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‘Credit card chaos’? Financial institutions bet big on repeal of first-of-its-kind Illinois law

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‘Credit card chaos’? Financial institutions bet big on repeal of first-of-its-kind Illinois law


“Credit cards may not work for sales tax or tips starting July 1.”

By now, you’ve heard that claim, but whether it’s true depends on who you ask.

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The ads — funded by the Electronic Payments Coalition of banks, credit unions and card companies — argue that Illinois lawmakers must repeal the state’s first-in-the-nation Interchange Fee Prohibition Act, slated to take effect July 1. That law prohibits financial institutions from charging “swipe,” or interchange, fees on the tax and tip portions of consumer bills and bans them from making up the fees elsewhere.

If it’s not repealed? “Credit card chaos” may ensue, the ads warn.

While the financial institutions are quick to cite a list of things that could hypothetically happen if the law isn’t repealed, it’s harder to pin down what’s being done and by who to comply with the law two years after it was signed.

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“The global payment system is not set up to where any one party to a transaction can make this happen on their own,” Ashley Sharp, of the Illinois Credit Union Association said at a Capitol news conference Wednesday. “There are multiple parties to every electronic transaction.”

The financial institutions are adamant that the global payment system as it exists today can’t discern the difference between tax, tips and total, and it would need to be retooled at a heavy cost to banks, card companies, merchants, point-of-sale companies and more.

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Instead of complying, they say, the card companies could decide to stop serving Illinois or drastically alter the way the consumer interacts with merchants at the point of sale.

An alternate reality

But as with all matters in Springfield, there’s another big-monied and powerful group on the other side of the issue. The Illinois Retail Merchants Association says the credit card companies already track all the information they need, and it’s a “complete fabrication” to say that it would take more than a mere coding change to implement the state law.

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Take your restaurant receipt, for example.

“You have the subtotal, the sales tax, the tip, if it’s applicable, and then the grand total, right? All they have to do is move their fee from the grand total to the subtotal,” Rob Karr, president of IRMA, said.

While card networks operate in over 200 countries with as many different laws, they say the only information the card processors ask for in any of them is the grand total. The receipt example, they say, erroneously conflates the point of sale with the actual processing of payments.

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In short, the two sides present starkly different realities — a muddying of the water that’s not uncommon at the Capitol.

But there is one concrete truth: The financial institutions have a lot to lose, and not just in Illinois.

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The tax and tip prohibition would shave approximately 10% off the revenue that banks and credit unions receive from retailers via interchange fees — a transfer of wealth likely to number in the hundreds of millions. It would also create massive noncompliance fines.

And then there’s the issue of precedent. The banks challenged the law but lost in court. Absent a successful appeal, the remaining battlefields would be other state legislatures.

If the card companies implement Illinois’ law, they’d be providing a blueprint for states across the nation to emulate — driving potential revenue loss into the billions.

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Thus far, Ben Jackson of the Illinois Bankers Association said, it hasn’t opened the floodgates, although some 30 states are considering similar action.

Still, it’s no wonder then, that the Electronic Payments Coalition has pulled out all the stops in its seven-figure ad campaign to repeal the law.

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How we got here

To fully understand the ongoing slugfest between banks and retailers, you have to go back to May 2024.

But first, an explanation of interchange fees. Each time a shopper swipes their credit or debit card, it sets off a complicated string of payments between banks. The retailer’s bank pays an “interchange fee,” typically around 1% to 2% of the transaction cost, to the consumer’s bank. The fees include both a set amount and a percentage of the transaction, but the credit card companies, namely Visa and Mastercard, control how they’re calculated.

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The financial institutions say interchange fees help fund credit card reward programs and security upgrades and provide compensation for bearing the risk of fraud. The hit to interchange revenue, Jackson said, would inevitably lessen reward program offerings. Sharp said credit unions, as not-for-profit cooperatives, use the revenue to offer lower rates to customers.

But the fees have long drawn the ire of retailers and small businesses, which sometimes pass the costs directly to consumers via a surcharge on bills.

