Municipalities raise concerns over governor’s plan to hold funds in reserve

Officials from the Illinois Municipal League said communities have concerns about the governor’s proposal to hold 5 percent of Local Government Distributive Funds in reserve from local governments if voters don’t approve a progressive income tax in November.

Illinois Municipal League laid out its legislative agenda, called “Moving Cities Forward,” on Monday.

Illinois Municipal League Executive Director Brad Cole said the proposed measures give municipalities more cost controls through mandate relief along with additional taxing powers.

“We have seen cuts and reduction and now reserve in LGDF and year after year after year of increased cost, increased mandates and increased expectations,” Cole said.

He said since 2011 the state has cut it’s 10 percent share of the state income tax with local governments to the point that in the current year local governments get a little over 5 percent of the state’s income tax.

Gov. J.B. Pritzker proposed in his state budget for the coming fiscal year that starts this summer that 5 percent of Local Government Distributive Funds be held in reserve pending the outcome of the progressive income tax proposal voters will decide in November, months after the start of the next fiscal year.

Of the $1.4 billion in reserve funds the governor plans to hold back if the flat tax isn’t changed by voters to a progressive one, there’s $73 million, or 5 percent for Local Government Distributive Funds. Another 5 percent of state sales taxes shared with local governments, or $25 million, would be held in reserve. That’s on top of $150 million in K-12 funding, nearly $15 million for community colleges, nearly $56 million from public universities, and $300 million in corporate income tax refunds being held if voters don’t approve higher income tax rates for higher earners.

And while Cole said the league has not taken a position on the progressive income tax, “every community is concerned” about the planned reserves if voters don’t approve the income tax change.

He said local governments get criticized for seeking more taxes, but it’s because of continued cuts in the share of income taxes meant for local governments. And the governor’s proposal to hold 5 percent in reserve pending the outcome of a proposed progressive income tax compounds that.

“It’s all currently riding on the graduated income tax, which if the voters don’t wish to adopt, their communities may be penalized,” Cole said.

“We would have to prioritize of course, for ourselves we’d have to take a look at the numbers, I think it was possibly over a million dollars in regards to the city,” Springfield Mayor Jim Langfelder said.

The city of Springfield already passed a budget that included expected funding from the state.

The league’s 2020 legislative agenda also includes giving smaller cities the ability to tax motor fuel on top of the state and federal gas taxes (Senate Bill 2978), levy a local sales tax (House Bill 5070), and the ability to assess a stormwater utility fee (House Bill 825), a measure one state lawmaker criticized as a “rain tax.”

Cole said as the state increases mandates and cuts the share of income taxes meant for local governments, municipalities have to be able to provide services local taxpayers deserve.

But Illinois Municipal League President and North Chicago Mayor Leon Rockingham Jr. said the league also is watching a couple of dozen bills that the organization said could go the wrong way on pensions, especially as the state successfully passed a law to consolidate nearly 650 downstate police and fire pension funds into two funds.

“IML is currently [tracking] nearly 25 proposals that would increase pension costs at a time when we’re taking necessary steps to reign in those costs,” Rockingham Jr. said.

North Chicago has been referred by its local public safety pension board to have money from the state diverted to the local pension fund because the city hasn’t been making required payments.

Another proposal the IML is pushing this year, Senate Bill 2511 and House Bill 5091, would either cap or eliminate any civil liability for municipal governments that have consumer information compromised by hackers. Cole said this would protect taxpayers if a private group or individual wants to sue a local unit of government, large or small, for damages after being hacked.

“We don’t think that the taxpayer should be on the hook for paying private individuals or private entities an additional ransom to take advantage of a crime that occurred against their system,” Cole said. “Now the issue of accountability, obviously the elected officials are the ones that are accountable and we’re trying to help them meet that need.”

Lawmakers return to Springfield on Tuesday.

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