, 2013). 46 Thomas A. Garrett and Howard J. Wall, Creating a Policy Environment for Entrepreneurs, (Washington, DC: Cato Journal, Fall 2006); Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: Center on Budget and Policy Priorities, February 19, 2013), 1; Douglas Elmendorf, Director, Congressional Budget Office, Policies for Increasing Economic Growth and Employment in 2012, and 2013, Testimony to the Senate Budget Committee, (Washington, DC: November 15, 2011); Matthew Knittel, Susan Nelson, Jason DeBacker, John Kitchen, James Pearce, and Richard Prisinzano, Methodology to Identify Small Businesses and Their Owners, (Office of Tax Analysis, U.S. Department of Treasury: August 2011); Yasuyuki Motoyama and Brian Danley, An Analysis of the Geography of Entrepreneurship: Understanding the Geographic Trends of Inc. 500 Companies Over Thirty Years at the State and Metropolitan Levels (Kansas City, MO: Ewing Marion Kauffman Foundation, September 2012). 47 Judith Stallman, David Valentine, and Andrew Wesemann, Policy Brief: Public Expenditures and Economic Growth (Columbia, MO: University of Missouri, Institute of Public Policy, Harry S. Truman School of Public Affairs, August 2013), 4. 48 Illinois Department of Commerce and Economic Opportunity, State Business Incentives: A Comparative Analysis (Springfield, IL: February 4, 2014). 49 Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: February 19, 2013), 1. 50 Daphne A. Kenyon, Adam H. Langley, and Bethan P. Paquin, Rethinking Property Tax Incentives for Business (Cambridge, MA: Lincoln Land Institute of Policy), 29. The authors state that location decisions have two broad stages: first choosing a metropolitan area, and then picking a specific regional location. At the first stage, choosing a metropolitan area, they find that property taxes in general are relatively unimportant. Thus, in the specific case of property tax incentives, the authors argue they only impact location decision when a business is deciding on a specific regional location, and only when all other factors (like proximity to market and skill of workforce) are equal. 51 Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: February 19, 2013), 14-15. 52 Rhett Morris, What Do the Best Entrepreneurs Want in a City? Lessons from the Founders of America’s Fastest-Growing Companies (Endeavor, February 2014). 53 Rhett Morris, What Do the Best Entrepreneurs Want in a City? Lessons from the Founders of America’s Fastest-Growing Companies (Endeavor, February 2014). 54 Veronique de Rugy, Infrastructure Spending Increase in the Last 10 Years (Arlington, VA: George Mason University, George Mason University, September 12, 2011), http://mercatus.org/publication/infrastructure-spending-increase-last-10-years. 55 Francisco Rodriguez, Have Collapses in Infrastructure Spending led to Cross-Country Divergence in Per Capita GDP? (Middletown, CT: Wesleyan University, Department of Economic and Social Affairs, Working Paper No. 52, July 2007), 2.

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56Judith Stallman, David Valentine, and Andrew Wesemann, Policy Brief: Public Expenditures and Economic Growth (Columbia, MO: University of Missouri, Institute of Public Policy, Harry S. Truman School of Public Affairs, August 2013), 4. 57 Lori Montgomery, “Siemens plant in Charlotte offers lessons as Obama, Romney Talk Job Creation,” Washington Post, September 4, 2012, http://www.washingtonpost.com/business/economy/siemens-plant-in-charlotte-offers-lessons-as-obama-romney-talk-job- creation/2012/09/04/f52304fa-f30c-11e1-adc6-87dfa8eff430_story.html. 58 GOMB, Illinois’ Economic and Fiscal Policy Report (Springfield, IL: January 1, 2014), http://www2.illinois.gov/gov/budget/Documents/Economic%20and%20Fiscal%20Policy%20Reports/FY2014/Economic%20and%20Fisc al%20Policy%20Report%201-1-2014.pdf. 59 Ernst & Young’s data included both the corporate income tax and PPRT in its corporate income tax category. Ernst & Young’s corporate income tax figure is $3.5 billion. CTBA used Illinois Department of Revenue, Annual Report of Collections and Distributions: Fiscal Years 2011 and 2012 to determine that actual corporate income tax revenue for FY2012 was approximately $2.5 billion, which was calculated by subtracting corporate income tax refunds (shown on page 20 of the cited IDOR report) from the total corporate income tax collection (shown on page 19 of the cited IDOR report). The PPRT revenue was then calculated by subtracting that $2.5 billion from Ernst & Young’s reported $3.5 billion. 60 CTBA estimate of property tax extensions by property type using: Illinois Department of Revenue, Property Tax Statistics, Table 8: Average Tax Rates, 2007- 2011 and Table 15: Comparison of Equalized Assessed Valuations by Class of Property. http://www.revenue.state.il.us/AboutIdor/TaxStats/PropertyTaxStats/2011/index.htm. This is based on the property classified as commercial (22.2 percent) and industrial (8.5 percent). The remaining 3 percent of property taxes are for properties classified as farm, railroad, and mineral. 61 IRSI Issue Brief: HJRCA 49: A Constitutional Amendment Regarding The Rules Governing Pension Benefit Increases (Chicago, IL: June 2012), 4. 62 Federal Tax Administrators. “2011 State & Local Revenue as a percentage of personal income.” http://www.taxadmin.org/fta/rate/11stl_pi.html 63 Joyce Errecart, Ed Gerrish, Scott Drenkard, States Moving Away from Taxes on Tangible Personal Property (Washington DC: Tax Foundation, October 4, 2012). 64 30 ILCS 115/12. In addition, public utilities pay a specific replacement tax in an amount equal to 0.8 percent tax on invested capital. Other replacement taxes include the Electricity Distribution Tax and Telecommunications Infrastructure Maintenance Fee. 65 Illinois Department of Revenue, Analysis of Selected Illinois Business Tax Incentives (Springfield, IL; April 2009) 5. 66 Forty-four states impose a state corporate income tax. Texas, Nevada, Ohio, South Dakota, Washington and Wyoming do not impose a state corporate income tax. For purposes of this figure CTBA is comparing Illinois’ corporate income tax rate with states that impose a similar corporate income tax. 67 Communication with the Illinois Department of Revenue in May 2013. 68 Communication with the Illinois Department of Revenue in May 2013. 69 PA 96-1496 35 ILCS 5/201 (b)(11). 70 JD Michael LLC, Probing Beneath the Surface: Understanding Why So Many Corporations Do Not Pay Illinois Corporate Income Tax (Chicago: Illinois Chamber of Commerce and the Taxpayers’ Federation of Illinois, February 2014). 71 U.S. Census Bureau, State Government Tax Collections, (Washington, DC: March 2011) http://www.census.gov/govs/statetax/historical_data_2010.html. 72 In the 2010 Annual Survey of State Annual Tax Collections, Illinois’ reported corporate income tax collection included both the corporate income tax collections and the PPRT collections. Therefore, CTBA adjusted the Census Bureau reported number to exclude PPRT collections. Data is not available at this time to determine whether PPRT collections were included in prior year surveys. Illinois net corporate income tax revenue used for the 2010 adjustment is $1.36 billion from COGFA, State of Illinois Budget Summary: Fiscal Year 2014 (Springfield, IL: August 1, 2013), 50. 73 OECD, Tax Revenues Continue to Rise Across the OECD (December 17, 2013), http://www.oecd.org/newsroom/tax-revenues- continue-to-rise-across-the-oecd.htm. 74 U.S. Department of Labor, Bureau of Labor Statistics, All total nonfarm U.S. employees from June 2009 – December 1, 2013. 75 U.S. Department of Labor, Bureau of Labor Statistics, All total nonfarm U.S. employees from December 2007 – June 2009. 76 Nin-Hai Tseng “We’re Still 8.3 million jobs from full recovery,” CNN Money, September 16, 2013. 77 Douglas Elmendorf, Director, Congressional Budget Office, “Policies for Increasing Economic Growth and Employment in 2012, and 2013,” Testimony to the Senate Budget Committee, November 15, 2011; This CBO report illustrates that reducing taxes on business 29 | Page