It comes down to this: The retailers don’t think they should have to pay a fee on the tax and tip portion of a transaction that they don’t keep. And the financial institutions say if they’re handling those funds, they should be compensated for doing so via interchange fees.

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As for the Illinois law’s passage, it was, as the ads claim, tucked into the budget two years ago, giving little time for the bankers et al to mount an opposition campaign.

Gov. JB Pritzker and lawmakers agreed to raise about $101 million in revenue to plug a budget hole by putting a $1,000 monthly cap on the “retailer’s exemption,” a tax break retailers claim for being the state’s de facto sales tax collectors.

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But the retailers weren’t going to take that lying down, and IRMA successfully lobbied for the long-sought tax and tip exemption.

After the law passed, the financial institutions quickly sued.

To avoid uncertainty as the case played out, lawmakers delayed the measure’s effective date from July 1 last year to the same date this year.

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U.S. District Judge Virginia Kendall ultimately determined in February that Illinois is within its right to regulate the fees. She partially rejected a portion of the law that prohibited banks from sharing certain data, which the credit unions say creates different rules for different institutions and further uncertainty.

The case is now pending appeal, and the legislative process is starting anew.

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This time, the financial institutions have mounted a dual front in the court of public opinion.

The cost of compliance

Karr estimated the prohibition would bring in “north of $200 million” for retailers — essentially letting them pocket that sum instead of transferring it to the banks. A study by the Electronic Payments Coalition pegged the number at $118 million, estimating that about 40% of the interchange windfall would go to the 40 largest retailers.

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Even so, Karr said, the largest retailers are subject to the $1,000 monthly retailer exemption cap that accompanied the swipe fee ban, while smaller retailers don’t reach that mark. Add in their cut on reimbursed swipe fees, and it amounts to what Karr calls “the largest small business relief that Illinois has ever passed.”

But Jackson argued the cost of retailers complying could eat up any benefits for smaller retailers.

As for compliance, Kendall wrote in her February opinion that “It is an open question whether the transaction process could adapt to the impact of the IFPA in time.”

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“The Interchange Fee Provision is indisputably disruptive, requiring additional investments, hires, and new procedures to replace the current process for authorizing and settling debit and credit card transactions,” she wrote.

The financial institutions argue it can’t all be done by July 1. Kendall said the parties involved know what’s required of them.

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“But those procedural changes are the product of an ecosystem built by Payment Card Networks and financial institutions to facilitate consumer transactions,” she wrote. “And these entities understand the onus of IFPA compliance is on them.”

Per the coalition, compliance “would require coordination across the industry and regulators worldwide,” including with the International Organization for Standardization. It would also require more data collection, creating privacy concerns, they say.

Those global changes would require testing and certification of new equipment. Depending on their card companies or point-of-sale vendors, retailers may need to invest in new equipment, software and training.

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Banks and credit unions may also have to add staff to process rebates under the law. It allows retailers or their processing companies to petition their financial institutions for reimbursement on fees charged on tax and tips within 180 days of a transaction.

If financial institutions don’t comply within 30 days, the law provides for civil penalties of $1,000 per each transaction — and hundreds of millions of these transactions happen annually.

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So will that chaos come to fruition?

Instead of complying, according to the coalition’s literature, the card companies could just stop processing cards altogether in Illinois. They could also stop processing tax and tip portions or require two separate swipes for the subtotal and the tax and tip portion of bills.

Such claims aren’t uncommon in the legislature’s annual adjournment push.

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Sports betting companies, for example, threatened to leave Illinois when the state raised its gambling taxes in the same budget cycle that yielded the interchange fee prohibition two years ago. Instead, they adapted, because Illinois has a lot of bettors — and there’s even more card users.

Karr accused the coalition of ulterior motives in their use of hypothetical language.

“There is no need for chaos,” he said. “The only chaos is if the credit card companies impose it themselves on their consumers.”

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Ultimately, lawmakers will have to weigh how compelling the arguments are, if the courts don’t intervene first.

