Article Summary
- Illinois municipal leaders are calling on state lawmakers to increase the amount of income tax revenue that is distributed to local governments.
- JB Pritzker’s budget proposal calls for reducing the amount of revenue from income taxes that goes to local governments, therefore keeping funding for the Local Government Distributive Fund flat in fiscal year 2027.
- Local government leaders say the flat funding amounts to a cut as they face rising costs to provide services.
- Funding for LGDF was reduced in fiscal year 2011 and local government leaders have been unsuccessfully lobbying the state for an increase since then.
This summary was written by the reporters and editors who worked on this story.
SPRINGFIELD – Local government leaders in Illinois are once again calling on state lawmakers to increase funding for their communities after Gov. JB Pritzker called for reducing the share of income taxes disbursed to municipalities.
Pritzker’s budget, introduced last month, calls for reducing the share of income tax revenues that is divided among counties and other municipalities via the Local Government Distributive Fund, from 6.47% of the revenue the state takes in to 6.23%.
The reduction would keep total funding for LGDF flat in fiscal year 2027 at $2.3 billion. That’s $60 million less than the state would spend otherwise, according to budget documents from Pritzker’s office.
Pritzker introduced a $56 billion spending plan that represents roughly 0.5% growth in most areas compared to the current fiscal year.
“The proposal suggests that overall LGDF formula distribution would remain flat, but flat funding is not neutral,” said Illinois Municipal League President Sheila Chalmers-Currin, who is also village president of Matteson, in southern Cook County, at a news conference in Springfield Wednesday. “Flat funding during a time of rising costs is a cut.”
Local governments would receive $2.3 billion from LGDF under Pritzker’s proposal, but the IML is seeking $3.7 billion.
Read more: Pritzker to present 8th budget as Illinois faces federal funding uncertainty
The IML leaders say the change prolongs a funding battle that began 15 years ago.
“It is the continuation of a long-term erosion of state revenue sharing,” Chalmers-Currin said.
She said more LGDF funding would allow local governments to provide more services and tax relief.
“When the state reduces shared revenue, costs do not disappear,” Chalmers-Currin said. “Costs shift. They shift to property taxes, local sales taxes, and service reduction.”
She said it flies in the face of lawmakers’ affordability message.
“You cannot talk about affordability while also cutting the revenue that funds essential local services,” she said. “If we want meaningful property tax relief, the state must stop reducing the dollars that are shared with municipalities.”
Years of lower rates
When the state income tax was first enacted in 1969, LGDF was earmarked to receive 10% of the revenue it brought in — although the initial personal income tax rate at the time was 2.5% compared to today’s rate of 4.95%.
That amount was set aside for local governments, which do not collect their own income taxes.
The state raised the income tax rate to 5% from 3% in fiscal year 2011. At the same time, they reduced the LGDF cut to 6%. The change in percentages meant that while the LGDF shrunk as a percentage, actual dollar amounts remained relatively stable.
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Since then, IML data shows local governments received $13 billion less than they would have under the 10% rate.
The distribution rate has changed over the years, but it has never risen back to 10% and has hovered between 6% and 7% since fiscal year 2021.
While the IML has lobbied state lawmakers to increase it to a more substantial amount, their pleas went answered even amid surpluses in the early 2020s.
“In the last couple of decades, the state’s budget has gone from $30 billion to $56 billion,” IML CEO Brad Cole said. “And during that time, we have lost a billion dollars a year in funding. So this is a matter of priorities.”
Pritzker’s office disputed that narrative.
“Since 2019, the governor has increased revenue sharing with local governments by nearly $1 billion — a 71% increase — and enacted more than $2.5 billion annually in additional ongoing resources through transportation funding, cannabis legalization, video gaming, casino expansion, and other measures,” a spokesperson for Pritzker said in an email. “He has also given local municipalities greater authority to adopt local sales taxes without requiring voter referendums and eliminating certain state administrative fees on collections — giving communities greater flexibility and control over their fiscal future.”
The state has provided other funding to local governments as budgets have increased. That includes funds from changes to the tax code, more motor fuel tax and bond revenue for infrastructure, and tax revenue from cannabis sales and video gaming. Some local governments with public transportation will also get more funding in FY27 under a new funding formula for public transit.
Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.