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income would only have a very small effect on employment and any short term growth from such policies may be offset in the long term. 78 Thomas A. Garrett and Howard J. Wall, Creating a Policy Environment for Entrepreneurs, (Washington, DC: Cato Journal, Fall 2006); Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: Center on Budget and Policy Priorities, February 19, 2013), 1; Douglas Elmendorf, Director, Congressional Budget Office, Policies for Increasing Economic Growth and Employment in 2012, and 2013, Testimony to the Senate Budget Committee, (Washington, DC: November 15, 2011); Matthew Knittel, Susan Nelson, Jason DeBacker, John Kitchen, James Pearce, and Richard Prisinzano, Methodology to Identify Small Businesses and Their Owners, (Office of Tax Analysis, U.S. Department of Treasury: August 2011); Yasuyuki Motoyama and Brian Danley, An Analysis of the Geography of Entrepreneurship: Understanding the Geographic Trends of Inc. 500 Companies Over Thirty Years at the State and Metropolitan Levels (Kansas City, MO: Ewing Marion Kauffman Foundation, September 2012). 79 Yasuyuki Motoyama and Brian Danley, An Analysis of the Geography of Entrepreneurship: Understanding the Geographic Trends of Inc. 500 Companies Over Thirty Years at the State and Metropolitan Levels (Kansas City, MO: Ewing Marion Kauffman Foundation, September 2012); Thomas A. Garrett and Howard J. Wall, Creating a Policy Environment for Entrepreneurs, (Washington, DC: Cato Journal, Fall 2006); Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: Center on Budget and Policy Priorities, February 19, 2013), 1; William Gale and Samuel Brown, Small Business, Innovation and Tax Policy (Washington, DC: Tax policy Center; April 8, 2013). 80 William McBride, What is the Evidence on Taxes and Growth? Tax Foundation Special Report No. 207, (Washington, DC: December 18, 2012). 81 Michael Mazerov, “Academic Research Lacks Consensus on the Impact of State Tax Cuts on Economic Growth: A Reply to the Tax Foundation” (Washington, DC: June 17, 2013), 2. 82 Michael Mazerov, “Academic Research Lacks Consensus on the Impact of State Tax Cuts on Economic Growth: A Reply to the Tax Foundation” (Washington, DC: June 17, 2013), 2. 83 Federal Tax Administrators. “2011 State & Local Revenue as a percentage of personal income.” http://www.taxadmin.org/fta/rate/11stl_pi.html. 84 CTBA calculation using Federal Tax Administrators. “2011 State & Local Tax Collection by Source.” “Microsoft Excel.” http://www.taxadmin.org/fta/rate/burden.html. 85 Totals for Illinois do not add due to rounding. 86 Ernst & Young’s data included both the corporate income tax and PPRT in its corporate income tax category. Ernst & Young’s corporate income tax figure is $3.5 billion. CTBA used Illinois Department of Revenue, Annual Report of Collections and Distributions: Fiscal Years 2011 and 2012 to determine that actual corporate income tax revenue for FY2012 was approximately $2.5 billion, which was calculated by subtracting corporate income tax refunds (shown on page 20 of the cited IDOR report) from the total corporate income tax collection (shown on page 19 of the cited IDOR report). The PPRT revenue was then calculated by subtracting that $2.5 billion from Ernst & Young’s reported $3.5 billion. 87 Totals for Illinois do not add due to rounding. 88 Illinois State Board of Education, FY2014 Operating Budget, Public Acts 98-033 & 98-034 (Springfield, IL: June 27, 2013), http://www.isbe.state.il.us/budget/FY14/fy14-budget.pdf; Illinois State Board of Education, FY10 General Funds Allocation As Approved by the State Board of Education on July 21, 2009 (Springfield, IL: July 21, 2009), http://www.isbe.state.il.us/board/meetings/2009/july/fy10_board_adopted_budget.pdf. 89 Mark Dixon, U.S. Census Bureau, “Public Education Finances: 2011”, G11-ASPEF, U.S. Government Printing Office, (Washington, DC: May, 2013), 28. http://www2.census.gov/govs/school/11f33pub.pdf. 90 CTBA subtracted the state’s contribution for amortizing unfunded pension liabilities (“amortization contribution”) from the state share of spending in the U.S. Department of Education, National Center for Education Statistics report. In FY2011, the ISBE budget was $6.953 billion, which is lower than the figure in the U.S. Department of Education, National Center for Education Statistics report of $9.305 billion. CTBA determined that the U.S. Department of Education, National Center for Education Statistics report also included pension costs in FY2011: both the normal cost and amortization contribution. CTBA included the normal pension cost of $849 million in total state spending, but subtracted the amortization contribution of $1,638.9 million from the U.S. Department of Education, National Center for Education Statistics report’s state spending figure. Thus. the state spending on education figure (or the numerator) becomes $7.666 billion. CTBA then also subtracted the amortization contribution from the total education spending, bringing that figure (or the denominator) from $28.7 billion to $27.06 billion. 91 See previous endnote. 92 Noah Berger and Peter Fisher, A Well-Educated Workforce is Key to State Prosperity (Washington, DC: Economic Policy Institute, August 22, 2013), http://www.epi.org/publication/states-education-productivity-growth-foundations/. 30 | Page

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93 Jeffrey Thompson, Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives (Amherst, MA: University of Massachusetts Amherst, Political Economy Research Institute, August 18, 2010). 94 Bureau of Labor Statistics, Current Population Survey, (Washington, D.C.: May 22, 2013) http://www.bls.gov/emp/ep_chart_001.htm. 95 Noah Berger and Peter Fisher, A Well-Educated Workforce is Key to State Prosperity (Washington, DC: Economic Policy Institute, August 22, 2013), 1-2; Michelle T. Bensi, David C. Black, and Michael R. Dowd. “The Education/Growth Relationship: Evidence from Real State Panel Data.” Contemporary Economic Policy 22, no. 2 (April 22, 2004): 297. 96 Michelle T. Bensi, David C. Black, and Michael R. Dowd. “The Education/Growth Relationship: Evidence from Real State Panel Data.” Contemporary Economic Policy 22, no. 2 (April 22, 2004): 297. 97 CTBA analysis using (i) US Census Bureau. “Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2012: July 2012 totals.” Last updated December 2012. http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml; and (ii) US Bureau of Economic Analysis. ”2012 State GDP.” Last modified June 6, 2011. http://www.bea.gov/. 98 S.Q. Cornman, P. Keaton, and M. Glander, “Revenues and Expenditures for Public Elementary and Secondary School Districts: School Year 2010–11 (Fiscal Year 2011)” National Center for Education Statistics, U.S. Department of Education, (Washington, DC: September, 2013), 8. http://nces.ed.gov/pubs2013/2013344.pdf. Additionally, similarly to endnote 90, CTBA calculated the percentage of the state’s contribution for amortizing unfunded pension liabilities (“amortization contribution”) from the total figure of education spending in Illinois ($1,638.9/$27,061.5 = 6.056%) in the U.S. Department of Education, National Center for Education Statistics report. CTBA included the normal pension cost in total state spending. Then CTBA ‘pro-rated’ the ‘Current expenditures per Pupil’ median figure of Illinois by 93.944% (1 - .06056). This new figure, a new approximation of the state’s median ‘Current expenditure per Pupil’, is $9,459. 99 Illinois State Board of Education, FY2014 Operating Budget, Public Acts 98-033 & 98-034 (Springfield, IL: June, 27, 2013), http://www.isbe.net/budget/FY14/fy14-budget.pdf. 100 Education Funding Advisory Board, Illinois Education Funding Recommendations (Springfield, IL: January 2013), 1. 101 State of Illinois Comptroller, GAAP Fund Balance, http://www.ioc.state.il.us/index.cfm/fiscal-condition/gaap-fund-balance. 102 COGFA, State of Illinois Budget Summary: Fiscal Year 2014 (Springfield, IL: August 1, 2013), 26. 103 Sources: FY2000 unadjusted appropriations from Governor’s final budget summary for FY2000; and FY2014 CTBA analysis PA 98- 34, PA 98-35, PA 98-17, PA 98-33, PA 98-27, PA 98-64, PA 98-50, passed by the 98th General Assembly. Inflation for healthcare inflated by Midwest Medical Care CPI; all other appropriations adjusted using ECI-C and Midwest CPI from the BLS as of January 2014, and population growth from the Census Bureau as of January 2014. 104 FY2009 net appropriations were $29.20 billion, as reported in GOMB, FY2010 Proposed Operating Budget (Springfield, IL: March 2009), Ch. 2-12. 105 CTBA analysis using: (i) US Census Bureau. “Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2012: July 2012 totals.” Last updated December 2012. http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml; and (ii) US Bureau of Economic Analysis. ”2012 State GDP.” Last modified June 6, 2011. http://www.bea.gov/. 106 CTBA analysis using: (i) US Census Bureau. “Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2012: July 2012 totals.” last updated December 2012. http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml; (ii) National Association of State Budget Officers, Fall 2012: Fiscal Survey of the States (2012), 4. (iii)General Fund budgets from all 50 states. 107 CTBA analysis using: (i) National Association of State Budget Officers, Fall 2012: Fiscal Survey of the State (2012), 4. (ii)General Fund budgets from all 50 states. (iii) US Bureau of Economic Analysis. “2012 State GDP.” Last modified June 6, 2013. http://www.bea.gov/. 108 US Census Bureau. “2011 State Government: Total Full-Time Equivalent State Employees.” Accessed July 10, 2013. http://www.census.gov/govs/apes/. 109 The structural deficit model shown in Figure 15 was created before the recent pension legislation (Public Act 98-599) was signed into law. PA 98-599 reduces the state’s future contributions to the state retirement systems by reducing benefits for current employees and retirees. However, that legislation will be litigated and may be found unconstitutional because of Illinois’ state constitutional protection of public pension benefits. 110 GOMB, 2014 Three Year Projection (Springfield, IL: January 1, 2014). 111 COGFA, Monthly Briefing for the Month Ended: October 2013 (Springfield, IL: October 2013). 112 GOMB, 2014 Three Year Projection (Springfield, IL: January 1, 2014).

