Fair Tax Now Off The Table, A More Equitable Approach to Higher Ed Funding is Urgently Needed Now More Than Ever

With the failure of the fair tax amendment on Illinois ballots this fall, there are fewer options on the table to begin closing Illinois' budget hole and adequately fund services essential to our state economy including higher education.

The possible reform of Illinois' longstanding flat tax system couldn't have been more timely as the state continues to reel from the public health and economic fallout of the COVID-19 crisis that has disproportionately affected low-income families and families of color. The pandemic has subsequently been more likely to disrupt the college plans for students of color and low-income students, threatening to widen disparities in college degree attainment, which remains the surest way to the middle class. Now particularly, having a college degree will be crucial in helping students and families across the state recover from this crisis.

On its own, the projected $3.4B in revenue a fair tax system would have brought in wouldn't have been enough to fill our projected state budget shortfall or close existing equity gaps, but it would have been a critical first step. In the immediate term, it could lead to level funding for FY2022, which can provide stability for students who rely on state-based financial aid to access college, and to institutions that depend on state funding for critical programs and services. In the long-term, it could position Illinois to implement a more adequate and equitable higher education funding model that prioritizes funding to institutions serving marginalized communities.

On this side of the election now, our most vulnerable colleges and universities instead remain in the same predicament they were in prior to the referendum: Underresourced due to underinvestment by the state, and bracing for possible cuts that would serve only to worsen their financial position and harm the financially vulnerable students they are more likely to enroll.

We do not envy the budget decisions our lawmakers will have to make in the months ahead. However as they weigh their options, we urge them to make their decisions through an equity lens. For our higher education system, that means lawmakers approaching the funding of higher education as a critical investment in our state's future economic stability and workforce, and prioritizing institutions with significant financial need and the historically marginalized students they disproportionately serve, while making key decisions about that investment.

In our new study, Higher Education Appropriations: A Framework for Equity in Illinois, the Partnership for College Completion discusses this, offering lawmakers a playbook for making higher education appropriations that:

  1. Invest in higher education, even in fiscal crises
  2. Consider the different funding needs of 2-year and 4-year public colleges and universities
  3. Prioritize financially vulnerable students and institutions
  4. Ensure funding comes with accountability and transparency

As we hold out hope that additional federal funding will soften the blows of COVID-19's drastic impact on our state economy, it's critical our lawmakers take the steps that will provide underresourced students more stable footing as they pursue a college degree - whether that be during this crisis or in its aftermath. Adopting a more equitable approach to funding higher education is a strong and necessary next step.

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Without graduated income tax, Illinois state universities brace for ‘almost inevitable’ budget cuts ‘because there’s just nothing left'

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November 12, 2020

by ELYSSA CHERNEY - Chicago Tribune

In Gov. J.B. Pritzker's first remarks after voters rejected his administration's signature proposal for a graduated-rate income tax in Illinois, the first-term Democrat singled out higher education as one of the many state-supported areas that could lose funding as lawmakers try to balance the next budget.

With no new sources of revenue and an expected drop in gains from sales tax during the coronavirus pandemic, Pritzker warned that he is left with few favorable options.

Reducing discretionary funding for the state's 12 public universities and community colleges could make it harder for students to afford college if schools raise tuition to offset the losses, some experts said. And there could be less money to support a grant program for low-income college students who qualify for state assistance in a time when more applicants are expected to seek aid.

While Illinois universities are not expecting any budget changes for this fiscal year, which began July 1, some advocates and policy experts said the long-term implications for Illinois higher education could be severe if new sources of funding aren't found.

"Without new revenue, our fear is that we will continue to see the same trajectory that the state has been on in terms of lower enrollment, especially for Black students," said Kyle Westbrook, executive director of the Partnership for College Completion, a Chicago-based nonprofit.

Over the past two decades, Westbrook said, state appropriations for public universities have remained relatively flat but haven't kept pace with inflation, and a greater share of the funding is being directed to pensions for public university and community college employees.

On top of that, some schools are still reeling from the state's two-year budget impasse under former Republican Gov. Bruce Rauner, Westbrook said. Universities that rely more heavily on state dollars and serve a higher number of lower-income students were disproportionately affected by the funding delays.

"You could argue the situation was dire even before the budget impasse, but that created a crisis in the system as a whole," said Westbrook, who led education policy in former Chicago Mayor Rahm Emanuel's administration. "The failure of the (tax amendment) to pass is so catastrophic for higher ed in the state."

Adam Schuster, senior director of budget and tax research at the right-leaning Illinois Policy Institute, agreed that inflation-adjusted spending on higher education is significantly down. Funding has dropped by nearly 20% since 2010, when accounting for inflation, while spending on pensions has skyrocketed, he said.

But Schuster called for reform to the state pension system, a politically divisive issue, as opposed to changing Illinois' flat income tax rate of 4.95%.

"Estimated progressive income tax revenues were not earmarked for any particular purpose and would have failed to close the state's structural deficit," he said in an email. "Cuts to state spending on higher education stem from the unsustainable growth in contributions to the state pension systems."

