Although a property tax increase is an effective revenue enhancement strategy, passing one is a substantial challenge. In today’s anti-tax, and in particular, anti-property tax environment, school boards and administrators face an uphill battle to convince taxpayers to increase school funding. Recently, my wife and I went to dinner with some old friends, both of whom were retired. Since this was an election year, the conversation naturally turned to politics as we lamented the ongoing barrage of candidate commercials. At one point I asked them who they supported for office. Even I was surprised by the answer I received since I had always seen my friends as good supporters of education. One of them responded, “Anyone who won’t raise my taxes.” This experience reminded me that school administrators and board members can never afford to take educational support for granted. Rather, they must listen carefully to public opinion. Unfortunately, my friend’s response is typical of how many of our constituents feel.

The reality for school board members and administrators is that winning public support for additional revenues will continue to be a tremendous challenge. Consider this. Since 1990, an average of only 36% percent of operating fund referenda including those asking to increase the limiting rate have succeeded (IASB Newsletter, 2010). As recently as April 2011, only 41% of questions to raise school district tax rates or to issue bonds were approved (IASA Newsletter, 2011). Given these realities, school district leaders need to understand the factors which contribute to this anti-tax sentiment if they plan to execute a successful referendum campaign.

As school leaders plan for a referendum campaign, recognizing the obstacles they will face is critical. A low key, non-publicized referendum approach will not likely succeed. Rather, referendum committees need to convince a wide variety of constituents, often with very different and strongly held positions, of the importance of a tax increase. This raises the question – What factors affect referendum campaigns?

Probably the most common factor is the general public’s perception that taxes are too high. Strike up a conversation with your neighbors about taxes and, in particular, property taxes and I am sure you will hear a great deal of consternation. We see this sentiment echoed during local, state, and federal elections around which politicians regularly ratchet up the anti-tax message.

An additional factor is the public’s perception of the quality of education. Since at least the publication of A Nation at Risk in 1983 which described the perceived shortcomings of our public schools and placed substantial blame for perceived failing on both educators and our educational system, public education has been under national scrutiny. Again and again, we read about the lack of student achievement including declining student performance against international competition. We also hear education opponents arguing that adequate public school funding is already provided if only we used these resources properly. Often these discussions, which can be perceived as a partisan attack on public education, are driven by the media and centered on the need to set higher standards for teachers, administrators, and students. This intense media scrutiny and barrage of negatively-focused reports, as well as federal legislation such as No Child Left Behind, portray our educational system as broken (Beyer & Johnson, 2005).

Another reality is that we live in a society which is me-centered. Let me relate an experience which illustrates my point. As superintendent, it was not usual for me to be confronted by groups of parents who employed high pressure tactics to demand special programs or services for their children, even if this meant that other children were negatively affected. One such event immediately comes to mind. A husband and wife who considered themselves school-community activists wanted their children’s bus stop changed. Their two children had to walk less than a block in a quiet suburban neighborhood to catch the bus. They felt this was inconvenient, particularly in winter, and demanded that the stop be re-located in front of their home.

The business manager and I met with them to discuss their request. After reviewing all pertinent data, we explained to them that we could not move the stop since it would mean a section of the route would have to be revised which would add additional route time. We also pointed out that other children would be inconvenienced by having to walk over from another street. Their response was that they did not care about the route length or other children. They paid taxes and were influential PTA members and their children should be accommodated. When we did not make the change, they threatened to take the issue to the school board and PTA. Over the next few years, they continued to create ongoing controversy using this event to stir others issues.

The important lesson here is not the actual decision made but the fact that administrators regularly deal with some individuals who are “me” focused, rather than willing to consider the greater good. Similar to these parents, when presented with a tax increase request, a significant portion of the population may ask – “What is best for me?” A stumbling block in any referendum campaign is attempting to convince individuals who will not benefit directly from the tax increase that it is in the best interest of the community even if it means that they pay higher property taxes. What is somewhat ironic in my example above is that these parents would actually be referendum supporters since their children would personally benefit from increased school district revenue. However, what might their position be in a few years after their children are grown?

Beside parent special interest groups, referendum planners must research community demographics. Traditionally, those who benefit from a referendum such as parents and employees will vote “yes” at a higher rate the others. However, referendum planners need to keep in mind that not all parents will be supporters. What is important to remember is that communities are primarily comprised of individuals who have little interest in the day-to-day activities of the school.

One such group is taxpayers who either have no children or whose children no longer attend district schools. In one district where I served as an administrator, this group represented almost 80% of eligible voters.