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113 Spending assumptions for FY2018-FY2025: (i) projecting spending on core services using the Congressional Budget Office’s 2013 projections on wage growth, and population growth using the Illinois Department of Commerce and Economic Opportunity’s population projections; (ii) pension contributions based on the funding plan put in place by Public Act 88-593; (iii) statutory transfers are projected based on historic Midwest CPI-U growth and population growth using the Illinois Department of Commerce and Economic Opportunity’s population projections; and (iv) bond debt service is the General Revenue Fund schedule reported by the Comptroller in FY2012 Bond Indebtedness and Long Term Obligations. Revenue estimates beyond FY2017 assume (i) state source growth will be in-line with historic rate of 2.8 percent and (ii) federal funding will be flat. 114 New pension contributions for FY2016-FY2017 from GOMB, 2014 Three Year Projection (Springfield, IL: January 1, 2014); projections for future years estimated using contributions from State of Illinois, Investor Presentation: $1,000,000,000 State of Illinois General Obligation Bonds Series, February 2014 (Springfield, IL: January 24, 2014) and contributions for the Judges Retirement System from COGFA, Special Pension Briefing (Springfield, IL: November 2013), 8. 115 Hugh Stretton, Economics: a New Introduction (London: Pluto Press, 1999), 623. 116 Institute on Taxation and Economic Policy, Who Pays? A Distribution Analysis of the Tax Systems in All 50 States, Fourth Edition (Washington, DC: January 2013), 35. The only state with a higher state and local tax burden on the lowest 20% of families is Washington, which does not have a state personal income tax. 117 Michael Mazerov, Cutting Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies (Washington, DC: February 19, 2013). 118 Matthew Knittel, Susan Nelson, Jason DeBacker, John Kitchen, James Pearce, and Richard Prisinzano, Methodology to Identify Small Businesses and Their Owners (Washington, DC: Office of Tax Analysis, U.S. Department of Treasury, August 2011), 36. 119 Donald Bruce and John Deskins, “Can tax policies be used to promote entrepreneurial activity?” (Washington, DC; February 2010). 120 Donald Bruce and John Deskins, “Can tax policies be used to promote entrepreneurial activity?” (Washington, DC; February 2010). 121 CTBA analysis of U.S. Bureau of Economic Analysis, National Income and Product Accounts Tables. Washington: Bureau of Economic Analysis, December 20, 2013. (Table 1.1.5. Gross Domestic Product). 122 John Springer and Heidi Goldberg, Relieving the Recession: Nineteen Ways States can Assist Low-Income Families During the Downturn (Washington, DC: Center on Budget and Policy Priorities, February 2, 2002). 123 J. Bradford DeLong, The Size of the Multiplier and the Marginal Propensity to Consume (UC Berkeley, Department of Economics: March 1998). 124Joseph Stiglitz – “Letter to Governor David A. Paterson,” March 2008, Columbia University Business School. 125 Federation of Tax Administrators, State Individual Income Taxes (Washington, DC: January 1, 2013) http://www.taxadmin.org/fta/rate/ind_inc.pdf. 126 Institute on Taxation and Economic Policy, States with “High Rate” Taxes are Still Outperforming No-Tax States (Washington, DC: February 2013). 127 Institute on Taxation and Economic Policy, States with “High Rate” Taxes are Still Outperforming No-Tax States (Washington, DC: February 2013). 128 United States Bureau of Labor Statistics, Local Area Unemployment Statistics: Illinois employment data, seasonally adjusted, 2000- 2013. Data retrieved October 2, 2013. 129United States Bureau of Labor Statistics. State and Area Employment Division. Illinois employment data, seasonally adjusted, 2000- 2010. Data retrieved 10-26-2010. 130 Matt Sherman, More Budget Belt-Tightening Means More Job Losses for States (Washington, DC: Center for Economic and Policy Research, September 2009). 131Illinois Constitution Article IX, Section 3(a).

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Illinois School Funding Reform Commission (ISFRC) Opportunity to Provide More Options to Re-Enroll High School Dropouts

Two Possible Options to Develop Funding and Therefore More Programming to Re-Enroll High School Dropouts as Part of the Illinois School Funding Reform Commission (ISFRC) Regarding Revising the School Funding Formula

In Illinois, there are over 70,000 high school dropouts in Illinois ages 16 to 20, and in Chicago there are over 25,000 high school dropouts 16 to 20 years old.

The Illinois School Funding Reform Commission has a critical opportunity to provide more high school dropouts with the option to return to school and earn a high school diploma and to successfully transition to college, employment and/or further training.

Below are two possible options for funding more programming that would re-enroll high school dropouts using evidence based research, mirroring the best practices research for programming to successfully re-enroll high school dropouts so that they could earn a high school diploma and successfully transition to college, employment and/or further training.

These two possible options would support school districts to develop and provide comprehensive, community based, small (150-200 students) schools/programs to successfully re-enroll and graduate high school dropouts.

1. There could be a per-student funding level to re-enroll high school dropouts that would provide an adequate level of funding to provide program elements that rest upon evidence based/best program practices.

The elements to successfully re-enroll, engage and graduate high school dropouts are evidence based/best program practices that detail the specific requirements to support a level of adequacy that will provide successful education of re-enrolled dropouts. These elements are outlined in the attached paper.

The attached paper details the evidence based elements to provide educational success for re-enrolling and graduating high school dropouts require a level of funding of at least $13,000 per re-enrolled high school dropout.

This formula must provide for a minimal threshold number of re-enrolled dropouts for programs that are new programs beginning from no experience and programming. This minimum would be at least 60 re-enrolled high school dropouts for programs that are starting from scratch.

Other programs that are already providing services for re-enrolled high school dropouts would be able to add re-enrolled high school dropouts to their existing programs without a minimum. These re- enrolled high school dropouts would simply be added to the numbers of re-enrolled high school dropouts at an already existing program. They would be new students at the existing program with an adequate funding level as designated by the formula driven by evidence based/best practices to successfully educate re-enrolled dropouts.

This proposal seems consistent with the process of the Illinois School Funding Reform Commission (ISFRC) in terms of developing a more equitable state school funding formula. The ISFRC examines the elements and overall picture of evidence based programming which establishes the level of per student funding in a logical and coherent way so that programs are developed and adequately funded based upon evidence and best program practices for the particular students to be served.

As described above, there are clear evidence based/best program practices that detail the elements of developing and operating a successful program to re-enroll high school dropouts. And the development of these basic elements and overall program design to successfully re-enroll high school dropouts drives a specific level of funding that is at least $13,000 per re-enrolled high school dropout, which will provide a level of funding adequacy.

The Youth Connection Charter School (YCCS) is a multi-site, not-for-profit charter school with 19 small, community based and run schools with enrollments of 150-200 and engaging educational programming along with comprehensive support services. Located in Chicago, YCCS contracts with the Chicago Public Schools (CPS) system and has 4,200 slots, re-enrolls 5,600 older high school dropouts and graduates 1,400 each year. YCCS has operated since 1997 and has a School Quality Rating Policy (SQRP) of 1, which is excellent and demonstrates the evidence based elements of these small, comprehensive schools to re-enroll, engage and graduate acutely high-risk high school dropouts.

2. There could be a formula for state funding that would specifically provide an incentive for a school district to re-enroll high school dropouts who have left the school rolls, 16-20 years old. (See the attached paper for a more detailed explanation). The formula would be a weighting of 2x thestudent funding formula for each re-enrolled high school dropout. This would provide the necessary funds to develop a comprehensive, evidence based, best practice schools to successfully re-enroll and graduate out-of-school youth.

