Local Tax Share Goes Untouched in State Budget

Local government officials across the state celebrated a major victory Tuesday as the Illinois General Assembly adjourned with a budget that leaves municipalities' income tax share intact.

Gov. Pat Quinn, who has not yet signed the $33.2 billion Fiscal Year 2012 budget, of the state retaining $100 million in tax revenue normally distributed to municipalities through the Local Government Distributive Fund (LGDF). The plan would have been enacted to allow the state to pay back $4.5 billion in debt, he said.

The proposal was met with disbelief and hostility at the local level, with organizations like the Metropolitan Mayors Caucus and the Southwest Conference of Mayors speaking out on the detrimental impact it would have on local governments.

Prior to the 66-percent income tax increase adopted in January, municipalities received 10 percent of the state's income tax revenue. However, the local share was decreased to about 6 percent following the tax increase, according to the Illinois Municipal League.

Based on projections for fiscal year 2012, governments are expected to receive an estimated $73 per resident — down nearly $20 from what was received prior to the 2008 recession.

Using the results from the 2010 Census, which counted Lemont's population as 16,000, the village adopted a 2011-2012 budget in April that estimated $1.17 million in income tax revenue from the state.

In a phone interview Thursday, Lemont Mayor Brian Reaves said he was "cautiously optimistic" about the state's budget.

"I'm glad to see that the state budget includes no cuts to the LGDF, but I'm still very leery about the governor's plans, especially because they're still four months behind on payments. Having the payments written into the budget and actually getting them are two different things."

The problem of late payments from the state is not expected to disappear. In fact, it may get worse. According to an Illinois Statehouse News story, the 2012 budget (which takes effect July 1) was balanced by delaying the payment of billions in unpaid bills.

"The state is $6 billion-plus in the current year, so late payments are definitely our biggest concern right now," Village Administrator Ben Wehmeier said.

The village's last payment was received in January, meaning the state still owes about $500,000, Wehmeier said.

When the latest budget was adopted, Reaves called it "the most bare bones budget" the village had adopted in the past decade. Wehmeier said the the village has avoided any problems with the late payments through the transfer of cash reserves to the general fund.

Whatever the speed of the payments, the Illinois Municipal League is calling it a win.

“This is a major victory for cities and counties who fought diligently to preserve their portion of the income tax,” the League wrote in a post to their website Wednesday. “The IML staff thank all of you wholeheartedly for your perseverance to send the message to legislators and the governor.”

Reaves credited local elected officials and organizations like the Illinois Municipal League and Southwest Conference of Mayors for keeping the governor's proposal out of the state's budget.

"The state would have gotten no support from us when it comes time for things they want to get done, or things they want during the election cycle," he said. "I think we all had a tremendous impact on the funds remaining in the budget."