After 12 years under federal rule, Rockfordians are looking forward to the end of the People Who Care school-desegregation lawsuit on June 30, 2002.  If the district administration and the school board have their way, however, the fat lady may not actually begin singing for another ten years.

One of the many elements that has made the Rockford case unique is the particular form of judicial taxation used to fund almost a third of a billion dollars in court-ordered “desegregation remedies”—everything from busing to magnet schools to pizza parties to owl pellets (don’t ask).  Using a novel interpretation of the Illinois Tort Immunity Act (which was designed to provide governmental entities with funds to pay one-time settlements in lawsuits), the school board, for nine years, levied an annual tax ranging from about $15 million to $30 million.  Unlike normal tax increases, which have to be approved by referendum, the tort tax was levied without public approval, often at the order of federal magistrate P. Michael Mahoney.

Through the efforts of a crusading attorney, Michael O’Brien (who took the case pro bono), and a citizen watchdog group, Rockford Educating All Children (R.E.A.CH.), up to 16,000 local taxpayers each year protested the tort-tax levy.  Finally, last year, the Illinois State Supreme Court declared the district’s use of the tort tax illegal and ordered the district to refund all of the taxes paid under protest, a total of about $35 million.

Facing a heavy hit to its $270 million budget, the district negotiated a settlement with O’Brien, under which it could pay taxpayers 100 percent of what they are owed in three equal installments over the course of three years, or 80 percent if the district makes full payment by June 30.  Moreover, the district was allowed to encourage taxpayers to waive their refunds, a strategy that seems to have worked: Currently, the district’s liability is only $29 million if it pays over three years, or $23.2 million if it takes the 80-percent route.

If the district took the first option, it would have to come up with $9.67 million per year for three years.  Now, cutting a little less than ten million dollars out of a budget of $270 million in order to free up the money for this year might be unpleasant, but it is certainly possible.  And making those cuts would have certain advantages.  First, if they were made in ongoing programs, they would only need to be made once; the money would continue to be available in the second and third years.  Second, after the three years have ended, the school board could reduce the onerous property-tax burden on Rockford’s taxpayers.  And third, the district would not have to borrow the money, saving millions in interest.

Still, since the 80-percent option was proposed by the school district’s lawyers,  no one should have been surprised when the administration and the school board decided to take it.  That left the district with three options: cut $23.2 million out of the budget when the fiscal year is already more than half over; find some way of raising the money; or combine cuts with “revenue enhancement.”  Obviously, if the school board and the administration were unwilling to cut $9.67 million, they certainly were not going to cut $23.2 million.  Instead, the administration initially turned to another oddity of Illinois law, the “backdoor referendum,” to raise the full $23.2 million.  (It is likely that this was their plan all along, which is why they proposed the 80-percent option.)  Under a backdoor referendum, a governmental body can issue bonds without voter approval, provided that it does not raise its overall tax rate to repay the bonds.  Voters can force a referendum by gathering the signatures of five percent of the district’s registered voters in 30 days.  If they fail, the governmental body has a green light to issue the bonds.

Under intense questioning from local radio talk-show host Chris Bowman late last year, District 205 Superintendent Alan Brown confirmed that his administration was considering a backdoor referendum.  Amidst a public outcry and vows by R.E.A.CH. and the Winnebago County Taxpayers’ Association to gather the signatures necessary to force the referendum onto the ballot, the district dropped the plan.  Instead, on January 8, the school board voted five to two to place a ten-year, $23.2 million alternative revenue bond referendum on the March 19 ballot.  The bonds would be paid off at a cost of approximately $3.125 million per year, using revenue from corporate replacement taxes.  However, since 6.1 percent of that revenue is currently used to cover the district’s contributions to the Illinois Municipal Retirement Fund, Social Security, FICA, and Medicare, and the rest is divided between the district’s education and operations funds, the school board and the administration will either have to make a little over three million dollars in cuts or—and here’s the rub—raise taxes an equivalent amount.  Since the referendum is now coming in through the front door (so to speak), the district is no longer restricted from raising its overall tax rate.

While it seems unlikely that the referendum will pass under such conditions, stranger things have happened.  In the mid-90’s, the district issued bonds to fund the court-ordered construction of schools and guaranteed them with tort taxes.  Rather than repudiate the bonds—an action that the Illinois Supreme Court, in its ruling, declared perfectly appropriate—the district put a referendum on the ballot to refinance the bonds and bring them under the education fund.  Many of the same people who had fought the desegregation suit and judicial taxation endorsed the referendum, and it passed overwhelmingly.  Now, taxpayers are saddled with that debt for another ten years.

If history repeats itself, the taxpayers of Rockford may well end up paying an additional $31.25 million in taxes over the next ten years in order to return to the tax protesters 80 percent of the money that was illegally taken from them over the previous nine years.  And so, rather than Independence Day come early, June 30, 2002, might just be business as usual.