This formula must be coupled with the clear directive that the schools to be developed with this incentive funding must follow evidence based/best program practice design in order to successfully reach, engage, educate, graduate and transition out-of-school youth (The attached paper details the evidence based/best program practices design).

This proposal has to be looked at carefully because it might be confused with the current discussions and thinking about adequacy for developing successful program resting upon evidence based/best practices. A confusion could result in that the process outlined in number 1 outlines successful elements that then drives the type of programming that is required and therefore the level of funding to develop the adequacy of programming. As outlined above, a formula looking at the elements of successful programming for high school dropouts would require a funding level of at least $13,000 based on evidence based/best program practices. Proposing a 2x funding formula could lead to a confusion where people might think the level of funding would be 2x $13,000 for a total of $26,000. This is not what we are proposing. This needs to be kept in mind in terms of this proposal of 2x the funding level for re- enrolled high school dropouts.

For each graduating re-enrolled dropout, studies have shown that Illinois tax payers will save over $290,000 over the lifetime of the graduated re-enrolled dropout in terms of that student earning a high school diploma, which means that they will earn more income, pay more taxes, and use the welfare, prison and healthcare systems less. Numerous studies by Dr. Andrew Sum of the Center for Labor Market Studies at Northeastern University in Boston, MA, Professor Dr. Russell Rumberger from UC Santa Barbara and other studies have demonstrated the cost benefit analysis of graduating re-enrolled high school dropouts.

With all of the shootings in Chicago, the re-enrolled students we are getting now are much tougher and suffer from extensive trauma from all the shootings they are witnessing. They need much more support services, trauma based care and other services to help them succeed. So, additional funding is definitely needed.

Doing this would provide the students with the opportunity to become successful adults by earning a high school diploma, reducing the violence and providing a strong workforce that will strengthen Illinois’ economy.

These two options would provide state student reimbursement for school districts that re-enroll dropouts, and the programming to be developed and implemented must be designed using the best practices/evidence based small, comprehensive schools using the elements and design as outlined by the materials that are attached. If the school districts do not do programs designed along best practices/evidence based programming, it would just end up providing the school districts with more funding for doing the same old stuff and not providing effective programs. This evidence based model program design (that is attached) details the type of program that should be established to successfully re- enroll high school dropouts.

Background

The 2006 – 2008 State Task Force on Re-Enrolling Students Who Dropped Out-of-School led to the groundbreaking legislation in the spring session of 2009, to significantly expand the slots for charter schools in Chicago and across the state and the slots for contract schools in Chicago. The legislation also led to the potential to develop, in Chicago, 5 more multi-site, not-for-profit, charter schools for high school dropouts with each charter school having up to 15 small schools under the umbrella of the multi-site charter school, and each multi-site charter school could develop up to 1,875 slots to re-enroll high school dropouts. If it would have been developed, the total would have been 9,375 slots to re-enroll and educate over 12,000 high school dropouts each year so that they can get their high school diploma and move on to college, employment or further training after graduation.

Unfortunately, this would not come to be because Barbara Byrd Bennett, as the CEO of Chicago Public Schools, decided to fund for-profit, heavily computer based programs whereby the re-enrolled dropouts would only be in class for three hours a day, and there would be very little, if any, support services and minimal staffing. The programs were designed to have the students work mainly on computers, which does not work as our experience doing this for 40 years has shown us. The schools have an official attendance rate of 40-50%. But a CPS site visit audit of these programs in the spring shows their attendance was far lower, and their official enrollment numbers of students were inflated a great deal. A series of articles by WBEZ and Catalyst on these for-profit schools details the significant problems that these schools have with their 3-hour a day, computer based, minimal staffing with very little support services.

The problem is that the students going to these for-profit schools may get a quick diploma, but they will not get the academic and soft skills they need to be successful after they graduate. Our experience is that the re-enrolled students in YCCS need longer term programs reflecting evidence based/best program practices that not only build their academic skills (reading, math, comprehension, writing, critical analysis, etc.), but also their “soft skills”, i.e., habits of showing up on time, working together with other people, following instructions, completing tasks and a host of other skills that they will need to succeed in college, training and/or employment after they graduate from high school.

The other piece of legislation that passed in 2009 was the Illinois Hope and Opportunities Pathways through Education (IHOPE). In the ISBE Race to the Top (RTT) proposal, $25 million was included for IHOPE, which would have served as start-up money to develop programs across the state to re-enroll dropouts through Regional Offices of Education (ROE). ROE’s would have received a percentage of the money in IHOPE of what their numbers of dropouts were versus the total number of dropouts in the state. The ROE would have to have a planning process involving local community based organizations that work with dropouts, the local community college(s), and local school district(s). The ROE would submit a proposal to ISBE, and, hopefully, it would be funded. Unfortunately, although there was $25 million in the ISBE Race to the Top (RTT) proposal in November 2009, the first and second ISBE RTT proposals were not funded. By the time the third ISBE RTT proposal was funded, it was only for $43 million with no funding for IHOPE.

So, all of the legislation that was passed in the 2009 spring legislative session to significantly increase the numbers of out-of-school high school dropouts to return to evidence based/best practice programs, unfortunately, did not lead to re-enrolling more high school dropouts.

The Illinois School Funding Reform Commission has a critical opportunity to provide more high school dropouts with the option to return to school and earn a high school diploma and to successfully transition to college, employment and/or further training.

In order to try to implement more programming for dropouts, the crucial point is that the re-enrolled dropout would be served in a small school that would be designed using evidence based/best practices programming that is comprehensive, both educationally and in terms of support services, in order to successfully engage, enroll, educate and graduate the re-enrolled students.

It takes about two years or longer for the re-enrolled students to graduate because the average YCCS re-enrolled student is 18 years old, has only enough credits to qualify as a late freshman or early sophomore and their reading and math scores are, on average, 6th grade or lower. So, to be effective, the re-enrolled students need to be enrolled for a longer time and require comprehensive education and support service programming, which is not the case of the for- profit schools set up by Barbara Byrd Bennett.

For more information please contact:

Jack Wuest, Executive Director of Alternative Schools Network at (312) 259-2360 / [email protected]. JW/EW 110116 Illinois Task Force on Re-Enrolling Students Who Dropped Out of School Final Report to the Illinois General Assembly – January, 2008 Appendix E

Characteristics of Successful/Evidence Based Comprehensive Programs Re-enrolling Students Who Dropped out of School

These re-enrolled students are being asked to run a marathon, but the preparation these programs provide is like walking around the block a few times.

There is clear research, decades of experience and very specific program outcome data demonstrating what practices and types of programs work to successfully re-enroll students who have dropped out of school and educate, graduate and help these students make the transition into postsecondary education, training or employment.

Small, community-based alternative schools have a long history of effectively educating and graduating re-enrolled students.37

Programs that are smaller (70 to 200 students) with small classes, a strong and experienced staff and principal, comprehensive support services, innovative education approaches and appropriate funding of at least $11,500 per student (the statewide high school district average for 2004-05 was $12,004 38) are able to succeed with re-enrolled students. The cost per re-enrolled student would be adjusted according to the local conditions. The $11,500 figure was in 2008. This figure should be $12,995 in terms of 2016 funding.

Re-enrolled student programs should be held to strict performance standards measuring enrollment, attendance, skill gains, credit gains, graduations and entrance into jobs or college.

Listed below are key points for developing high performance schools for re-enrolled students based upon 30 years of successful program experience and research.

A. Programs are small (70 to 200) at a separate school site that site-governed and administered with a distinct identity.

Small School Size (70 to 200) with small, personalized classes (1 to 10 students), and a unified and common focus for the entire school, with personalized and comprehensive programming. Local, Separate School Site with Local Decision-Making on program and budget issues. Specific Performance-Based Goals and Outcomes measuring enrollment, attendance, skills, credits, graduations, and transition to college, training or employment as well as other competency-based measures.

B. Strong leadership is provided by the principal/director that builds high teacher and staff expectations for student success. Teachers and staff have high expectations for students, knowledge of and experience of effective teaching methods, and a high level of commitment supporting student success.

Strong, Experienced Principal and Experienced, Competent Teaching Staff who have high expectations for every student to learn deeply and broadly. Respect and Responsibility Are Key Values for Everyone Involved with The School – staff, students, parents, and community residence.

Illinois Task Force on Re-Enrolling Students Who Dropped Out of School Final Report to the Illinois General Assembly – January, 2008

Continuous Staff Training with time for staff to plan and collaborate.