By way of example, let me relate one more story. Several years ago, I had a wealthy friend who I would describe as reasonably community-minded. He owned a very successful business. His children had all been “school stars” both academically and athletically. He had nothing but good things to say about the local school system which his children attended.

One day, after they graduated, our school district went to referendum. As an educator, I was naturally a supporter and assumed from his past history that he would be too. At a neighborhood get-together, the referendum came up. When I said that I was voting for it, I remember being surprised when he said that he would not. For him, money was not an issue. His children had benefited from their educations, and he generally was a positive person. What he next said was instructive. He noted that he had done his share by supporting past referenda and paying substantial property taxes over the years. Now he said it was someone else’s turn since his family would not longer benefit from any tax increase.

What is important to consider from these real life examples is that they highlight the importance of conducting a comprehensive referendum campaign. From my experience, the days of counting on a majority of the community to vote for increased school funding just because the school board supports it or because it is the right thing to do are gone. Today, referendum success is largely linked to winning over more than the traditional “yes” voters.

A referendum is really more of a political than an educational process for which administrators are often unprepared and/or ill-equipped. Many will need the assistance of attorneys and financial consultants to guide them through the referendum process because they maybe unfamiliar with all the legal requirements including adopting a referendum question. Some referendum committees even hire consultants to assist them in the political process. What is probably most useful for you to understand is how to conduct a comprehensive referendum campaign which will be discussed in this section. However, before we do let’s distinguish between the two most common types of referendums: building bonds and operating rate.

Building Bond Referendum

A building bond referendum is primarily facilities-focued. Schools boards, who want to rennovate schools, build additions, or construct new schools, can ask the local taxpayers for a temporary tax increase to generate a specific dollar amount to use for specified improvements. A building referendum is the preferred option when school district lack sufficient operating revenue or reserves to fund a major project. For example, if a school board wants to build a new elemenatary school but needs an additional $20M, the school board would ask the taxpayers for the authority to sell bonds through a referendum. If more than fifty percent of the voters approve, the school board is allowed to tax property owners for the $20M.

Once a referendum is approved by the voters, the school board can sell building bonds to pay for the project. Usually bonds are paid back over a period of at least 15 years. Bond holders receive repayment of their principal with interest over some specified period of time from annual property tax proceeds.

One additional point is worth noting. Building referenda which are “brick and motor” projects generally succeed at a higher rate than requests for operating fund tax increases. From 1990 to 2010, on the average 58% of Illinois school building referenda have succeeded (IASB, 2010). During the the April 2011 election, this figure was only 42% which was still higher than the success rate for operating fund referenda (IASA, 2011).

Operating Referendum

The second type of referendum is designed to increase property taxes permanently for school district operations. Unlike a building referendum with a specified focus, school districts have greater latitude to choose how to use additional tax revenues generated through an operating fund referendum. Most often, these new revenues support educational programs and services. However, before discussing this type of referendum, an important consideration is to recognize the differences in referendum requests between tax-capped and non-tax capped school districts.

According to the Illinois Department of Revenue, PTELL school districts are allowed to seek voter approval to increase property taxes. However, because of recent changes in the law, formulating a referendum question in tax capped counties has become more complex. Sections 18-120 and 18-125 of the Property Tax Code identify four types of referendum questions (Illinois Department of Revenue, 2009). Since these can be confusing, school districts will often employ financial consultants in order to select the most advantageous option.

In non-tax capped school districts, the referendum process has remained essentially the same as in the recent past. When a school board seeks a property tax increase through a referendum, the district asks taxpayers to approve an increase in the tax rate of a specific fund.

The school board may levy the requested rate against the total taxable district EAV as long as the requested tax rate increase does not exceed the state maximum for a particular fund.

To illustrate this, let’s consider an example. Here are our assumptions.

Although the example simplifies the factors and does not include some provisions which school district leaders would normally consider if they were conducting an actual referendum, it does demonstrate the basic process.

To calculate the approximate effect of tax increase on increased school district revenues in the Education Fund, you simply apply the property tax calculation discussed in Chapter 3:

If you are considering a property tax increase through a referendum, remember that you will want to seek professional expertise from an attorney or financial consultant to ensure that you meet all legal requirements.

Given the complexity of passing a referendum, school boards and administrators must develop a comprehensive referendum campaign plan built around a network of multiple stakeholders. Complicating any referendum, though, are state laws which disallow the use of school district dollars to fund the referendum campaign as well as restrictions on when and how school board members and district employees may promote the referendum (Braun, 2008). Consequently, “selling” the referendum falls to a large extent on local residents who must not only lead the process but work many hours. Clearly, school leaders must educate the community about the district’s financial needs if they are to mobilize community support.