It’s possible that the 7th Circuit appellate court — or even the U.S. Supreme Court — gives the banks a win. But oral arguments are slated for May 13, meaning the appellate court might not rule by the time the law is slated to take effect.

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Adding a new wrinkle on Wednesday, the federal office of the Comptroller of the Currency, a subset of the U.S. Treasury Department, appeared poised to issue an order preempting Illinois’ law. It hadn’t been published as of late Wednesday, making its impact unclear.

“While the office has failed to explain their reasoning or allow public review, it’s clear the goal is an end-run around the legal process after a judge recently upheld the law,” Karr said.

As for the legislative prospects, state Rep. Margaret Croke, D-Chicago, says she’s seen enough to be concerned. The Democratic nominee for comptroller is sponsoring a bill to fully repeal Illinois’ interchange fee prohibition.

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But as of last week, she said she wasn’t planning to move it. Instead, she finds it more likely that lawmakers once again delay the law’s implementation.

“If this is a policy that the state of Illinois decides they’re going to want to have, then we need to make sure we’re doing it properly,” she said.

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This story was originally published by Capitol News Illinois and distributed through a partnership with The Associated Press.

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After recent Illinois lightning strikes, officials share safety tips

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After recent Illinois lightning strikes, officials share safety tips


WILLIAMSON COUNTY, Ill. (HEARTLAND NEWS) – Officials are reminding residents to take lightning safety seriously following a recent strike that sent a Franklin County man to the hospital.

Lightning can strike more than 10 miles away from the storm itself, whether you’re at the pool, lake or courts. Emergency management officials say the biggest mistake people make is waiting until the rain starts before heading inside.

“Lightning often strikes outside the area of the heaviest rainfall, and if you can hear thunder, you’re in danger,” said Brian Burgess, director of the Williamson County Emergency Agency.

Scott Radecki teaches tennis lessons at Herrin City Park and constantly monitors weather conditions as part of his outdoor job. He tracks weather on his phone, especially on days with uncertain conditions.

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“I’ve had lessons later in the day, had to go back to Marion, drive to courts, a popup storm came, started raining, so it’s just kind of part of the job and you just try to deal with it the best you can,” Radecki said.

Burgess said people need to know where they’ll go if storms develop before heading outdoors. The National Weather Service says you need to stay inside a safe building for at least 30 minutes after the last rumble of thunder because all thunderstorms produce lightning and are dangerous.

If you’re caught outside and can’t immediately find shelter, stay away from isolated tall trees, towers and utility poles. If you are in a group of people, make sure you spread out.

Lightning can also be dangerous inside buildings as well.The National Weather Service says Electricity travels through anything that’s metal or any medium, including electronics.

“Lightning will travel through wiring and plumbing if your building is struck, so don’t take a bath or a shower or wash dishes during the storm,” Burgess said.

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Official organizations like the CDC offer a simple reminder: when thunder roars, go indoors.

Copyright 2026 KFVS. All rights reserved.



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Illinois waives tax penalties for 11 counties hit by storms, including Stephenson and Winnebago

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Illinois waives tax penalties for 11 counties hit by storms, including Stephenson and Winnebago


(WIFR/WREX) – Illinois leaders announce disaster tax relief for individuals and businesses in 11 counties affected by severe thunderstorms earlier this year.

The relief waives penalties and interest for taxpayers who cannot file returns or make payments on time because of the severe weather. It covers income, withholding, sales, specialty and excise taxes.

The tax relief applies to any area included in Gov. JB Pritzker’s state disaster proclamation.

Locally, this includes Stephenson and Winnebago Counties. Other counties across the state included in the proclamation are:

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  • Coles
  • Cook
  • Effingham
  • Jefferson
  • Kankakee
  • LaSalle
  • McLean
  • Warren
  • Woodford

The proclamation covers severe weather in these counties between March 10 and June 21.

“In the wake of these devastating storms, my administration is ensuring that impacted residents and businesses have the support they need to recover,” Pritzker said. “By offering temporary tax relief to individuals and businesses in 11 counties, we’re giving impacted communities the time and breathing room necessary to focus on recovery.”