C. Students choose to attend and a positive peer culture develops in a family atmosphere built on a cooperative effort to succeed.

Students are there by their choice. A positive peer culture develops and students support program goals. A family atmosphere is developed, and students engage in a cooperative effort to help one another achieve and succeed.

D. Comprehensive long-term program combines education, employment, skill training and other needed support services. There are high program standards and expectations for student learning; work experience and learning are integrated so that students have the opportunity to earn a high school diploma, find a decent paying job, go to college, or get advanced skill training.

Per Student Funding Close to the average 2005-06 operating cost of $12,300 for Illinois secondary schools. In 2016 dollars this would be $12,995. Comprehensive Program Focus combining education, employment and support services.

Employment and Internship Programs are offered during the school year, after-school and summer school programs that link internships, work and learning. Small Teams of Students Supported by Full-Time, Paid Mentors who worked to retain and graduate students. High Expectations for Students to Learn Both Broadly and Deeply linked to the highest state standards. A Comprehensive High Technology Learning Center providing high speed Internet access and a broad-based, highly sophisticated curriculum focusing on academic and world of work subject areas, Students Learn Actively Through Study and Action. Summer Program Combining School and Work.

These programs characteristics of effective programs for programs serving high-risk and out-of-school students come from the following reports:

1. Ford Foundation Report on Alternative Schools 1974 2. Alternative Schools for Disruptive Youth, Robert Arnove, Indiana University 1976 3. The U.S. Department of Labor Youth, Knowledge, Development Reports 1980 4. Effective Programs for the Marginal High School Student, Gary Wehlege, University of Wisconsin, Madison 1982 5. Can We Help Dropouts: Thinking About the Undoable, Dale Mann, Columbia University 1986 6. School Dropouts – Survey of Local Programs, General Accounting Office 1987 7. Reducing the Risk – Schools as Communities of Support, University of Wisconsin 1989 8. Effective Program Options for Serving Out-of-school Youth, Center for Human Resources, Brandeis University, Cary Grove 1984 9. Key Components and Characteristics for Effective Programs for Dropouts and At-Risk Students. A Joint Statement to Congress by sixteen leading education and training researchers 1995 10. Alternative Schools: The State of the Art, Mary Anne Raywaid, Hofstra University. 11. Models of Reform: A Comparative Guide, Herbert Walberg, University of Illinois, Chicago 1998 Illinois Task Force on Re-Enrolling Students Who Dropped Out of School Final Report to the Illinois General Assembly – January, 2008

12. Numerous books and articles on small schools from 1995 to present. 13. Successful experience of Alternative Schools Network youth, skills, development and training program for out-of-school foster care youth as reported in annual program reports measuring attendance, skill gains, credit gains, promotions, graduations and transitions/placements since 1999. Also the Youth Connections Charter School successful experience of re-enrolling out-of-school students since 1997 as documented in its annual program reports. 14. These successful program characteristics were also endorsed by the following leaders and experts in education in 1995. Their positions are listed as of that date:

Dr. Robert Taggart, Professor, Howard University; Director, Remediation and Training Institute; Former Director, U.S. Department of Labor National Youth Employment Programs. Dr. Stephen F. Hamilton, Professor and Chair, Department of Human Development and Family Studies; Director of the Cornell Youth and Work Program, Cornell University. Norm Fruchter, Co-director, Institute for Education and Social Policy, New York University; Program Advisor, Aaron Diamond Foundation. Dr. Mary Anne Raywid, Professor of Administration and Policy Studies; Director of the Center for the Study of Alternative Education, Hofstra University. Dr. Michelle Fine, Professor of Psychology, City University of New York; Graduate Center. Dr. Gary Wehlage, Associate Director, Center on Organization and Restructuring of Schools, University of Wisconsin – Madison. William Spring, Member, Boston School Committee; Former White House Domestic Policy Advisor. Dr. Alexandra Weinbaum, Co-Executive Director, School and Community Services, Academy for Educational Development, New York. Dr. Donald Moore, Executive Director, Designs for Change, Chicago. Dr. Richard Lacey, President, Lacey Associates; Former Program Officer, Ford Foundation. Dr. Paul Osterman, Professor, Human Resources and Management, Sloan School Management, Massachusetts Institute of Technology. Tony Baez, Faculty, University of Wisconsin Center for Urban Community Development, Milwaukee, Wisconsin. Professor Andy Sum, Director, Center for Labor Market Studies, Northeastern University, Boston, Massachussetts. Dr. G. Alfred Hess, Jr., Executive Director, Chicago Panel on Policy. Dr. Joe Nathan, Director, Center for School Change, Humphrey Institute of Public Affairs, University of Minnesota. Gary Walker, President, Public/Private Ventures, Philadelphia.

Illinois Task Force on Re-Enrolling Students Who Dropped Out of School Final Report to the Illinois General Assembly – January, 2008

Performance Outcomes for Programs Re-enrolling Out-of-School Students

The Task Force has identified the following outcomes as essential in terms of monitoring student and overall program progress.

1) Enrollment – Programs would report monthly and yearly enrollment levels, measuring student continuity.

2) Attendance – Programs would report individual student and total student monthly and yearly attendance.

3) Skills Gains – The skill gains of each re-enrolled student would be measured, as well as data collected about the skills gained by all students in an individual program and for the project as a whole, if there is more than one program.

4) Credit Gains – The credit gains of each re-enrolled student would be measured, as well as data collected about the credit gained for all students in the individual program and for project as a whole, if there is more than one program.

5) Promotions – Individual re-enrolled student promotions would be measured, i.e., the number of freshmen who became sophomores, sophomores became juniors, and juniors became seniors, as well as matriculation levels for individual programs and the project as a whole, if there is more than one program.

6) Graduation – The graduation rate is determined for each individual program and the project as a whole, providing the number of students who graduate for each. A reasonable percentage range would be based upon the difficulty and high-risk status of the students who are re-enrolled.

7) Transition – Measure the transition of students to post-secondary education (community college, four-year colleges, graduate school), employment, career and technical education, and military service. The Proposal Would Be to Develop a 2x State School Formula Weighting Incentive for School Districts to Re-Enroll High School Dropouts Designed According to Evidence Based/Best Program Practices to Successfully Re-Enroll and Graduate High School Dropouts

The proposal is to see if there could be an extra weighting to the state student reimbursement formula at perhaps 2x for school districts that would re-enroll high school dropouts that would set up programs using evidence based research, which would mirror the best practices research for programming to successfully re-enroll high school dropouts so that they could earn a high school diploma and successfully transition to college, employment and/or further training.

There are various weightings to develop broader and deeper programming for low-income students, special education students, etc. This weighting for high school dropouts would be in this tradition and would provide incentives for school districts to develop and provide comprehensive, community based, small (150-200 students) schools/programs to successfully re-enroll and graduate high school dropouts.

For each graduating re-enrolled dropout, studies have shown that Illinois tax payers will save over $290,000 over the lifetime of the graduated re-enrolled dropout in terms of that student earning a high school diploma, which means that they will earn more income, pay more taxes, and use the welfare, prison and healthcare systems less. Numerous studies by Dr. Andrew Sum of the Center for Labor Market Studies at Northeastern University in Boston, MA, Professor Dr. Russell Rumberger from UC Santa Barbara and other studies have demonstrated the cost benefit analysis of graduating re-enrolled high school dropouts.

With all of the shootings in Chicago, the re-enrolled students we are getting now are much tougher and suffer from extensive trauma from all the shootings they are witnessing. They need much more support services, trauma based and other services to help them succeed. So, additional funding is definitely needed.

Doing this would provide the students with the opportunity to become successful adults by earning a high school diploma, reducing the violence and providing a strong workforce and strengthening Illinois’ economy.

In a nutshell, there are two key elements that must be joined in order for this proposal to be successful. Providing 2x the state student reimbursement for school districts that re-enroll dropouts must implement programs/schools that the school districts develop and/or support for these re-enrolled dropouts have to be designed using the best practices/evidence based materials that are attached. If the school districts do not do programs designed along best practices/evidence based programming, it would just end up providing the school districts with more funding for doing the same old stuff and not providing effective programs. This evidence based model program design details the type of program that should be established to successfully re-enroll high school dropouts.

The 2006 – 2008 State Task Force on Re-Enrolling Students Who Dropped Out-of-School led to the groundbreaking legislation in the spring session of 2009, to significantly expand the slots for charter schools in Chicago and across the state and the slots for contract schools in Chicago. The legislation also led to the potential to develop, in Chicago, 5 more multi-site, not-for-profit, charter schools for high school dropouts with each charter school having up to 15 small schools under the umbrella of the multi-site charter school, and each multi-site charter school could develop up to 1,875 slots to re-enroll high school dropouts. If it would have been developed, the total would have been 9,375 slots to re-enroll and educate over 12,000 high school dropouts each year so that they can get their high school diploma and move on to college, employment or further training after graduation.

