CHICAGO - Battle lines have been drawn in Illinois over a proposed state constitutional amendment that could force the state to increase school funding between $1.8 billion and $3 billion a year.
The proposed amendment on the Nov. 3 ballot would give the state "preponderant responsibility for financing the system of public education." according to the proposed referendum.
The current state constitution says Illinois has "primary responsibility" for school funding.
Supporters of the amendment say it is needed to strengthen the language of the constitution to guarantee that the state provides most of the funds needed for public education spending.
But opponents say the amendment would cause economically regressive increases in income taxes on businesses and individuals.
Rating agencies, meanwhile, are waiting to see how the state would finance increased school funding if the amendment passes.
The state's share of school funding has dropped to 33% this year from a high of 48% in the 1975-76 school year. About 63% of school funding comes from property taxes, with the remainder from federal funding.
The staff of Gov. Jim Edgar, who has not taken a stand on the issue, interprets the proposed amendment to mean that the state would have to provide at least half of all funding for education - at an estimated increase to the state of $3 billion a year. Illinois currently spends about $3.4 billion annually on education.
Supporters contend the amendment would help equalize school district spending, which currently ranges from $2,250 to $14,000 per pupil each year. State funds are distributed to schools under a complicated school aid formula based on financial need.
"Over the past 20 years, the state has failed to live up to its responsibility to education," said state Sen. Arthur Berman, D-Chicago, who was instrumental in placing the referendum on the ballot.
Berman estimated the plan would cost the state an additional $1.8 billion a year.
The proposed amendment has won the support of teachers unions and education advocacy groups across the state.
Opponents say modifying the wording of the constitution is unnecessary because legislators can change the state's funding of schools under the current constitution.
They also say passage of the measure could result in a 25% to 50% increase in the state's income tax for individuals and businesses.
"We have grave concerns about what [an income tax increase] may mean for the economic climate in Illinois," said Greg Baise, president of the Illinois Manufacturers' Association. The association is part of a statewide coalition of business organizations that has sponsored radio advertising to defeat the measure.
Baise said the coalition supports other measures to equalize school funding disparities, such as changing the state school aid distribution formula.
Although the proposed amendment says the state would have the "preponderant" responsibility for financing public education, it does not discuss the source or distribution of increased funding.
However, state officials say the General Assembly would be charged with those tasks. The Assembly would then have to implement the amendment, if it passes, as early as Nov. 5, when it begins its fall veto session.
Dan Egler, the governor's spokesman, said Edgar would reluctantly support a state income tax increase to implement the amendment if it is passed by voters. During his 1990 campaign for governor, Edgar pledged not to increase taxes.
Political observers and rating agency officials have said that any new school funding would likely be settled in court.
Passage of the amendment also could make moot a pending lawsuit against the state that was filed by a coalition of school districts. The suit claims the differences in property tax wealth throughout Illinois have caused an unconstitutional disparity in spending among school districts.
Rating agency officials said they will monitor how the state meets the requirement if the referendum passes.
Todd Whitestone, a managing director at Standard & Poor's Corp., quality implications for the state and local school districts, depending on the plan drafted to meet the requirement.
He said the state's credit rating probably would not be affected if the state devised a plan that would not affect its cash flow situation or increase its deficit.
"As seen by the two downgrades in the last two years, [the state is] under some pressure. They really don't have extra money to fund [the requirement]," Whitestone said.
In August, the state's general obligation debt was downgraded to AA-minus from AA by Standard & Poor's and to Aa from Aal by Moody's Investors Service because of the state's weakened financial position. In August 1991. Standard & Poor's dropped the state's rating to AA from AA-plus. A little over a month later, Moody's lowered the state's GO rating to Aal from Aaa, a rating the state had held with that agency since 1944.
Standard & Poor's said in a press release that "there could be negative credit consequences for Illinois school districts if a cap on local funding is used as a technique for making the state the "preponderant" source of school funding, and [if) a district's expenditures are not curtailed sufficiently to match available funding sources. "
George Leung, vice president and managing director of state ratings at Moody's Investors Service, said "under [the state's] current budget constraints, the ability of the state to meet this initiative would place additional pressures on an already stringent condition."
Harvey Zachem, an assistant vice president for the Great Lakes region at Moody's, said the measure "may help" school districts if it gives them "more operating flexibility."