Individuals and businesses located in those counties qualify for state tax relief. Any counties added later will also be eligible, according to the governor’s office.

Taxpayers seeking a waiver of penalties and interest should send a brief written explanation to the Illinois Department of Revenue regarding why they cannot file timely or pay. They should provide their full name, account number, mailing address and an estimate of when they believe they can file or pay their taxes. If using a Social Security number, include only the last four digits.

Requests may be submitted electronically to REV.DisasterRelief@illinois.gov or by postal mail using the address on the return. When submitting by mail, taxpayers should write “Severe Storms – Summer 2026” at the top of the return in red ink and attach or include the explanation for requesting abatement of penalties and interest.

Taxpayers who have already been billed for penalties should email REV.DisasterRelief@Illinois.gov and provide their name, business name, account numbers and the periods for which they filed late due to the storms to request penalty abatement. Taxpayers should also include “Severe Storms – Summer 2026” in any communications with the department when requesting relief.

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Property owners who experienced damage should contact their county supervisor of assessments if they wish to apply for reassessment due to any property damage. The Motor Fuel Use Tax is not included in this disaster tax relief.

Copyright 2026 WIFR. All rights reserved.



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As Illinois enters 10th year under Evidence-Based Funding model, equity remains an elusive goal

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As Illinois enters 10th year under Evidence-Based Funding model, equity remains an elusive goal


SPRINGFIELD — Illinois has made progress in recent years boosting funding for schools that serve some of the state’s poorest communities and leveling out some, but not all, of the wealth-based disparities in per-pupil instructional spending.

But as Illinois enters the 10th year of financing schools under the Evidence-Based Funding model — a formula adopted in 2017 that was supposed to improve both the adequacy and equity of the state’s school finance system — wide disparities still exist in the property tax system that funds more than half the cost of K-12 education.

An analysis of school finance data by Capitol News Illinois covering the nine-year period from 2017 to 2025 shows homeowners in the lowest-wealth districts pay tax rates that are double those in the wealthiest districts.

The findings are largely consistent with those of other researchers who follow school finance issues nationally.

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“Given the design of EBF and the evidence basis on which it was built, this is about what I would expect. I mean, it’s actually a little better than I would have expected,” Bruce Baker, a school finance researcher at the University of Miami, said in an interview. “To a significant extent, it leveled out the resources, but it, by no stretch of the imagination, brought the state to equal educational opportunity.”

Evidence-Based Funding

The Evidence-Based Funding formula came about after years of negotiations among legislators and stakeholders who were searching for a way to reform what many considered to be the most inequitable school funding system in the country.

“I have always talked about Pennsylvania and Illinois as being kind of the equity trainwreck states,” Baker said. “Connecticut has taken Illinois’ place in that role.”

At that time, according to State Report Card data, Illinois was spending about $7 billion a year funding public schools, less than one-fourth of the total $28.4 billion being spent by the state’s public schools. Federal funding provided another $2.1 billion, or 7.5% of the total.

But more than two-thirds of the total, $19.3 billion, came from local revenues, primarily property taxes.

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Meanwhile, there were vast disparities across the state’s school systems, both in terms of the taxes they levied on property within their boundaries and the money they spent educating their students.

The aim of the new formula was to improve both the adequacy and equity of school funding in Illinois. That involved establishing an “adequacy target” for each district, using research-based evidence to estimate the cost of educating each student in a district.

The formula was predicated on the idea that some students are more expensive to educate than others. That meant the adequacy target had to account for such things as the poverty rate within a district, the percentage of its students from non-English speaking backgrounds, the number of students receiving special education services and regional cost of living differences, among other factors.

“A district that’s 60% to 70% kids from low-income households, 20 to 30% non-English speaking kids, that school or district might need 40%, 50% or even 100% more in spending per pupil than a district that has no kids from low-income families and no kids who are English learners,” Baker said. “The per-pupil spending really needs to be differentiated based on the costs to achieve common outcomes.”