Unfortunately, this would not come to be because Barbara Byrd Bennett, as the CEO of Chicago Public Schools, decided to fund for-profit, heavily computer based programs whereby the re-enrolled dropouts would only be in class for three hours a day, and there would be very little, if any, support services and minimal staffing. The programs were designed to have the students work mainly on computers, which does not work as our experience doing this for 40 years has shown us. The schools have an official attendance rate of 40-50%. But a CPS site visit audit of these programs in the spring, shows their attendance was far lower, and their official enrollment numbers of students were inflated a great deal. A series of articles by WBEZ and Catalyst on these for-profit schools details the significant problems that these schools have with their 3-hour a day, computer based, minimal staffing with very little support services.

The other piece of legislation that passed in 2009 was the Illinois Hope and Opportunities Pathways through Education (IHOPE). In the ISBE Race to the Top (RTT) proposal, $25 million was included for IHOPE, which would have served as start-up money to develop programs across the state to re-enroll dropouts through Regional Offices of Education (ROE). ROE’s would have received a percentage of the money in IHOPE of what their numbers of dropouts were versus the total number of dropouts in the state. The ROE would have to have a planning process involving local community based organizations that work with dropouts, the local community college(s), and local school district(s). The ROE would submit a proposal to ISBE, and, hopefully, it would be funded. Unfortunately, although there was $25 million in the ISBE Race to the Top (RTT) proposal in November 2009, the first and second ISBE RTT proposals were not funded. By the time the third ISBE RTT proposal was funded, it was only for $43 million with no funding for IHOPE.

So, all of the work we did and the major legislation that was passed in the 2009 spring legislative session, unfortunately, did not lead to re-enrolling more high school dropouts.

In order to try to implement more programming for dropouts, I would like to talk to you about an idea to try to develop more small schools for re-enrolled dropouts by providing an incentive for school districts to re-enroll dropouts in terms of providing the school district a double weighted state school reimbursement for each high school dropout that would be re-enrolled, and a crucial point is that the re-enrolled dropout would be served in a small school that would be designed using evidence based/best practices programming. The double weighted student reimbursement together with the evidence based/best practices programming has to be provided to be comprehensive, both educationally and in terms of support services, in order to successfully engage, enroll, educate and graduate the re-enrolled students.

The short paper that outlines the details of a design to be followed to create successful programs to re-enroll dropouts has been drawn from evidence based/best practices research and rests upon strong research, experience and practice. The Youth Connection Charter School (YCCS) in Chicago is a multi-site charter that has over 19 years of experience re- enrolling high school dropouts through 19 small (150-200 students), community based and run, alternative school. YCCS is rated 1 on the SQRP rating system used by CPS. 1 is a very high rating. In a given year, YCCS enrolls over 5,700 high school dropouts and graduates over 1,400 each year. It takes about two years or longer for the re-enrolled students to graduate because the average YCCS re-enrolled student is 18 years old, has only enough credits to qualify as a late freshman or early sophomore and their reading and math scores are, on average, 6th grade or lower. So, to be effective, the re-enrolled students need to be enrolled for a longer time and require comprehensive education and support service programming, which is not the case of the for-profit schools set up by Barbara Byrd Bennett.

The for-profit schools have students referred to them from the neighborhood public high schools which removes the students from the neighborhood public high schools’ test scores, and the for-profit schools also award very quick credits and a very quick high school diploma without raising the students’ skills and test scores. In this way, the neighborhood public high schools benefit from referring their difficult students to the for-profit schools, and the neighborhood public high schools can add to their graduation rolls the students that earn quick high school diplomas at these for-profit schools, and in this way, the neighborhood public schools increase their graduation rate and decrease their dropout rate, but often at the expense of the students who go to these for-profit schools who are lured with the promise of getting a quick high school diploma. The problem is that the students going to these for-profit schools may get a quick diploma, but they will not get the academic and soft skills they need to be successful after they graduate. Our experience is that the re-enrolled students in YCCS need longer term programs reflecting evidence based/best program practices that not only build their academic skills (reading, math, comprehension, writing, critical analysis, etc.), but also their “soft skills” of showing up on time, working together with other people, following instructions, completing tasks and a host of other skills that they will need to succeed in college, training and/or employment after they graduate from high school.

For more information please contact:

Jack Wuest, Executive Director of Alternative Schools Network at (312) 259-2360 / [email protected]. JW/EW 102816

Link/Author Summary/Key takeaways

1. Understanding Illinois education finance. There are changes that need to be made to Illinois’ funding formula, but not for the reasons that most lawmakers believe.

Understanding Illinois’ broken education funding Over the past two decades, education spending in Illinois has grown at a rapid pace. Total per-student spending has grown at an system: A primer on General State Aid - Illinois average rate of nearly 5 percent a year. The neediest districts receive a majority of their funding from state sources; over 93 percent ​ Policy Institute of the $5 billion GSA is allocated to foundation districts.

State Funding of Illinois' Education: Let's Clear A key problem in Illinois is not the lack of funds in education, but rather the convoluted and nontransparent funding formulas that Things Up – Part 1 - Taxpayers' Federation of mask where and how dollars are spent. Complex formula changes over the past decade have led to major policy shifts in education ​ Illinois spending, rendering the state’s main funding formulas less effective in meeting their original goals.

General State Aid for Education – Time for an The analysis highlights how a pool of state funds, meant for broad redistribution and equalization, has been channeled to some Overhaul – Part 2 - Taxpayers' Federation of high-property-wealth-growth districts in the form of property-tax relief. It also shows how poverty grants have altered the dynamics of ​ Illinois the GSA and the Foundation Level. And, importantly, it reveals where the most of the money goes.

Busting Forrest Claypool's 4 big myths about CPS Illinois’ funding formula does not discriminate against Chicago students. In fact, it has favored CPS. State spending on CPS has funding - Illinois Policy Institute consistently grown over the past decade and a half. And under Claypool’s own metrics, Chicago has been a winner in terms of state ​ funding. Over the last 10 years, when all state spending on education, including state contributions to pensions, is totaled, Chicago received more in state funding than it would have received under Claypool’s demands.

2. Increased education spending is not Opponents argue that funding inputs are all that matters to improving educational outcomes. However, research has correlated with improved educational consistently proved that there is little correlation between the level of funding and outcomes. outcomes.

State Ed Trends: Academic Performance and Illinois education spending, adjusted for inflation, has increased by 100 percent since 1972. SAT scores, adjusted for participation Spending over the Past 40 Years - Cato Institute and demographics, are virtually unchanged. ​ A New Defendant at the Table: An Overview of These lessons generalize to other states facing school nance litigation.The authors conclude that changes in school funding Missouri School Finance and Recent Litigation - formulas, and the seemingly interminable litigation about those formulas, are not an effective vehicle for addressing achievement ​ University of Missouri gaps or the overall level of school performance.

Does Spending More on Education Improve Continuous spending increases have not corresponded with equal improvement in American educational performance. Long-term Academic Achievement? - Heritage Foundation NAEP reading scale scores and high school graduation rates show that the performance of American students has not improved ​ dramatically in recent decades even though education spending has soared.

3. Skyrocketing pension costs are crowding Record levels of state funding are going to education. It’s just that pension costs are crowding out spending for out spending for Illinois classrooms. classrooms. There is no fixing Illinois’ education system and funding concerns without first reforming Illinois’ broken pension system.

Pensions vs. Schools - Illinois Policy Institute State spending on retirement costs already rivals the total amount the state spends on classrooms. Today, retirement spending is ​ almost equal to classroom spending. And by 2025, if pension spending continues its current trajectory, the amount spent on retirement costs will surpass that spent on classrooms.

CPS pensions: From retirement security to political Chicago teacher pension benefits, fueled by the nation’s highest salaries among the country’s largest school districts, have grown at slush fund - Illinois Policy Institute a pace of more than 6 percent yearly since 1997. Those costs threaten the future of CPS. ​ What’s driving Illinois’ $111 billion pension crisis - The average recently retired, career teacher retired at age 59, currently receives $73,300 in annual pension benefits, and can expect ​ Illinois Policy Institute to receive over $2.2 million in lifetime benefits. 4. Real cost-saving solutions. Only focusing on the state’s funding formula neglects other, more promising areas of reform in education that can save hundreds of millions, if not billions, of dollars annually.