A solid referendum campaign has its roots at the school board, staff, and community levels. When the school district administration determines that the additional tax revenues are essential in maintaining current programs and services, educating the school board, employees and local residents as soon as possible is a priority. A lack of understanding about why additional tax revenues are needed usually translates into a lackluster referendum campaign and, subsequently, a failed effort.

One key to success is school board support. Often, some voters look to board members for guidance. District administrators must convince school board members that a referendum is imperative. Without the support of all seven school board members, winning a referendum becomes even more difficult.

Since referendum success rests to a large degree on the comprehensiveness of the referendum process, a key question to consider is – What are the stages in a successful referendum campaign?

To illustrate how a school district might design a successful referendum campaign, let’s consider one employed by a suburban Chicago school district which passed an operating fund increase after failing a prior referendum (Kersten & Armour, 2004).

Phase 1. Building Support

Whether you have failed a previous referendum or are initiating your first in several years, a critical step is getting your message out early through school-community education. Although school district administrators may use a variety of strategies to accomplish this, all include identifying key local leaders and invested stakeholder groups. A successful approach used by our sample school district administrators and school board members was to conduct a series of reflection meetings for community leaders, parents, and district employees several months before the actual referendum day.

These sessions served a variety of purposes including:

From these sessions, a core group of motivated, knowledgeable leaders emerged who formed the heart of the community-based referendum team.

Phase 2: Pre-Referendum Campaign

After building an initial support base, the referendum process entered the pre-referendum campaign phase. At this point, since the school board had not yet officially initiated a referendum, district administrators had the latitude to educate as many residents and staff members as possible about the school district’s financial needs. It was during this critical phase that much of the referendum groundwork was laid including the development of a comprehensive referendum campaign plan. It is important to remember that once a school board votes to place a referendum on the ballot, legal restrictions limit school board and employee involvement. However, it is also important to remember that school board members do not lose their rights as citizens and can serve in an individual capacity on the referendum committee.

During this stage, a critical step was selecting a referendum leadership team which was responsible for developing the actual referendum campaign plan. Since this was pre-referendum, the superintendent and other district administrators were actively involved in the planning process.

As is typical of most successful referenda, the leadership team organized the campaign around a committee structure. Although the number, type, and scope of committees may vary from school district to school district, I have identified below those employed by the case study district.

Voter Registration. As noted earlier, a key to a successful referendum campaign requires getting out the “yes” vote. A good first step is taking every opportunity to ensure that the supporters are registered to vote. Strategies included:

The referendum leadership team used these voter registration activities to increase the likelihood of reaching the “yes” voters.

Public Relations. The leadership team also recognized the value of tapping into local community residents with public relations experience to serve on the public relations committee which was charged with:

The public relations committee was invaluable in getting the referendum message out to voters.

Outreach. School districts are becoming increasingly diverse. As a result, successful referendum campaigns target district diversity whether related to specific age groups or special populations. This district’s outreach committee planned specific activities to reach these unique groups. In addition, another major responsibility of the outreach committee was canvassing voters, which will be discussed later.

Data and Technology. Today more than ever, technology can be utilized to generate information and create access to the general public. An important committee to include in the referendum planning process is data and technology. Any referendum effort requires gathering large amounts of data about the district and potential voters. Our sample school district’s data and technology committee increased the efficiency of the campaign by:

Fundraising. As noted earlier, state law prohibits school districts from using district funds to finance a referendum campaign. This raises the question – who will pay for such items as informational materials, advertising, supplies, and phone calls? The answer is the referendum committee. As a result, in our sample district, a fundraising committee composed of volunteers with fundraising interest and in some instances experience raised adequate dollars to fund all planned activities. It is important to remember that Illinois political disclosure requirements apply to the referendum committee.

Phase 3: The Actual Campaign

After the Board of Education officially authorized the referendum, the actual campaign began. At this point, the referendum plan was in place. The school district administration had explained the financial position of the district. Community members were well aware that a referendum was imminent. The stage was now set for the actual formal campaign to begin.

It is important to note that a school board should not initiate a referendum sooner than three months before election day. If you begin a formal referendum campaign too early, you might have difficulty maintaining a high level of positive momentum while also increasing the risk of organized opposition.

However, once the referendum is certified, much needs to be accomplished. Some good advice I once received from an experienced superintendent who passed many referendums can be summed up in three simple statements:

This is how every campaign from the presidency to a school referendum is won.

