State eyes local governments' share of income taxes

Published: Saturday, March 30, 2013 5:30 a.m.CDT

Local governments could lose thousands of dollars if the state decides to roll back their share of income tax revenue.

Officials in DeKalb and Sycamore expect services would be affected depending on how much money they lose from the state capping the Local Government Distributive Fund. Income tax revenue from the state is deposited into this fund, which is then dispersed to local cities on a per capita basis.

If the General Assembly decides to cap revenue at 2012 levels, the city of DeKalb could lose between $232,468 and $504,413. Sycamore could lose between $92,850 and $201,468. Genoa could lose between $27,522 and $59,719.

“We’ve been trying to grow our public safety efforts,” said DeKalb Assistant City Manager Rudy Espiritu. “This would adversely impact those efforts.”

Espiritu said the city has taken numerous steps to reduce its operating costs and staff expenditures since 2008, with city staff levels dropping 20 percent since then.

Sycamore City Manager Brian Gregory also was worried about how the city’s services would be affected.

Gov. Pat Quinn’s budget office and the Illinois Municipal League disagree on how much money cities and villages would lose.

Abdon Pallasch, the state’s assistant budget director, said by capping local income tax revenue at 2012 levels, municipalities would only be losing out on $68 million, or $5.30 a resident.

“The IML said, ‘We think we know better than the state,’ “ Pallasch said. “I think the governor’s office knows the governor’s proposal better than they do.”

Larry Frang, the executive director of the Illinois Municipal League, said income tax revenues are pouring in at figures much higher than state projections. Frang estimates municipalities would lose out on $148 million in revenue, or $11.50 a resident.

“We don’t believe this is the right place to raise funds, by taking funds from local governments,” Frang said.

Pallasch said the governor’s office is proposing taking this fund and 80 others off this “autopilot” status they are on so they can be reviewed like other parts of the budget.

“Every single part of the budget we’re trying to trim the line on,” Pallasch said, because of the state’s “catastrophic” financial situation.

Pallasch noted that Quinn was the first governor in a decade to lead a capital bill through the state legislature, which has directed capital funds to municipalities all around the state. Capital funds can be used for large building projects.

“The governor has been doing a lot to help cities around the state,” Pallasch said.

Frang said he has not seen a bill appear in the legislative session that would make the necessary statutory changes. Frang said there’s a lot of support for leaving the fund alone, but he’s cautiously hopeful.

“It’s hard to line up absolute positions on a budget bill,” Frang said.

Both State Rep. Robert Pritchard, R-Hinckley, and state Sen. Dave Syverson, R-Rockford, said they were opposed to diverting local funds to the state.

“Local governments shouldn’t have to be punished, because the state can’t live within its means,” Syverson said.

What’s at stake

The state has proposed rolling back municipalities’ share of the Local Government Distributive Fund to 2012 levels. The state is projecting municipalities to lose $5.30 a resident; the Illinois Municipal League is projecting them to lose $11.50 a resident.

Here’s how much local governments could lose, using both projections and Census 2010 population figures.

DeKalb: $232,468 to $504,413

Sycamore: $92,850 to $201,468

Genoa: $27,522 to $59,719

Cortland: $22,631 to $49,105

Malta: $6,169 to $13,386

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