Public universities contacted by the Tribune had little to say about the failed constitutional amendment. A spokesman for Illinois State University said the school "will have to wait and see what next year's budget cycle looks like." Meanwhile, a spokesman for the University of Illinois System did not offer comment beyond confirming that no changes to state appropriations were planned for this year.

"It would be premature for us to comment on the current budget cycle or future appropriations until the governor's office and the General Assembly share their plans," said Mike Hines, a spokesman for Northeastern Illinois University.

On Thursday, the University of Illinois Board of Trustees approved a request for an 8.3% increase in state funding next year as officials projected $270 million in costs related to the pandemic. The request is sent to the state Board of Higher Education, the governor and the legislature for consideration.

But Jennifer Delaney, associate professor of higher education at U. of I.'s Urbana-Champaign campus, painted a darker picture. Because higher education spending is the largest discretionary portion of Illinois' budget, it is often the most vulnerable when cuts are required, Delaney said.

Delaney, who also serves on the Illinois Board of Higher Education, said her research shows that higher education funding is more volatile than other spending categories and closely tied to economic conditions. She said the pandemic-related recession exacerbates the situation this year.

"It's almost inevitable that higher ed will be cut because there's just nothing left," Delaney said. "The hope of the (tax amendment) is that it would have brought new or additional revenues in, and without those, it's just not at all clear where the money will come from."

Pritzker's graduated-rate income tax proposal might have provided some relief, but it fell short of the thresholds needed to pass on Election Day. The administration estimated the measure would have generated $1.2 billion in the budget year that ends June 30 and $3.4 billion in future years.

The state remains on shaky financial footing, with the administration projecting a combined loss of $6.5 billion in revenue this year and next year. Pritzker also asked state departments to propose cuts of 5% this year and 10% next year and previously warned there could be a 15% cut to discretionary spending without the constitutional amendment.

In addition to potential cuts, Pritzker said he is considering raising income taxes by 1 percentage point across the board. The General Assembly would have to approve the rate hike.

Melissa Hahn, a spokeswoman for the Illinois Board of Higher Education, released a statement saying "we're still in the budget development process," but did not provide further comment.

During a spring session that was truncated because of the pandemic, the General Assembly passed a $43 billion state budget that held funding relatively steady for education. That was a disappointment for universities, which were hoping to receive a 5% bump in funding before the pandemic hit.

The Illinois Student Assistance Commission, a state entity that manages need-based grants for college students, was also in line to receive an additional $50 million but instead saw its funding frozen at last year's level.

Eric Zarnikow, ISAC's executive director, said he understands that budget challenges were created by the pandemic but hopes lawmakers will continue to prioritize his agency's grants, which are distributed through the Monetary Award Program. MAP saw funding increases in 2018 and 2020, bringing it to a historic high of approximately $451 million.

Zarnikow said he thinks budget constraints might be a long-term issue and that it would help if lawmakers in Washington stepped in.

"In Illinois, as well as across the country, education and particularly higher education has been really impacted by COVID-19," he said. "We think support from the federal government is really going to be important to meet the needs of the education community."

Chicago Tribune's Dan Petrella contributed.

Original article: https://www.chicagotribune.com/news/ct-ilinois-higher-education-graduated-income-tax-20201112-h3nurmlqlra7hkuuneqlr4eqwe-story.html

This article was also featured in the Journal Gazette & Times-Courier, Herald & Review, The Bloomington Pantagraph


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Guest Blog: Fallen Flat on the Shoulders of My Students

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For too long, Illinois' working and low-income residents have borne the brunt of the state's 'flat tax.' A fair tax would ensure the state's wealthiest pay their fair share and Illinois' working and low-income residents have greater access to realizing their dreams - including going to college.

Keisha Rembert

Keisha Rembert | October 2020 
Keisha Rembert is an Assistant Professor at National Louis University. She is a Teach Plus Illinois Policy Fellowship alumna, 2019 Illinois History Teacher of the Year and NCTE's 2019 Outstanding Middle Level Educator in the English Language Arts. The ideas expressed in this piece are the personal opinions of the author and not reflective of or connected to her employer.

My students are the essential workers you see stacking shelves at your local grocery store, the child care workers who are caring for and keeping young children safe, and the ones at the drive-thru window serving you while the world seems paused. They work, attend classes, take care of siblings and ill relatives and oftentimes, have been the sole support for their families during this pandemic. They are the heroes we herald and laud in this time of crisis.

While they gave the lion's share of their energy to care for us all, they are burdened by an unfair tax system that requires more of them still -- as low-income and working people in Illinois pay twice as much as wealthy people in the name of a "flat tax."

My students have given and Illinois has taken.

It is time to right that wrong. A fair tax structure in Illinois means the wealthiest among us pay their fair share, and we do not leave the hefty financial burden to marginalized communities who have long carried this tremendous load.What would a possible state revenue increase of $3 billion a year do for my students, our essential workers? The possibilities are innumerable. It could, first, make additional educational funding more readily available and accessible, enabling my students to continue the education they so desperately desire. Their educational dreams often rest in their ability to pay for their schooling. A fair tax structure could allow for more state-directed dollars to go to financial aid grants like the state's Monetary Award Program (MAP) that makes higher education feasible for them and other Illinoisans for whom college seems like an impossible dream.

