Illinois’ COVID-19 shutdowns could hit taxpayers as local governments brace for impact

Local governments across the state anticipate COVID-19-related closures will squeeze municipal budgets.

With bars, restaurants, conventions, hotel cancellations and other economic activity at a virtual standstill, local tax revenue is expected to decline.

Illinois Municipal League Executive Director Brad Cole said municipal officials should be prepared.

“Communities are actually trying to put together their forecast for the upcoming fiscal year, so the timing is good for that,” Cole said. “Unfortunately, this is going to be a significant negative impact.”

Springfield already passed its city budget that started at the beginning of March. Alderman Ralph Hanauer said officials didn’t anticipate reduced revenue.

“We don’t know how bad this is,” Hanauer said. “If they shut down more businesses, that’s just more tax money that we’re going to see [in decline].”

Hanauer said the lost revenue from the COVID-19 shutdowns would be compounded if lawmakers approve the governor’s proposed state budget. Gov. J.B. Pritzker’s budget proposal calls for holding back millions of dollars from local governments if voters don’t approve a progressive income tax this November.

Hanauer said city budget officials were looking at freezing spending levels.

“I appreciate asking for a 5 percent reduction, or a hold on 5 percent of the budget this year because of this, but quite frankly I don’t think it’s going to be enough,” Hanauer said.

Cole said local governments were going to have to look at non-essential spending, employment reductions and revenue sources.

“So it’s gonna have to be a top-to-bottom look,” Cole said. “This is going to have a cost, not just a revenue impact, so there’s both a loss of revenue and an increase in expenditures and that’s going to be borne eventually by the taxpayer.”

Another area the anticipated economic downturn could hit is local pension funds. Stock market losses could diminish, if not wash away, any investment returns.

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