Tax Cap Legislation

In the 1991, the collar counties of Chicago became subject to the Property Tax Extension Limitation Law (PTELL) otherwise known as the “Tax Cap” law. The new law’s purpose was to slow the growth of revenue for school districts as it relates to property value increases that exceed the rate of inflation. The majority of all public school districts across the state fall under this voter approved limitation. PTELL uses a formula to establish a limiting rate on an annual basis. In short, a school district’s increase in property tax extension (total dollars to be received) is limited to 5 percent or any increases in the national Consumer Price Index (CPI) from the previous year’s levy—whichever is less.

The "Tax Cap" legislation has had a dramatic effect on public school funding over the years. Most recently, the 2008 CPI was 0.1 percent. This limited local property tax revenue for taxing bodies to nearly zero growth for the levy year in which that factor was used in the calculation formula for PTELL. The difficulty for school districts under this limitation law is that while their local property tax dollars are limited by an increase of 5 percent or less, expenses relating to such things such as salaries, insurance costs, energy and supply costs, and contractual services are usually not capped. In essence, the limitation erodes a district’s ability to maintain a constant level of services.

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