The law then called for increasing state funding each year by at least $300 million and earmarking the bulk of that money for the districts furthest below their adequacy target, with the goal of eventually getting all districts up to at least 90% of adequacy.

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It also called for funding $50 million each year in property tax relief grants to reduce levies in certain high-tax districts. Districts are awarded grants based on a formula spelled out in statute. Districts are expected to use the grant funds to abate taxes they would otherwise levy.

At Gov. JB Pritzker’s urging, lawmakers did not fund the grants in the fiscal year that just ended June 30 but instead passed a bill calling for the Illinois State Board of Education’s Professional Review Panel to file a report assessing the impact of the program.

That report was released in March. It found that from 2015 through 2023, total property taxes collections grew in almost every district in the state, although the growth was slightly lower in districts that had received the grants than those that did not.

Lawmakers renewed the grant program for the fiscal year that began July 1 but extended the period in which districts must use the funds to abate taxes to three years.

In the years since the EBF formula was adopted, overall annual state funding for schools has increased more than $3 billion, to an estimated $10.8 billion in the fiscal year that just began.

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Out of 850 elementary, high school and unit school districts in the state, according to ISBE’s EBF distribution data, the number of districts that are funded at or above 90% of their adequacy target has grown from 194 in fiscal year 2018 to 313 in 2026.


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But after nine years under the EBF model, that still leaves 537 districts, 63% of the total, funded at less than 90% of adequacy. ISBE reported during this year’s budgeting process that it would take an additional $3 billion to get all districts up to at least 90% of adequacy.

“We need more, and I have tried very hard, as you know, in very tight budget circumstances,” Pritzker said during a recent news conference. “We nevertheless increased funding for K-12 schools.”

But an analysis of school finance data covering the first eight years of the EBF formula shows the state has made only modest progress to improve the equity of its school finance system, either in terms of the taxes people pay to fund their local schools and the amount of resources those districts devote to classroom instruction.

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Tax inequity

One of the hopes of the new funding system was that as state funding for schools increased, local districts would become less reliant on local property taxes.

At the time EBF went into effect, there were vast disparities among districts in terms of their relative wealth and the tax rates they levied.

According to data from the Illinois Local Education Retrieval Network, or ILEARN, in fiscal year 2017, the year before EBF took effect, district wealth ranged from a low of $20,449.57 in taxable property valuation per pupil to a high of $2.47 million.

Property tax rates among the districts also varied widely, from a low of $1.14 per $100 of equalized assessed valuation, or EAV, to a high of $21.82.

According to the data, people in the poorest 10% of districts in the state paid an average tax rate of $5.39 per $100 of EAV. That was more than double the average tax rate in the wealthiest 10% of districts, which was $2.50 per $100 of EAV.

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Using a statistical tool known as regression analysis, the data showed that for every $10,000 increase in a district’s per-pupil property wealth, there was a corresponding $0.028 decrease in its property tax rate. And while other factors also influenced a district’s tax rate, property wealth explained 21% of the variation.

By 2025, the eighth year of the EBF formula, data from school districts’ annual financial reports showed those disparities had eased only slightly.

There was still wide variation in tax rates among school districts, from a low of $19,580 to a high of $3.3 million.

From 2017 through 2025, the average tax rate among the poorest 10% of districts fell considerably, to $4.81 per $100 of EAV. But that was still more than twice as high as the average tax rate among the wealthiest 10%, which was $2.40 per $100.


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scatter visualization

Differences in per-pupil property wealth still explained about 21% of the variation in tax rates but the relationship was not as severe. In 2025, for every $10,000 increase in property wealth, there was a corresponding $0.018 decrease in tax rates.

Spending inequity

One area where Illinois appears to have made more progress is in directing new resources to districts serving large numbers of high-needs students.

The EBF formula is predicated on the idea that some students are more expensive to educate than others. The additional cost of educating those students — including low-income students, English language learners and students receiving special education services, among others — is used as a factor in calculating each district’s adequacy target and, eventually, how much new money they receive each year.

