Local governments call for increase in state revenue sharing

SPRINGFIELD - A local government advocacy group laid out its legislative agenda Monday and called on lawmakers to fully fund a program that shares state income tax revenue with local municipalities.

The Illinois Municipal League's "Moving Cities Forward" agenda also includes efforts to: protect local governments from lawsuits resulting from data breaches; give non-home rule communities greater authority to tax and greater access to financially distressed cities assistance; and remove unfunded mandates on municipalities.

The organization's top priority is for full funding of the Local Government Distributive Fund, which is funded below statutory levels, according to Illinois Municipal League Executive Director Brad Cole.

"City leaders from throughout the state understand the need for shared sacrifice in addressing the state's budget woes," Cole said during a Capitol news conference. "However, municipal share of that sacrifice continues to grow and negatively impact the communities that provide for the health, safety and welfare of the residents."

In two budget scenarios laid out by Gov. J.B. Pritzker last month, the distributive fund would be funded at either 95 percent or 90 percent of statutory levels for the fiscal year that begins July 1. Which amount is allocated depends on the passage of a constitutional amendment that would allow the state to impose a graduated income tax rate structure.

That's because Pritzker's budget leaves $1.4 billion in state spending authority in reserve, including $79 million to the distributive fund, if the graduated tax amendment does not gain approval from voters in November. Should it pass, an already approved graduated rate structure would take effect and make the added spending authority possible, according to Pritzker's budget team.

"Because this reserve is so large, it inevitably cuts into some of the things that we all hold most dear: increased funding for K-12 education, universities and community colleges, public safety and other key investments. But as important as these investments are, we cannot responsibly spend for these priorities until we know with certainty what the state's revenue picture will be," Pritzker said in his budget address last month.

If the amendment passes, the distributive fund would remain flat from current-year levels at a 5 percent reduction from statutory levels. The budget proposal lays out only Pritzker's budget priorities, however, and the General Assembly must approve any budget before it can become law.

Springfield Mayor Jim Langfelder, who attended the news conference, said his city just passed a budget that included the full amount from the distributive fund.

"Anytime you put on hold funds that are due the municipalities, it creates an issue," he said, adding the city "would have to prioritize" spending in the event of distributive fund cuts, as every 5 percent decrease in funding would cost the city about $650,000.

The group is also backing legislation to reinstate the original statutory requirement of 10 percent of income tax contributions to the distributive fund. Municipalities receive a prorated portion of 5.8 percent of personal income tax revenues and 6.5 percent of corporate tax revenues, Cole said.

Local taxing authority

The group also announced backing for measures to increase the ability of non-home rule municipalities to levy certain taxes.

Home rule is a status that state law confers to any municipality with more than 25,000 residents or other municipalities that choose to adopt it by referendum. Those municipalities have greater authority to control their own local affairs. According to the Illinois Municipal League, 217 of Illinois' 1,298 incorporated municipalities have home rule powers.

They are backing House Bill 5070, which would allow municipalities to impose a local sales tax up to 1 percent via an ordinance, rather than requiring the municipality to put the issue before voters in the form of a referendum.

The group also supports Senate Bill 2978, which would allow non-home rule municipalities outside Cook County to charge a local motor fuel tax of up to 3 cents per gallon.

House Bill 825 is also on the agenda. It allows non-home rule municipalities to levy storm water utility charges to "offset the cost of owning, maintaining, and improving local storm water infrastructure."

"Providing public safety services, improving municipal infrastructure and attracting and retaining economic development are issues of importance to every municipality, home rule status aside," Cole said. "Yet state law hampers the ability of non-home rule communities to address these important issues."

Other issues

Illinois Municipal League members also stumped for the elimination of a fee charged for the state's administration of locally imposed sales taxes.

"In Illinois, only the Department of Revenue is allowed to collect certain locally imposed sales taxes, and they then distribute them to the local government," said Cathy Adduci, mayor of suburban River Forest and vice president of the Illinois Municipal League.

In fiscal year 2018, Adduci said, the state "arbitrarily" imposed a 2 percent fee for its collection and remittance efforts. In fiscal year 2019, it decreased that fee to 1.5 percent, which Adduci said shifted $45 million back to local governments.

League President Leon Rockingham Jr., who also is the mayor of North Chicago, said another way to alleviate pressures on local governments is to get rid of "unfunded mandates," including publishing requirements for a municipality's annual report.

"State mandates on municipalities are one of the largest drivers of property taxes. With mandate relief, the financial burden to comply with these mandates will lessen and taxpayers will benefit," he said.

He, along with the group, also urged opening up of the state's financially distressed cities law to non-home rule municipalities. That program makes cities in both the top 5 percent of aggregate property tax rate and bottom 5 percent in per capita tax yield eligible for state assistance.

Adduci also spoke in favor of a bill, supported by the Illinois Municipal League, to remove the liability of municipalities if they fall victim to cyberattacks.

"Municipalities, despite their due diligence, are under threat of becoming the subject of financially unsustainable lawsuits if a cyberattack were to occur," she said.