Chicago Illinois Real Estate Blog

With irate property owners clamoring for relief, Illinois lawmakers passed a law in 1991 to cap skyrocketing real estate tax bills.

At the time, no one anticipated that more than 17 years later, the rate of inflation—the key measure used in the legislation to limit tax increases—would be less than 1 percent.

In 2008, the annual bump in the rate was an unprecedented 0.1 percent. That means most taxpayers can expect only slight increases in their 2009 tax bills, which are paid in 2010.

But it also means that many school districts and other government agencies will see only tiny increases in the property-tax revenues they will collect next year. And that has sent shock waves around the state, as school districts scramble to adjust their budgets and plan for cuts as early as next school year.

With tax referendum measures unlikely to succeed in the current recession, suburban districts are moving to eliminate everything from staff to band programs and sports teams as they try to cover teacher salaries and other costs that are going up by far greater than 0.1 percent.

"Property taxes are huge for us. They comprise about 56 percent of our revenue stream," said Tom Hernandez, director of community relations for Plainfield Community Consolidated School District 202.

The tax cap as a theory works exactly as intended for taxpayers, he said, and municipalities and other home-rule communities can offset the cap through gas taxes and sales taxes .

"But we can’t do that," he said. "We are limited to the rate of inflation and we are now taking a big hit from it."

John Reiniche, assistant superintendent for business services at Orland School District 135, said his district and others have been closely watching the Consumer Price Index. While there have been no cutbacks in District 135 in personnel or programs as a direct result of the economy and tax cap, the situation will be front and center in setting a tentative budget by June.

"That will definitely be a point of conversation with our board coming down the road in 2010," he said.

Most districts rely on local property taxes to cover the majority of their budgets and don’t anticipate the state coming to the rescue. The state already is behind on sending money to districts for special education, transportation and other costs.

The unease has reached Springfield, where lawmakers have begun filing legislation to change the so-called tax-cap law and provide relief for school budgets.

Taxpayer advocates are wary of any changes.