In a school desegregation case watched nationwide, the Illinois Supreme Court sided with protesting taxpayers and against Rockford School District 205 on October 26. The district was wrong, the court ruled, to levy a tax that had not been approved by voters to pay for court-ordered desegregation remedies. Rockford is the state’s second-largest city, located about 90 miles northwest of Chicago.
The tax–a tort levy designed to pay compensatory damages to an injured party in a lawsuit–was first levied in 1991 at the direction of a federal judge. Since then, many taxpayers had objected to efforts by the judge and school board to expand the use of the tort tax beyond its legally prescribed scope. Repayments ordered by the state supreme court could total as much as $140 million.
“[T]he Tort Immunity Tax does not authorize the levying of taxes to fund desegregation remedies and to pay the debt on general obligation bonds,” declared the court in a 6-1 ruling. While disruption of government functions and waste of public funds may be valid public policy concerns, those concerns “do not override the express legislative intent as set forth in the language of the Tort Immunity Act,” concluded Justice Michael Bilandic, writing for the majority.
“It just goes to show that we do have laws in this country,” said Rockford businessman Lloyd Falconer, national chairman of the Leadership Trust of the National Federation of Independent Business. He said the desegregation remedies pursued over the past decade had made the situation in Rockford worse rather than better. “Two wrongs don’t make a right,” he noted.
While pleased with the court ruling, Falconer said the past decade had been a tragedy for students and taxpayers alike, with “a downhill slide” in the quality of education despite city property taxes that now are among the highest in the nation. With the tax hike–plus a court-ordered desegregation plan that gave parents an oxymoronic “controlled choice” of schools–real estate values fell, private school enrollments soared, and families uncertain about school quality fled to the suburbs.
“None of the Tort Immunity Fund actually went to an injured party, but instead went to new offices, new furniture, and a new bureaucracy,” explained Falconer. A lawsuit that started with good intentions in 1989 was turned into a racial issue, he contends.
Rockford attorney Michael F. O’Brien agreed. He argues that the Rockford School District’s acquiescence to guilt in a racial discrimination and segregation lawsuit has unfairly painted the multiracial city of 140,000 as bigoted.
O’Brien, an attorney with the law firm of McGreevy, Johnson & Williams, first raised the issue of the illegal use of tort funds in 1991. Serving pro bono, he subsequently filed 13 lawsuits against the school district on behalf of thousands of city taxpayers who protested the use of the Illinois Tort Immunity Act to pay for federal court desegregation remedies.
“We undoubtedly have had our share of bigots on and off the school board, but Rockford is demonstrably a good city with lots of fine people who are not racists,” O’Brien told a Heritage Foundation audience several years ago. He pointed out that a black Rockford man, Charles Box, was elected mayor with 63 percent of the vote in 1989, reelected with 71 percent in 1993, and elected to a third term in 1997. “Not bad for a city that’s 80 percent white,” said O’Brien.
How Rockford Schools Unraveled
Ironically, it was a 1988 school board plan to save money for Rockford taxpayers that ultimately resulted in the skyrocketing tax levies now ruled illegal.
With falling enrollments during the 1980s, the school board had closed many small elementary schools to save money. Then, in late 1988, the school board proposed saving $7.3 million by closing 10 more schools and restructuring several others to create huge elementary schools with enrollments of up to 1,227–four times the average school enrollment in the district.
Local black businessman Ed Wells organized a group called People Who Care and filed suit against the school district in May 1989. Under a first agreement, the school board quickly dropped most of its “megaschool” plan.
Under a second agreement two years later, where the school district did not admit liability, all parties signed on to a plan that would spend an additional $6.8 million a year and issue $25 million in bonds for new and refurbished schools. Under this “Second Interim Order,” as it was called, federal district judge Stanley J. Roszkowski said the school district could use the Tort Immunity Act to fund the cost of the remedial measures. This allowed the school district to levy additional property taxes and issue bonds without taxpayer approval.
But dissatisfaction with the remedy remained. The attorney for People Who Care, Chicago civil rights lawyer Robert C. Howard, had the lawsuit converted to a class action suit alleging the school district had engaged in a pattern of intentional segregation and discrimination.
In what O’Brien calls “strange behavior for a litigant,” the school district within a few years “actually stipulated that the evidence was sufficient to find it guilty, and it also agreed not to appeal.” The district also agreed to having the case assigned to federal magistrate P. Michael Mahoney. By 1996, the federal court had ordered the district to implement and fund detailed, system-wide desegregation remedies as mandatory injunctive relief for the plaintiffs.
But as the Illinois Supreme Court noted, “Throughout this time, beginning with the first interim order, funds to implement remedial programs were raised by real estate taxes levied and bonds issued under the Tort Immunity Act.” One of these bonds is a balloon payment time bomb: issued in 1994 to refinance some of the remedial debt, it is a 20-year bond issue of $58 million with essentially no principal payments until 2008.
Soaring Costs
The court-ordered remedies were, and still are, costly. The school district’s tax levy more than doubled, from $54 million in 1990 to $116 million in 1996. By 1996, court-ordered taxes paid for about 400 employees, more than two-thirds of whom were administrators for the desegregation process: Directors of Desegregation, of Equity, of Compliance, and so on. Of the District’s current $127 million tax levy, more than a quarter–$35 million–is for the tort fund.
But should unlimited tort taxes be levied to pay for court-ordered desegregation remedies? The Illinois Tort Immunity Act gives government units the power to levy taxes for “compensatory damages,” i.e., settling lawsuits and paying for liability, workmen’s compensation, and unemployment insurance. That way, money earmarked for day-to-day operations needn’t be diverted to personal injury and liability judgements.
Tort taxes intended to pay damage claims shouldn’t be used to pay for desegregation remedies, argued O’Brien, and his view has been upheld by the Illinois Supreme Court. “The remedies at issue clearly involve mandatory injunctive relief and not compensatory damages awarded to the plaintiffs,” said the court. Thus, they concluded, “the Tort Immunity Act does not authorize the school district to levy taxes to fund the injunctive remedies at issue.”
The ruling will affect many other Illinois school districts using tort taxes for day-to-day operations. The Rockford Register Star discovered two years ago that the Belvidere Schools used almost $300,000 in tort taxes to pay for playground aides, crossing guards, school nurses, and police officers. The Harlem School District used $1.3 million in tort funds to pay for a running track, repairs, and equipment purchases. “[N]o one enforces the law,” noted Register Star reporter Spencer Hunt.
George A. Clowes is managing editor of School Reform News.
George Clowes is former Heartland senior fellow addressing education policy. He served as founding managing editor of School Reform News between November 1996 and January 2005.
