Metro-east school district cuts residents’ tax rate with help from a new state program
A new state program is providing some respite to St. Clair County school districts and other taxing bodies that have been losing revenue as a consequence of a property tax exemption for veterans with disabilities.
The Veterans Property Tax Relief Reimbursement Pilot Program went into effect last summer, setting aside up to $15 million annually for the Department of Revenue to reimburse taxing districts for a portion of their revenue loss associated with the homestead exemption for veterans with disabilities.
Fiscal year 2024 is the first year of the program, and taxing districts are getting reimbursed 45% of what they lost during tax year 2021.
“This gave us the ability to lower our tax rate and really make our taxpayers whole,” Mascoutah School District 19 Superintendent Dave Deets said.
The district lost nearly 15% of its equalized assessed value in 2021, the largest percentage among St. Clair County school districts, according to the county’s reimbursement application to the Illinois Department of Revenue.
The district estimates that it has lost more than $13 million since the implementation of the broadened property tax exemption for disabled veterans in 2015, Deets said. In fiscal year 2024 alone, the district lost about $2.3 million in revenue.
At its April board meeting, the board of education of Mascoutah 19 approved its tax rate for fiscal year 2025 at 4.4375, a decrease of about 7% from the previous year.
Deets said the district was able to do that largely because of the $1 million reimbursement it’s slated to receive soon, which the board is using to offset the higher property taxes residents are paying in the district’s unrestricted funds, like its debt service fund.
He emphasized that Mascoutah 19 fully supports the exemption providing tax relief to the community’s many veterans, but that the district appreciates local legislators’ efforts to address the “unintended consequences in terms of how much tax revenue it did take off for districts and how that did unfortunately shift some of the tax burden to others,” Deets said.
Tax base erosion
The reimbursement pilot program came about after state Rep. Jay Hoffman, D-Swansea, and state Sen. Chris Belt, D-Swansea, sponsored an item in the state’s fiscal year 2024 budget implementation bill for the program’s creation.
“Since the state provided this exemption, it would seem rational that the state would provide some money to the taxing districts for what they were losing,” Hoffman said.
In 2015, Illinois revamped its property tax exemption for veterans with disabilities by adding a tier and making it possible for veterans to receive a full exemption.
Under the new system, veterans with a service-connected disability rating of 30-49% — as certified by the U.S. Department of Veterans’ Affairs — receive a reduction of $2,500 on their equalized assessed value. Abbreviated as EAV, this is one-third a property’s fair market value and the number on which the tax bill is calculated.
Veterans with a rating of 50-69% receive a reduction of $5,000 on their EAV, and veterans with a rating of 70% or higher are fully exempt from property taxes.
Those reductions in EAV and full exemptions add up in St. Clair County, which is home to Scott Air Force Base. As a result, local taxing districts have seen significant decreases in the total EAV within their boundaries, meaning an erosion of their tax base.
EAV erosion can have two effects: taxing districts are extended a smaller amount of taxes than they levy, or they raise their tax rate to get the tax extension they need with a smaller tax base, meaning the property tax burden is shifted to non-exempt residents.
A study by the Department of Revenue completed in June 2023 showed that the EAV erosion has been worse in St. Clair County than in five other counties included in the study.
Veterans exemptions resulted in a loss of about $272.15 million in St. Clair County in 2021, and the EAV of veterans exemptions as a percentage of the total tax base was 6.02%, both significantly higher than the other counties, the study found.
The EAV erosion in St. Clair County has increased since 2015 alongside the increasing number of exemptions, including full exemptions, granted to disabled veterans.
In 2015, there were 2,697 exemptions, 1,548 of which were full exemptions, according to Dina Thurlow, chief deputy for the St. Clair County Clerk. In 2023, there were 6,198 exemptions, 4,984 of which were full exemptions.
Hoffman said the idea of the reimbursement program is to provide money lost as a result of the exemption to local taxing districts, which could then abate their taxes to provide property tax relief to residents, like Mascoutah 19 is doing.
“I’m hopeful that the rest of the taxing districts will, when they receive their funding, do the same,” he said.
This year districts are getting reimbursed 45% of what they lost in tax year 2021. Each following fiscal year until 2028, that reimbursement bumps up to 90%.
Funding for the program, however, needs to be appropriated within the state’s budget each year. Hoffman said he will continue to advocate for that appropriation.
Even with the full $15 million appropriated in future years, St. Clair County districts might not receive the entirety of their calculated reimbursement, according to Thurlow.
That’s because this year, neither Lake nor Rock Island counties — the two counties other than St. Clair that can benefit from the reimbursement program — participated, she said.
In total, St. Clair County taxing districts will be reimbursed a total of nearly $10.5 million this fiscal year, about $6.77 million of which is for school districts.
Since St. Clair is the only county participating in the program the first year and its total reimbursement amount is less than the $15 million cap, taxing districts are receiving the full 45% reimbursement.
If the other two counties participate in the coming years and the total reimbursement amount exceeds $15 million, then each taxing district’s reimbursement amount will be reduced proportionately.
