Common Misdirection Examples

Just as an illusionist employs misdirection to pull off a magic trick, politicians often employ misdirection to place their desired spin on an issue.  Let’s talk about some of the ways our taxing bodies may attempt to mislead us while exploring new ways to take Our Tax Money.  There are several that have been used and will be again in the near future.

One Cent Sales Tax

You’ve got to love the one the local school districts and St Clar County attempted to use a few years back when they wanted to get more of Our Tax Money for school construction/maintenance and for the building of a new jail.  It was the “One Cent Sales Tax”.  Now who for even a second, thought they were serious about a one cent tax?  It was intended to make you believe that it was such an insignificant amount of money that we would never feel it in our personal budgets.  The good news is, no one really fell for it! 

We all knew that it was a One Percent Sales Tax that would be added to the existing sales taxes in place at the time.  Well, they are going to try and do it again.  A County Schools Facilities Tax (CSFT) will probably be coming at you on the November Ballot.  A one percent sales tax to add to the existing 9.35% sales in O'Fallon, for a new total of 10.35%.

Mark my words, it will again be referred to as a “One Cent Sales Tax”.                   

Zero Tax Rate Increase

How about the recent “Zero tax rate increase” proposed by District 90 to help pass the Working Cash Bond sale.  Well, it is a zero tax rate increase only if certain conditions are met.  The tax rate doesn’t increase as long as the district’s aggregate taxable real estate value (Equalized Assessed Value - EAV) of our properties increases by a minimum of 2% per year for the first several years that the bond debt service is being paid.  The argument was that the EAV has increased that much for each of the last 8 years.  Correct.  However, if you look at the 7 years prior to that, EAV never hit 2%!  So if that happens again, we will indeed see a tax rate increase which obviously will raise our property taxes.  Past performance may not be indicative of future performance. 

Speaking of raising our taxes, if your EAV goes up by 2%, your tax bill also goes up by 2%!  The tax rate may not, but your Property Tax Bill will!  There is no winning here folks.  They are determined to get Our Tax Money.

Veterans with Disabilities Standard Homestead Exemption

Here’s a good one also.  “The Veterans’ Tax Exemption puts a much larger tax bill on the rest of us due to the Vets not paying their fair share”.  Well, fair share is pretty tough to define.  More importantly, it really has a minimal effect on what we end up paying.

For example, O’Fallon District 90 has 11 funds in their budget that receive Our Tax Money, 7 of which are restricted, which means they have a set tax rate to apply to our EAV.  No matter how much the Vets don’t pay, the taxing body can only collect so much on the value of our individual properties, therefore nothing is added to our bill to make up for the veteran’s exemption.  Now, the other 4 funds are set by the county to collect only the amount the taxing body must have to cover the costs of the fund.  The largest of these is the Debt Service. 

The loss in revenue to O’Fallon District 90 due to the disable veterans exemption last year was about $2.5 million of $27.2 million collected.  That is roughly 9.0%.  Of that, only $8.0 million would be affected, so a difference of $728 thousand.  There are about 1500 Veteran exempted properties out of the roughly 12,000 taxable properties in the district.   So the $728 thousand is distributed among the remaining 10,500 tax paying properties, meaning about $69.33 per property per year, or $5.78 per month.  I think our Vets are worth that much. 

The State of Illinois is also going to provide ‘make up’ funds to the most disproportionately affected taxing bodies with a greater than 2.5% EAV reduction due to veteran exemptions.  The numbers are not yet in, but it’s anticipated the ‘make up’ will be over a million dollars for O’Fallon District 90.  It’s also worth noting that the fund balances of just the O’Fallon District 90 Operating Funds for fiscal year 2024 will be in excess of $9.0 million even after the Veteran exemptions are applied and before any reimbursement from the state.  So, is O’Fallon District 90 really hurting for tax revenue?

Adequate Fund Balances

Speaking of fund balances, O’Fallon District 90’s Policy Manual requires the Superintendent maintain a 15 – 20% fund balance to revenue ratio across the Operating Funds.  That is 20% of almost $40 million, equating to $8 million in reserves.  A 5% reserve would be $2 million.  Why so much?  If you make $60k a year, do you require $12k in ‘reserves’?  Or at $100k, $20k in reserves.  Wow.  And again, for what purpose? 

The Superintendent will tell you that this policy is to meet the requirements of the Illinois School Board of Education’s (ISBE) “School District Financial Profile” score.  That is ISBE imposed oversight of our districts.  That means the ISBE, “Big Brother” is watching!  If the fund balance was to drop to 10% the school district would still be in the same category as it is now and it would free up $4 million dollars of Our Tax Money!  If it went to 5% (1 million) where it probably should be, then ISBE will “watch us” more closely.  Ring a Ding!

Incidentally, O’Fallon Township High School District 203 maintains fund balances as a percentage of expenditures, not revenues.  That makes more sense as a reserve should be used to compensate for a crisis in expenses, not revenues.  If we had a revenue crisis, such as the county, state or federal government not paying up on time, there are alternative short-term methods for covering those deficits.