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Municipalities decry proposal to sustain funding cuts, talk need for pension consolidation

Illinois Watchdog.Org

Thursday, May 17, 2018  |  Article  |  By Greg Bishop

Local Government (60) , Taxes, income (86) Hastings, Michael--State Senate, 19 , Rose, Chapin--State House, 110
Gov. Bruce Rauner's administration says its proposed reduction of income tax revenue to local governments in the coming fiscal year is a continuation of the previous year's budget approved over the governor's veto.

Rauner’s director of the Governor’s Office of Management and Budget Hans Zigmund told a Senate Appropriations committee Wednesday that the governor's proposed budget for the coming fiscal year has a 10 percent reduction in the Local Government Distributive Fund, or LGDF, something that would save the state $131 million. LGDF was set up decades ago when Illinois established an income tax. The LGDF was a way to keep local governments from imposing their own income taxes. The amount that each municipality or county gets is based on its population in proportion to the total state population.

State Sen. Michael Hastings, D-Tinley Park, asked Zigmund for suggestions on how local governments should handle the proposed reduction.

"So you want them to go ahead and raise local income taxes, is that what you want?” Hastings asked.

“I don’t think we’ve suggested that,” Zigmund replied.

“Then what do you suggest they do when you take their money away,” Hastings asked.

“The same thing that the state of Illinois has to do or any other unit of government has to do and they can institute either cost savings measures or renegotiate contracts,” Zigmund said.

State Sen. Chapin Rose, R-Mahomet, said Democrats are opposing what they supported in last year's budget.

“Just to be clear, anybody who is now worried about their mayors back home should have been just as worried last year when they voted for it,” Rose said.

Several mayors from central Illinois communities said while they didn't like it, they accepted the current cut as temporary and any long-term reductions would mean fewer services for their residents.

The conversation then turned to how the state could help cities control their pensions costs.

Both Decatur and Springfield mayors said all of their municipal portion of local property taxes go to pay local pension costs.

Decatur Mayor Julie Moore Wolfe said it wasn't always that way.

“We used to be able to fund our local roads through the property taxes,” Wolfe said. “We can’t anymore because all of the money that we get from property taxes goes straight into the pensions and then some.”

Illinois Municipal League Executive Director Brad Cole said the organization and its members have been trying to address the pension issue for some time to no avail. He said they have five bills for municipal pension consolidation at the statehouse that "could save millions, not one, millions, like a hundred million dollars for municipalities.”

Cole also said there are other unfunded mandates the state could lift to ease the funding burden on local units of government.

Another element of the governor’s cost savings plan that Zigmund presented was withholding funds for downstate transit programs to save the state $62 million and shifting health insurance costs that would save even more money. There's also a proposed shift of health insurance costs for the state's higher education system that Zigmund said the state subsidizes. The proposed budget would reduce that by $105 million in the first year of a four-year shift, but Zigmund said that would be offset by a one-year, $105 million lump sum appropriation.

Yet another proposed cost savings would be ending a $4 million subsidy for retired community college instructors.

Last week, the same committee heard about the impact of other proposals that would shift pension costs back to the local school districts that set the salaries those pensions are based on.