Illinois should make this budget fix for local government

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The Illinois Legislature on the last day of session in May 2021.

AP Photos

Raise your hand if you know what “LGDF” stands for in state and local government circles here in Illinois.

For those with hands still down — a fair number of our readers, we suspect — LGDF stands for Local Government Distributive Fund. That is the share of Illinois income tax revenue distributed to cities, towns and villages to help shore up local budgets and pay for critical services like road maintenance, garbage pickup, snow removal, police and firefighters, street signs, traffic lights, libraries and parks.

In short, it’s money that pays for all the basics people expect from local government.

For years, LGDF money has been a sore spot with mayors and other municipal leaders. When the state’s income tax rate was temporarily raised in 2011 from 3% to 5%, municipalities didn’t get a boost in LGDF. Instead, the state cut LGDF from 10 % of net income tax revenue — where it had been for years — to 6%, essentially erasing the revenue increase cities and towns would have received due to the higher tax rates.

It should not be surprising, then, that mayors and city managers and other local officials have been clamoring for the state to restore those cuts.

Two proposals now in the Illinois Legislature, HB 4169 and SB 3010, would partially restore LGDF to its original percentage by raising it from 6% to 8%. Chiefly sponsored by state Rep. Anthony DeLuca, D-Chicago Heights, and state Sen. Laura Murphy, D-Des Plaines, the legislation has the support of a broad coalition of mayors and groups that include the Illinois Municipal League, South Suburban Mayors and Managers Association, Lake County Municipal League and more.

Dozens of legislators from both parties, including House Speaker Emanuel “Chris” Welch and Senate Majority Leader Kimberly A. Lightford, have signed on as co-sponsors.

More lawmakers should get on board. The bills are, at the least, a starting point for the Legislature to come up with a concrete plan and timeline to fully restore LGDF to its original 10%.

“We’re not asking the state for money,” as Darien Mayor Joseph Marchese, vice president of DuPage Mayors and Managers Conference, told the editorial board. “We’re asking them to give us back what is legitimately ours, to give us money that truly belongs to the taxpayers.”

Restoring local governments to their prior percentage share of income tax revenue would make a “meaningful difference,” as Ralph Martire, executive director of the Center for Tax and Budget Accountability. told us. Chicago, for example, would receive over $160 million more in new revenue annually.

It would also be a boon for suburbs like North Chicago and Hazel Crest that do not have big box retailers or shopping malls that generate significant local sales taxes. An extra, say, $400,000 to $500,000 for them could make a major difference in budgeting for services — and avoiding property tax increases on residents.

Fixed stream of revenue

That will cost the state money, of course. Restoring LGDF to 10% now would cost $1 billion, according to a spokesperson for Gov. J.B. Pritzker. The state has sought to support local government with more revenue from other sources and has provided $1.1 billion annually.

But that’s a patchwork solution, in our view, too reliant on year-to-year decision-making.

“If we have to worry every year if that money will be there, that’s a struggle, a lot of pressure, especially on smaller communities,” Hazel Crest Mayor Vernard Alsberry Jr. said.

And not every town or village wants to allow weed shops or bring in video gambling — which means the state ought not count “legalized recreational marijuana” and “increased video gaming operations” among the sources of additional revenue provided for local municipalities.

Mayors got a raw deal in 2011. Perhaps the state had little choice, given its fiscal problems then and in the years since.

It’s time to rectify that raw deal.

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March 27, 2022 at 11:31PM

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