Playing favorites: Ed pension spending favors Two-thirds of Illinois school districts pick up some or all of a teacher’s pension contributions. By eliminating teacher pension pickups, wealthy, suburban schools (Apdx) - Illinois Policy districts could then use those funds to pay for the cost of a teacher pension cost-shift. In 482 school districts, doing this would ​ ​ ​ Institute produce net savings.

Steps and lanes: Understanding how teachers get Public school teachers unions across Illinois have clung to such pay schemes despite evidence that shows salary schedules reward multiple pay raises each year - Illinois Policy teachers for things that have little to do with improving student outcomes. Salary schedules pay all teachers in the same step and ​ Institute lane the same salaries, regardless of that teacher’s skill, effectiveness or achieved outcomes for students.

Cash-strapped Illinois should end master’s degree School districts across Illinois waste more than $941 million a year by giving raises to teachers who earn their master’s degrees, pay bumps - Illinois Policy Institute even though most studies show these degrees do nothing to boost student achievement. ​ Too many districts: Illinois school district Among the key candidates for consolidation are the state’s 859 local school districts, which consume nearly two-thirds of the $27 consolidation provides path to increased billion in local property taxes that local governments across Illinois collect each year. Illinois has the fifth-largest number of school efficiency, lower taxpayer burdens - Illinois Policy districts in the nation. Nearly 25 percent of Illinois school districts serve just one school, and over one-third of all school districts have ​ ​ Institute fewer than 600 students. An additional layer of administration for these districts is inefficient.

The School Staffing Surge: Decades of Between fiscal years 1950 and 2009, public schools grew staffing at a rate four times faster than the increase in students over that Employment Growth in America’s Public Schools time period. Of those personnel, teachers’ numbers increased 252 percent, while administrators and other nonteaching staff Part 1, Part 2 - Friedman Foundation for experienced growth of 702 percent, more than seven times the increase in students. ​ ​ ​ Educational Choice

5. School choice is the solution to meeting the School choice is the single best way to ensure accountability, improved finances and innovation in education. unique needs of each child.

A Win-Win Solution: The Empirical Evidence on Eighteen empirical studies have examined academic outcomes for school choice participants using random assignment, the gold School Choice - Friedman Foundation for standard of social science. Of those, 14 find choice improves student outcomes, six find all students benefit, and eight find some ​ Educational Choice benefit and some are not visibly affected.

Thirty-three empirical studies (including all methods) have examined school choice’s effect on students’ academic outcomes in public schools. Of those, 31 find choice improved public schools. One finds no visible effect. One finds a negative effect.

Twenty-eight empirical studies have examined school choice’s fiscal impact on taxpayers and public schools. Of these, 25 find school choice programs save money. Three find the programs they study are revenue neutral. No empirical study has found a negative fiscal impact.

The Fiscal Effects of School Choice Programs on School choice programs that allow school districts to retain funding for any fixed costs would not harm the fiscal health of public Public School Districts - Friedman Foundation for schools or decrease resources available to students who remain in public schools. ​ Educational Choice

1soatr94.p 12-4 Darien School District 61 11/09/16 Page:1 05.16.10.00.00 Enrollment as of: 10/17/2016 Run On - 11/09/2016 8:32 AM

School Enrollment with Special Education Breakdown for SCHOOL 100 Mark Delay School

American Ind Asian Black Nat Hawaiian White Hisp/Lat Eth Multi-Race Total Total Grade Male Female Male Female Male Female Male Female Male Female Male Female Male Female Male Female 01 0 0 5 6 6 5 0 0 41 33 13 23 2 5 67 72 139 02 0 0 5 5 3 5 0 1 31 38 22 10 6 3 67 62 129 E4 0 0 3 2 2 3 0 0 10 7 5 3 0 1 20 16 36 KG 0 0 5 5 6 8 0 0 48 33 16 15 3 2 78 63 141 TOTAL 0 0 18 18 17 21 0 1 130 111 56 51 11 11 232 213 445

Total Special Education Students: 01 0 0 1 1 2 1 0 0 5 4 4 0 0 0 12 6 18 02 0 0 0 0 2 0 0 0 15 0 1 1 0 0 18 1 19 E4 0 0 1 1 0 0 0 0 8 6 2 0 0 0 11 7 18 KG 0 0 1 1 4 1 0 1 4 2 1 1 0 0 10 6 16 TOTAL 0 0 3 3 8 2 0 1 32 12 8 2 0 0 51 20 71

Eval Code Description Code Male Female Total CSE 48 18 66 1soatr94.p 12-4 Darien School District 61 11/09/16 Page:2 05.16.10.00.00 Enrollment as of: 10/17/2016 Run On - 11/09/2016 8:32 AM

School Enrollment with Special Education Breakdown for SCHOOL 200 Lace School

American Ind Asian Black Nat Hawaiian White Hisp/Lat Eth Multi-Race Total Total Grade Male Female Male Female Male Female Male Female Male Female Male Female Male Female Male Female 03 0 0 6 5 3 11 0 0 40 43 14 10 2 0 65 69 134 04 0 0 4 2 9 4 0 0 34 46 17 13 1 4 65 69 134 05 1 0 3 8 6 12 0 0 36 38 13 11 3 3 62 72 134 TOTAL 1 0 13 15 18 27 0 0 110 127 44 34 6 7 192 210 402

Total Special Education Students: 03 0 0 1 0 5 2 0 0 5 4 4 1 0 0 15 7 22 04 0 0 1 0 0 2 0 0 5 5 2 2 1 0 9 9 18 05 0 0 0 0 2 0 0 0 4 4 1 1 0 0 7 5 12 TOTAL 0 0 2 0 7 4 0 0 14 13 7 4 1 0 31 21 52

Eval Code Description Code Male Female Total CSE 17 13 30 1soatr94.p 12-4 Darien School District 61 11/09/16 Page:3 05.16.10.00.00 Enrollment as of: 10/17/2016 Run On - 11/09/2016 8:32 AM

School Enrollment with Special Education Breakdown for SCHOOL 300 Eisenhower Jr. High School

American Ind Asian Black Nat Hawaiian White Hisp/Lat Eth Multi-Race Total Total Grade Male Female Male Female Male Female Male Female Male Female Male Female Male Female Male Female 04 0 0 1 0 0 0 0 0 0 0 0 0 0 0 1 0 1 06 0 0 2 8 10 11 0 1 39 46 11 15 1 1 63 82 145 07 0 0 6 8 9 13 0 0 43 48 6 8 0 1 64 78 142 08 0 1 7 10 12 8 0 0 47 47 10 11 0 1 76 78 154 TOTAL 0 1 16 26 31 32 0 1 129 141 27 34 1 3 204 238 442

Total Special Education Students: 06 0 0 2 0 1 2 0 0 18 3 2 4 0 0 23 9 32 07 0 0 0 0 0 1 0 0 2 4 4 0 0 0 6 5 11 08 0 0 2 0 2 3 0 0 9 2 1 1 0 0 14 6 20 TOTAL 0 0 4 0 3 6 0 0 29 9 7 5 0 0 43 20 63

Eval Code Description Code Male Female Total CSE 14 6 20 1soatr94.p 12-4 Darien School District 61 11/09/16 Page:4 05.16.10.00.00 Enrollment as of: 10/17/2016 Run On - 11/09/2016 8:32 AM

Totals for All Schools

American Ind Asian Black Nat Hawaiian White Hisp/Lat Eth Multi-Race Total Total Grade Male Female Male Female Male Female Male Female Male Female Male Female Male Female Male Female 01 0 0 5 6 6 5 0 0 41 33 13 23 2 5 67 72 139 02 0 0 5 5 3 5 0 1 31 38 22 10 6 3 67 62 129 03 0 0 6 5 3 11 0 0 40 43 14 10 2 0 65 69 134 04 0 0 5 2 9 4 0 0 34 46 17 13 1 4 66 69 135 05 1 0 3 8 6 12 0 0 36 38 13 11 3 3 62 72 134 06 0 0 2 8 10 11 0 1 39 46 11 15 1 1 63 82 145 07 0 0 6 8 9 13 0 0 43 48 6 8 0 1 64 78 142 08 0 1 7 10 12 8 0 0 47 47 10 11 0 1 76 78 154 E4 0 0 3 2 2 3 0 0 10 7 5 3 0 1 20 16 36 KG 0 0 5 5 6 8 0 0 48 33 16 15 3 2 78 63 141 TOTAL 1 1 47 59 66 80 0 2 369 379 127 119 18 21 628 661 1289

