 The Illinois House of Representatives voted March 7 to divert up to an
additional $314 million in state tax dollars each year to local governments.
This proposal, House Bill 278, would increase state spending despite Illinois’
billions of dollars in deficit spending, billions more in unpaid bills, over
$130 billion in pension debt, and dismal credit rating. The bill also props up a
system that encourages local government overspending and a lack of
accountability.
After passing 67-47 in the Illinois House of Representatives, HB 278 heads to
the Illinois Senate for consideration.
Sixty-four Democrats and three Republicans voted in favor of HB 278:
Carol Ammons, Jaime Andrade, Luis Arroyo, Daniel V. Beiser, Daniel Burke, Kelly
Burke, Kelly M. Cassidy, Linda Chapa LaVia, Deb Conroy, Melissa Conyears-Ervin,
Jerry Costello II, Fred Crespo, John C. D’Amico, William Davis, Anthony DeLuca,
Scott Drury, Marcus C. Evans Jr., Sara Feigenholtz, Laura Fine, Mary E. Flowers,
La Shawn K. Ford, Robyn Gabel, Jehan Gordon-Booth, LaToya Greenwood, Will
Guzzardi, Michael Halpin, Sonya M. Harper, Gregory Harris, Chad Hays, Elizabeth
Hernandez, Jay Hoffman, Frances Ann Hurley, Thaddeus Jones, Stephanie A.
Kifowit, Lou Lang, Camille Y. Lilly, Theresa Mah, Natalie A. Manley, Robert
Martwick, Rita Mayfield, Emily McAsey, Christian Mitchell, Anna Moeller, Martin
J. Moylan, Michelle Mussman, Brandon W. Phelps, Robert W. Pritchard, Steven
Reick, Al Riley, Robert Rita, Sue Scherer, Carol Sente, Elgie R. Sims Jr.,
Justin Slaughter, Cynthia Soto, Juliana Stratton, Katie Stuart, Silvana Tabares,
André Thapedi, Arthur Turner, Litesa Wallace, Lawrence Walsh Jr., Emanuel Chris
Welch, Ann M. Williams, Kathleen Willis, Sam Yingling, Michael J. Zalewski
Illinois LGDF funding roll call
HB 278 hikes state spending, increasing the burden on Illinois taxpayers
Illinois already spends $8 billion more than it takes in and has a $12 billion
unpaid bill backlog and a $130 billion pension crisis. HB 278 will divert up to
$314 million more each year in state tax dollars to localities, which will
create an even larger hole in the state budget that politicians will look to
taxpayers to fill.
Illinois taxpayers just avoided a tax hike worth nearly $7 billion when the
Illinois Senate’s so-called “grand bargain” budget deal failed to pass in early
March. The Senate’s “grand bargain” tax proposals included: raising individual
and corporate income taxes 33 percent, hiking taxes on food, drugs and medical
supplies, expanding sales taxes to cover services, and imposing a tax on sugary
drinks. Diverting more state tax revenues to localities, however, could tempt
politicians to take another swing at a tax hike.
HB 278 props up local government overspending and other bad habits that lead to
high property taxes
HB 278 moves state tax dollars around in a shell game that enables fiscal
irresponsibility and overspending by local governments.
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The bill would raise the percentages of individual and corporate
income tax revenues that the state will send to Illinois’ local
governments by way of the Local Government Distributive Fund, or
LGDF. Through the LGDF, the state funnels income tax dollars to
local governments based not on need, but on their pro rata share of
the state’s population. The LGDF has $1.3 billion in state income
tax collections that it will pay to cities and counties.
HB 278 provides that starting in 2020, 10 percent of net state
individual and corporate income tax revenue will go to the LGDF, up
from the 8 percent of net individual income taxes and 9.14 percent
of net corporate income taxes the LGDF currently takes in. The
measure phases in the increase, raising the LGDF’s cut of net
individual income taxes to 8.5 percent and its take of net corporate
income taxes to 9.355 percent in 2017, and by additional increments
each year from 2018 to 2020.
State funding of localities fuels reckless spending on perks and
expenses that would otherwise be unaffordable for local governments.
And the spending enabled by LGDF dollars is often far costlier than
it may first appear. For example, local governments may use LGDF
money to hire extra municipal government personnel, or to avoid
conflict with government-worker unions by handing out overgenerous
salaries and benefits to public employees. If the money comes from
the LGDF, local residents may not immediately feel the effects of
this spending, and politicians can dole out funds without having to
justify it to local taxpayers. But eventually pension costs for
those employees end up growing at extraordinary rates. This forces
local residents – who already pay some of the highest property taxes
in the nation – to pick up the hefty tab and crowds out funding for
municipal services such as libraries and road repair.
All Illinoisans lose under HB 278
HB 278 creates an additional $314 million annual burden that
Illinois cannot afford.
And just as concerning, it takes the state even farther away from
ending the state-local funding shell game that occurs through the
LGDF. Rather than increasing funding to the LGDF, lawmakers should
put an end to all LGDF distributions to counties and municipalities
with populations above 5,000. Requiring local governments to spend
within their means, rather than encouraging bloated bureaucracies
and expensive perks through state funding, is an important step
toward reining in property taxes.
But lawmakers should not stop there. In addition to curbing state
subsidies such as the LGDF, lawmakers should take further steps to
hold down property taxes by instituting a property tax freeze and
ending costly state mandates that drive up local governments’ costs.
And instead of resorting to harmful tax hikes, lawmakers should
bring Illinois’ costs under control by: reforming pensions, aligning
the cost of state worker compensation with what taxpayers can
afford, streamlining Medicaid spending, and reducing excessive
bureaucracy and administrative costs in higher education.
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