With increased revenue and financial investments in higher education, my students mobility to the middle class and beyond is viable.The additional state revenue and financial support could also prevent institutions of higher learning from faltering as was the case for six Illinois institutions who closed their doors in 2019-20. There are educational deserts in our state--places where colleges and universities are virtually nonexistent. More places around the state could fall into this category as institutions have already experienced formidable cuts and are bracing for future cuts to state funding in the coming years.

These cuts impact my students most. They are the ones who have already been disproportionately affected by COVID-19. They are the ones already combatting an opportunity and equity gap.

Read Keisha Rembert's Chicago Sun-Times Letter to the Editor, "Vote for the fair tax to give my college students a fighting chance to get ahead"

My students work hard and deserve to enter a workforce eager and ready to welcome them. The current job and financial landscape look grim for them and without significant changes, like the fair tax amendment offers, the prospect of entering a healthy job market is unlikely with current double-digit unemployment rates. Inability to secure employment means a continuation and expansion of the existing wealth gap.

My students know the perils and feel the effects of Illinois not paying its bills year after year. They have lived with inadequate access to childcare and grown up in schools forced to cut teachers and without proper resources. They deserve more.

The fair tax amendment is a step toward creating a more equitable Illinois. A chance to remove the undue burden my students have been saddled with for far too long. It means more access, more funding, more resources to move Illinois forward. A vote for the fair tax amendment gives my students a chance to realize their dreams.

My mother always told me 'life is not fair.' I hated to hear it and wondered why life couldn't be more fair. Her mantra is essentially what the state of Illinois has been living by with its current tax system. Now is the time to make it fair--it's possible.

Learn more about what the fair tax could mean for Illinois Higher Education here.

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PCC: Vote 'Yes' to Fair Tax and Help Build a Pathway to More Equitable Higher Education in Illinois

Early voting begins today in Illinois, and with it, the opportunity to increase our state's revenue and set the stage for increased funding for higher education. The proposed Fair Tax amendment aims to change the income tax rate from a flat rate (taxing everyone at the same rate) to a graduated rate. Ninety-seven percent of Illinoisans will see either no tax increase at all or a tax cut; this change will increase taxes only on Illinois' wealthiest residents. By passing the fair tax referendum this fall, state leaders will not only raise more than $3B a year, but more importantly, create a pathway to adequately fund colleges and universities, invest in college students, and build a strong future for our state.

Support for a fair tax system could not come at a more pivotal time. The state is reeling from the fallout of an unprecedented public health crisis that has had deep economic implications for colleges, students, families, and Illinois communities. For students, higher education remains the surest way to the middle class and will be more important than ever to help students and their families recover from the pandemic. According to the Pew Research Center, the unemployment rate in May was lowest among workers with a bachelor's degree or higher (7.2%), the only group not to experience an unemployment rate in the double digits. Similarly, those with a postsecondary degree or credential will likely fare better in the recovery, as over 95 percent of jobs created after the Great Recession went to workers with at least some college education.

Amidst the fallout, Illinois colleges and universities have persisted in carrying on their missions. Despite significant strains on existing resources, they continue to deploy critical resources to students and community members who have been most impacted by the virus, demonstrating their unique value to the future vitality of our state. As the state faces the ongoing impact of COVID-19, investment in higher education will be critical to supporting institutions and equipping students with the resources they need to enroll and persist in college and achieve their career aspirations.

However, as the proverbial budget-balancing wheel, without additional funding from the federal government or new state revenue, colleges and universities are preparing for the worst. Just this month, the Governor asked state agencies to plan for 5% cuts in the current year and 10% cuts next year. This is troubling news for all institutions but could be devastating for Illinois' most financially vulnerable colleges and universities, often the same institutions that serve higher percentages of Black and Latinx students. This is particularly concerning now, as COVID-19 is disproportionately impacting Black and Latinx communities and exacerbating inequities experienced by students of color. Cuts to the Monetary Award Program (MAP) or to institutions serving marginalized students will undoubtedly result in more pronounced equity gaps in access and completion for Illinois' Black and Latinx students and students from low-income communities. For many, it could close the door to higher education altogether.

On its own, a fair tax system will not fill our projected state budget shortfall or close existing equity gaps, but it is a necessary first step. In the immediate term, it could lead to level funding for FY2022, which can provide stability for students who rely on state-based financial aid to access college, and to institutions that depend on state funding for critical programs and services. In the long-term, it could position Illinois to implement a more adequate and equitable higher education funding model that prioritizes funding to institutions serving marginalized communities.

When filling out your ballot this fall, vote yes on a tax system that will work towards economic equality and provide Illinois the revenue boost it needs to fund critical services, like higher education.

*Public higher education institutions and employees are limited in their ability to take action on behalf of Fair Tax. If you're interested in supporting a fair tax system in Illinois as an individual, sign on to endorse Fair Tax here. 

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