To measure how effectively Illinois was directing resources to high-need districts, CNI compared each district’s instructional expenses per-pupil with its percentage of low-income students, as reported in the ISBE’s annual Report Card data.

ISBE defines instructional expenditures as “the direct costs of teaching pupils or the interaction between teachers and pupils.” Low-income students are defined as those “who receive or live in households that receive Supplemental Nutrition Assistance Program or Temporary Assistance for Needy Families benefits; are classified as homeless, migrant, runaway, Head Start, or foster children; or live in a household where the household income meets the U.S. Department of Agriculture income guidelines to receive free or reduced-price meals.”

In 2017, the year before EBF took effect, there were wide wealth-based gaps in instructional spending across all school districts in Illinois.

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At that time, instructional spending averaged about $7,320 per pupil statewide. The average among elementary districts was below that level, at $6,822, while high school districts the average was $9,224.

Within elementary districts, however, the wealthiest 10% — those with the lowest percentage of low-income students ­— instructional spending per-pupil was 39% higher than it was among the poorest 10%.

Among high school districts, the wealthiest districts spent 29% more on average than the poorest districts.

Among unit districts, however, there was little difference in spending levels between wealthy and poor districts.

By 2025, the eighth year of the EBF program, the spending picture had changed considerably.

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visualization

First, the infusion of $3 billion in additional annual state funding boosted instructional spending across the board. That year, the statewide average was $10,601 per pupil, a 45% increase over 2017 levels.

In addition, many of the wealth-based disparities had been erased.

Among unit districts, the poorest 10% of districts actually spent about 29% more per-pupil on instruction than the wealthiest. Among elementary districts, spending levels were about even between rich and poor districts.

Among high school districts, however, wealth-based disparities persisted. There, the richest 10% of districts continued to spend about 29% more per-pupil on instruction than the poorest districts.

Chris Johnson, deputy superintendent at New Trier Township High School District in northern Cook County, one of the wealthiest districts in the state, acknowledged in an interview that his district is fortunate to have more than adequate resources. But he said that is not the fault of the EBF system.

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“We were 91% funded by local property taxes, and so we have a long history of our community generously committing to support our schools,” he said.

In 2025, New Trier ranked third in the state among high school districts for per-pupil instructional spending, at just over $21,000. Its property tax base was also among the highest, at nearly $1.9 million per pupil, and it had one of the lowest property tax rates, at $1.92 per $100 of equalized assessed valuation.

As a result, New Trier receives very little state funding through EBF, which is designed to prioritize the neediest districts. But Johnson, who wrote his doctoral dissertation on the implementation of EBF, said he supports the system and believes it is performing as it was intended.

“It’s brought more money to Illinois school districts, and it’s done it in an equitable way that focuses on the districts that need the most support,” he said.

“What I found in my dissertation was that the function codes — the ways the district spent the money in their budgets — were aligned with the rationale for passing law,” Johnson said. “So, the categories in school district budgets related to instruction grew at a faster rate than expenditures related to some of the administrative and other expenses.”

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One district official in a smaller rural school district said the EBF model was probably more useful in helping larger districts quantify their needs. “But like for ours,” he said, “it tells us that we need a 0.2 school psychologist and a 0.1 social worker. I can’t do a point one person.”

Overall, that official said the biggest benefit the EBF system has provided his district is greater certainty that state funding will arrive on time.

“I like the guaranteed money, you know. Making sure they’re gonna send us some money,” he said.

Some lawmakers, however, have expressed growing frustration with the slow progress being made in bringing all districts up to adequate funding levels.

Sen. Graciela Guzmán, D-Chicago, introduced legislation this year calling on the state to fund all districts at 100% of their adequacy target. Although the bill never advanced out of committee, it did receive serious discussion during one committee hearing in May.

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“If the state says that a service is required, the state should fund it,” Guzmán said during that hearing. “And then if the state has defined what adequate education looks like, the state should also fund that. So, if we’re serious about equity, property tax relief and supporting public schools across Illinois, then we have to stop treating underfunding as if it is normal.”

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation. 



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