CHICAGO – Gov. Pat Quinn will consider giving Illinois communities a larger share of state income tax revenues as a way to help solve the municipal pension crisis, an idea he previewed Monday as part of his pitch to extend the temporary income tax increase.
The Chicago Democrat didn’t give specifics, but said he doesn’t want cities to rely on increasing property taxes. His comments before the City Club of Chicago offered the possibility of an alternative funding source to raising property taxes in order to help pay for an overhaul of two Chicago pension systems.
“If we have more revenue sharing from the income tax, and I’m definitely willing to engage in that discussion,” Quinn told the crowd of business executives and public officials, “don’t you think that is a better way to go than to say to local units of government, ‘The only alternative you have, your only resort, is to raise property taxes ...?’ ”
Quinn floated the idea as mayors statewide are pushing for legislative help to overhaul local pension systems for police and firefighters, hoping to build on momentum from the state’s new law reforming state pension systems. The mayors said risings costs are squeezing out spending for essential services and raising property taxes may be a way out. Since programs are created by state law, only state legislators can make changes.
Earlier this month, lawmakers approved plans for Chicago’s municipal employee and laborer pension systems. The proposal would eliminate the $9.4 billion shortfall in those funds by cutting benefits and increasing contributions for both the city and employees. Mayor Rahm Emanuel wants the city’s additional contributions to come from a property tax increase, although the proposal no longer calls explicitly for a property tax hike.
Quinn said he’s still reviewing the legislation, but reiterated his stance against raising property taxes.
Instead, he wants to extend the temporary income tax hike, which rolls back in January and is forecast to leave a roughly $1.6 billion revenue shortfall. It will be a tough sell, particularly in an election year. Quinn wants to keep current income tax rates to prevent budget cuts and said Monday that raising communities’ share of income tax revenues should be part of that discussion.
Municipalities receive roughly 6 percent of state income tax revenues from individuals and corporations, after money has been set aside for refunds, according to Illinois Department of Revenue spokeswoman Sue Hofer. The money is distributed based on population.
The share municipalities receive was decreased from 10 percent to 6 percent when the income tax was increased in 2011. State officials have said the actual amount municipalities received was approximately the same since overall revenue went up, but city officials said they received less during the tough economic times.
Chicago officials were receptive Monday to the idea of a revenue bump, but called on Quinn to sign the legislation.
“Mayor Emanuel would welcome this reversal in policy to restore full funding of the income tax to local governments,” Emanuel spokeswoman Kelley Quinn said in a statement.
Quinn’s Republican challenger Bruce Rauner said the governor’s approach to leading didn’t add up. Republican leaders said they wanted to know more details on his plan.
“It is kind of a head scratcher to us. We’re not sure if it’s a serious proposal,” said Patty Schuh, a spokeswoman for state Senate Republican Leader Christine Radogno. “It looks like more plain politics.”
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