Given these three focuses, the case study district Outreach Committee employed a sophisticated voter canvassing process. As the superintendent told me later, this was probably the most critical part of the political process because here was where they actually identified, primarily through personal contact, the perceived yes, no, and maybe voters. The canvass activities of the oversight committee included:

Phase 4: Election Day

After months of hard work, referendum day finally arrived, but the work of the committee was not yet complete. On this day, when anticipation and excitement built, it was important to remember that the focus of the referendum campaign was to get out the “yes” vote. Consequently, every effort was made to use these last few hours toward this goal. Several strategic ways the referendum committee used their volunteers on election day included:

Nothing is more satisfying to school district stakeholders than the feelings associated with a referendum victory. All the planning and hard work has paid off. The school district will now be financially sound for years to come. Everyone can turn their attention back to their real priority – providing an outstanding education for district children.

However, for other school districts, continued referendum failures may ultimately lead to financial insolvency. This raises an important question – What happens when a school district’s financial position deteriorates to the point that it is on the verge of insolvency?

Although most school districts use a combination of revenue enhancements and expenditure controls to maintain financial viability, a few cannot escape financial crisis. These school districts usually have explored multiple options to increase revenues and failed several operating fund referendums. They have also “cut” educational programs and services to the point where only the most basic education is offered. In addition, they have exhausted almost all their reserves. When school districts arrive at this point and are on the brink of insolvency, outside intervention becomes a reality.

During the 1990s when a few school districts began to reach the insolvency stage, the Illinois State Board of Education (ISBE) in cooperation with the Illinois Legislature passed legislation entitled School District Financial Assistance which was designed to help school districts resolve their financial crises (105ILCS 5/1B-1 to 1B-22). As of FY11, five school districts have been to date designated by ISBE as “in financial difficulty,” that is, nearing insolvency: Cairo Unit School District 1, Hazel Crest School District 152-5, Proviso High School District 209, Round Lake Area School District 116, and Venice Community School District 3, (ISBE, 2011).

When school districts such as those above reach the insolvency stage, their school boards may ask ISBE to certify them in financial distress (105ILCS 5/1A-8). When school boards make this request, they are aware that they are relinquishing a significant portion of their decision-making authority for expenditures.

Financial Oversight Panel

The lowest level of state intervention is financial oversight. The school district voluntarily requests that ISBE designate a Financial Oversight Panel (FOP) composed of three board members appointed by the state superintendent of schools. The FOP’s primary purpose is to exercise financial control of the district by taking such actions as approving expenditures and the annual budget. The goal of the FOP is to help the district return to solvency (Illinois State Board of Education, 2009b). If, however, the FOP determines that additional oversight is necessary, the panel may petition the ISBE to establish a School Finance Authority (SFA).

School Finance Authority

The SFA is a five member board appointed by the state superintendent of schools to replace the FOP. Its members must include two school district residents and three non-residents usually with school finance backgrounds who serve two to three years terms. What is unique about the SFA is that ISBE in cooperation with the state legislature writes school district-specific legislation establishing the SFA which must be approved by the legislature and signed by the governor. The initial term of the SFA extends from three to a maximum of 10 years (Illinois State Board of Education, 2009).

In addition to the responsibilities of the FOP, the School Finance Authority has even greater control over the school district’s financial management including actions such as:

One other important difference is that the School Finance Authority employs a management team which includes a chief executive officer (CEO), chief financial officer (CFO), and a chief educational officer (CEDO). It is not uncommon for the CFO and CEDO to be current district administrators while the CEO usually is employed from the outside. This team manages the district and reports to the SFA rather than the elected school board. However, the CEDO, similar to traditional superintendent, focuses on the educational aspects of the district and also works directly with the school board.

The SFA may choose a different management model as deemed necessary. For example, the SFA may decide to maintain the current administrative staff and not employ a separate CEO. In any event, once the SFA is in place, a two board governance structure emerges.

As you might imagine, the shifting of authority for all financial decisions to the SFA can create some management and political issues especially if the school board and SFA do not work collaboratively together. However, because of the need to address tough financial decisions, the SFA was purposely designed to operate independent of the school board and voting public (Kersten, 2006).

Dissolving the SFA

Since this legislation was initially approved, seven school districts have functioned under Financial Oversight. Two school districts were ultimately dissolved and annexed to neighboring school districts, one of the options available. The other emerged from oversight is in 2006 was designated by ISBE as the category of “Financial Recognition.” These are the most likely results for school districts which emerge from oversight (Ruiz & Koch, 2008).

In Chapter 10, we examined both how school districts use the referendum process to generate much needed school district revenues as well as the Illinois financial oversight process defined in law for those school districts who are near insolvency. These two scenarios illustrate the importance of financial planning along with the impact of wide variances in school funding throughout Illinois.