Total Special Education Students: 01 0 0 1 1 2 1 0 0 5 4 4 0 0 0 12 6 18 02 0 0 0 0 2 0 0 0 15 0 1 1 0 0 18 1 19 03 0 0 1 0 5 2 0 0 5 4 4 1 0 0 15 7 22 04 0 0 1 0 0 2 0 0 5 5 2 2 1 0 9 9 18 05 0 0 0 0 2 0 0 0 4 4 1 1 0 0 7 5 12 06 0 0 2 0 1 2 0 0 18 3 2 4 0 0 23 9 32 07 0 0 0 0 0 1 0 0 2 4 4 0 0 0 6 5 11 08 0 0 2 0 2 3 0 0 9 2 1 1 0 0 14 6 20 E4 0 0 1 1 0 0 0 0 8 6 2 0 0 0 11 7 18 KG 0 0 1 1 4 1 0 1 4 2 1 1 0 0 10 6 16 TOTAL 0 0 9 3 18 12 0 1 75 34 22 11 1 0 125 61 186

Eval Code Description Code Male Female Total CSE 79 37 116

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Superintendent Goals 2017 - 2020

Goal #1 Indicator When FY FY FY FY Target Finances 17 18 19 20

Review and Present the findings from Wight & October/November-initial meeting with implement Company. Wight to present the 10 Year Life Safety results from 10-year life December-share report with Facilities safety report Committee and Board of Education

January/February-prepare for requirements of 10 year life safety study and coordinate future projects Stay current Board awareness of future funding Participate in State Funding sessions on Illinois based on the reforms discussions and between DATES School impact of funding model on District #61. Funding Share material with Board of Education at Reform month packets: August, September, Commission October, November and the impact on Evaluate the impact of the funding model, District #61 once identified, on District #61 (Tentatively March 17 and beyond) Develop Document outlining organizational Share structural options with the Board of organizational structures for District #61 currently and Education-December 2016 plan for beyond 2020. future of Discuss options presented to the Board of District Education-January/ February 2017

Code NA PREPARING IMPLEMENTING ACCOMPLISHED 1 November 15, 2016 Superintendent Goals 2017 - 2020

Goal #2 Indicator When FY FY FY FY Target Curriculum and 17 18 19 20 Instruction Provide monthly Board will hear presentations by Assessment and 5Essentials Feedback updates to the Superintendent and Building to Board from: Board of representative on Curriculum and District Perspective: October Education and Assessment Building Level: November community from Curriculum Curriculum and Assessment presented Committees Board packets, from August through May, monthly with Board Packet will have monthly updates providing progress on curriculum development and implementation during the school year. This documents will be on the District website.

Continue the Presentation to the Board of Education on April/May 2017 review of Science Science Education from the Science instruction with Committee a recommendation for future and based on State Standards

Code NA PREPARING IMPLEMENTING ACCOMPLISHED 2 November 15, 2016 Superintendent Goals 2017 - 2020

Goal #2 Indicator When FY FY FY FY Target Curriculum and 17 18 19 20 Instruction Begin the review Social Study committee updates will be October/November: Staff identified to of the Social upcoming serve as committee members Studies curriculum Provide PD opportunities for members related to the of the committee State Standards November/December: Committee formed and begin the process of Social Studies Curriculum review

Analyze Board will be provided with updates on Shared EJH scheduling committee with effectiveness of the progress at EJH on schedule options Board-October elective and elective design programs at all EJH committee working with options levels in the to meet multiple needs with regards to District building schedule related to curriculum needs-September, October,

Code NA PREPARING IMPLEMENTING ACCOMPLISHED 3 November 15, 2016 Superintendent Goals 2017 - 2020

Goal #2 Indicator When FY FY FY FY Target Curriculum and 17 18 19 20 Instruction Examine cohort Board will receive results of students October-feedback to Board on the subgroups over performance sorted by cohort groups progress students have made under time and over time similar circumstances. establish ways to close the District will be presented with ways they achievement are working to close the achievement gaps between gaps for all students groups Provide opportunities to share data and the impact on instruction with Board of Education

Code NA PREPARING IMPLEMENTING ACCOMPLISHED 4 November 15, 2016 Superintendent Goals 2017 - 2020

Goal #2 Indicator When FY FY FY FY Target Curriculum and 17 18 19 20 Instruction Integrate technology and curriculum to meet 21st century skills and knowledge Generate recommendation for future technology needs for the District by establishing the use of technology as an instrument to enhance instruction and student achievement

Code NA PREPARING IMPLEMENTING ACCOMPLISHED 5 November 15, 2016 Superintendent Goals 2017 - 2020

Goal #3 Indicator When FY FY FY FY Target Communication 17 18 19 20 Create opportunities for stakeholders to be involved in: achievement of our student; planning of facilities; and long-term financial and organizational strength of the district Diagnose and improve Administration works with organizational morale throughout available data to prepare for new the District school year-June/July Improvement on climate survey for District; 5Essentials data shared with each building-August/September

Feedback gathered from staff with focus on:

Update on Superintendent Advisory

committee;

Presentation to Board in October Frank conversations with staff at will be shared on website with the District and building level around community; 5Essential data.

Code NA PREPARING IMPLEMENTING ACCOMPLISHED 6 November 15, 2016 Darien Public Schools District #61 DuPage County To: Board of Education From: Bob Carlo Subject: Curriculum and Assessment Update Date: November 11, 2016

The following provides an update on curriculum issues in the district provide by the teacher chairperson for each committee.

This is also posted on the District website under Superintendent News.

Curriculum and Instruction

On Language Art from Kristin Shell

The ELA Committee has been hard at work and has a lot planned for the 2016-2017 school year.

Reading Last school year, the ELA Committee spent a few months reading and discussing the book, The Book Whisperer, by Donalyn Miller. As a result of our book study, the ELA Committee members continue to implement some of the following ideas in their classrooms or at their schools: • Giving students more independent reading time • Having students do book talks or commercials • Having a “Read-In” Day for students • Having bins around the schools called “Little Libraries” for students to pick up a book and read during spare moments when in bus line, at lunch, waiting for their class to take bathroom or water breaks, etc. • Having an all school read aloud • Doing a March Madness bracket with picture books • Having author visits • Having Literacy Nights at school for parents and/or students • Taking a field trip to the local public library or having the library visit the schools • Reading many books by a certain author each month

We have updated District #61’s Reading Instruction Model to better reflect our new learning and understanding of independent reading time.

Writing Our main focus this year continues to be the strengthening of our writing curriculum. In order to meet the Common Core State Standards, we teach writing through the Writer’s Workshop using 6+1 Traits of Writing language. We are constantly looking for mentor texts in order to show students strong writing examples. We continue to develop rubrics where expectations are explicitly stated in order to assess writing pieces. Finally, we look forward to spending time with grade level teams and through vertical articulation meetings looking at our writing curriculum scope and sequence to ensure that our writing instruction connects between grade levels and does not contain any gaps.

Darien Public Schools District #61 DuPage County On Mathematics from Amy Steffgen

The math committee continues to discuss how things are going with the Common Core Standards. We continue to streamline ideas and strategies to support the Common Core Standards. We have been discussing strategies for intervention and ways to keep concepts current even when not taught at that grade level.

On Science from Joe Polasek

Starting this school year, the State of Illinois has new Science Standards called the Next Generation Science Standards or NGSS for short. The Science Committee has been preparing for these new Standards for the last couple of years.

In response to the NGSS each grade level is: • realigning topics to match the NGSS • developing new NGSS based activities and assessments • requesting Science materials needed to teach more in a NGSS style • searching and reviewing new NGSS resources as they become available • receiving NGSS training and professional development

On Staff Development from Mary Andersen

At the last meeting on October 17, 2016 the committee discussed the Survey Results from the August Institute Days and the September SIP Day.

August 22 & 23, 2016 Institute Days survey results: https://docs.google.com/spreadsheets/d/1lD0O3nPQXlb8s12x_CuSTS4LyDj99t4LEscLbRs k0o/edit#gid=1802898694

September 23, 2016 SIP Day survey results: https://docs.google.com/spreadsheets/d/1a4cEtUamviu9JXgHEoQDCF8DxuDmOTPfUJcjvb KBOU/edit#gid=94764268

The committee: o discussed the NGSS training with the ROE; o planned for the September and October SIP Days by formulating the 2- day trainings: September was hands on activities and unpacking the standards & October align current experiment with new NGSS; o reviewed feedback SIP survey; o requested “Submit Planning Time” for special area teachers for the October SIP. o began planning for November 21, 2016 Institute Day.