A new report prepared this August by the Illinois Petroleum Resources Board illustrates why local oil production is so vital.
The report states that “oil production has been a key economic driver in Illinois, particularly in the southern portion of the state where the vast majority of production occurs.” Not only does the production of oil provide jobs but it also provides revenue for the areas that produce the oil. This is due to Illinois state statutes which “allow producing counties to assess and tax minerals, including active oil and natural gas production, as real estate.”
This tax is called an ad valorem tax, which is a tax that is based on the value of the property. This is important because the money collected doesn’t get funneled to Springfield; it stays local. The IPRB report states that “it goes directly to support the areas where oil is produced, including counties, villages, townships, cities and local schools.” But it goes far beyond that. It helps to fund a variety of public services.
“Typically, at least half of ad valorem property tax revenue is used to fund public education, while the remaining monies go to fund various local public services, including fire departments, local hospital districts, local public library districts, local park districts, county governments and townships.”
The IPRB reviewed the latest data from the Illinois Department of Revenue and determined that “Illinois oil reserves generated approximately $89.17 million in ad valorem property tax revenue from 2007–2017.” That equates to approximately $8.11 million per year in ad valorem tax revenue, though that figure fluctuates from year to year.
Oil is produced in just 42 of Illinois’ 102 counties, all of which are downstate counties. The report states that “there are a total of 281,746 residents in Illinois’ oil-producing counties, representing just 14.6 percent of the state’s overall population.
The report further states that 90 percent of the state’s oil is produced in just 15 of those 42 counties; those 15 counties include: White, Marion, Crawford, Lawrence, Fayette, Wabash, Wayne, Clay, Franklin, Richland, Clark, Jasper, Hamilton, Gallatin and Jefferson counties.
These 15 counties, which collectively represent just 2.2 percent of the state’s population, generated $79.02 million of the $89.17 million. The oil-producing counties generated “at least $44.5 million in ad valorem tax revenue for public schools, and of that $44.5 million, the top oil-producing counties generated $39.5 million.
IPRB further notes that “many of these counties have relatively small populations and are relatively poor compared to many other state counties and the state as a whole.” Despite this, these local communities bear a much heavier burden to fund their public education systems than the rest of the United States.
According to the report, “66 percent of Illinois public education funding came from the local level, while 25 percent of funding came from the sate level and the remaining nine percent came from the federal level.”
This stands in stark contrast with the rest of the country which sees 47 percent of public education funding come from the state, 45 percent from the local level and 8 percent from the federal level.
“Illinois public schools were woefully underfunded at the state level during the 2007-2017 time frame…Not only did Illinoi rely on property taxes more than any other state in the nation to fund public schools, state funding was ‘widely considered the most inequitable in the country,’ while Illinois ranked ‘dead last’ in educations funding in 2013.”
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