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Illinois School Board Journal - ARCHIVES
November-December, 2004
ASK THE STAFF:
Why the controversy over tort fund levies?
By Jerry Glaub
Jerry Glaub, IASB deputy executive director for communications , answers this issue's question.
Question: We have a taxpayer group that is complaining about our school board's tax levy in the tort immunity fund. Why is this fund so controversial?
Answer: The Tort Fund is controversial in part because it is an "open ended" fund, meaning that there is no maximum tax rate of the sort applicable to the Education Fund or to other funds. The Tort Fund also is controversial because not everyone agrees on what expenses can or should be legitimately charged to the fund.
The fund is without maximum rate because its purpose is to protect the district and its property owners against large legal settlements. The legislature recognizes that a public body cannot logically budget every year for a big payout in a lawsuit that may or may not happen. A "limitless" fund makes such a payout feasible "as needed" in one year or allows for payment spread over several years.
But the limitless nature of the fund also means it can be used to raise the overall rate that property owners pay in real estate taxes. Other funds have maximum rates that cannot be exceeded and, therefore, cannot be used to raise the total overall rate.
Controversy over the Tort Fund reached a fever pitch some years ago when the law was amended to permit school boards to use the fund to avoid lawsuits as well as to settle them. That is, school districts can charge the cost of insurance and/or risk management programs to the fund.
Such charges to the fund seem to make perfect sense because insurance and risk management protect taxpayers against having to pay large legal judgments. But those charges come under question when a school board in dire financial straits decides to push the envelope in defining "law suit avoidance." That is, how much of the superintendent's time is devoted to avoiding lawsuits? And how much of that time and compensation should be charged to the Tort Fund? What about the time and efforts of other employees? How much can we properly charge to the Tort Fund?
Keep in mind that the limited tax rates in the Education, OMB and Transportation funds make it advantageous to transfer as much expense as possible to any fund with no rate limit. (This is true in school districts that are not under the PTELL tax cap. The tax cap just about eliminates any advantage of the open-ended fund.)
Taxpayer groups often pay close attention to the types and amounts of expenses that school boards charge to their Tort Funds or to any other open-ended funds. Taxpayers know the open-ended fund drives up the total tax rate and the total tax bill.
In fact, some taxpayers argue that the outlays for risk management expenses that are charged to some Tort Funds should make those school districts the safest places on Earth.