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Push to Eliminate LGDF and Use Tax Revenue Sharing Heats Up

May 9, 2014 | Legislative briefs

The IGFOA Legislative Committee shares an update from the Illinois Municipal League on SB 279

from the May 9th IML Statehouse Briefing: 
IML Testifies Against Elimination of LGDF and Use Tax Revenue Sharing

Yesterday was a very busy day at the Capitol and IML staff spent considerable time defending vital municipal dollars that come to your community through the State and Local Tax Reform Fund (Use Tax) and the Local Government Distributive Fund (Income Tax).

The Senate Appropriation II Committee held a lengthy discussion about SA#1 to SB 279 (Sen. Trotter, D-Chicago).This is the amendment that would eliminate LGDF for FY2015 (this year's State budget) and transfer the revenue to the Common School Fund. IML staff immediately analyzed the fiscal impact and began working Committee members.

The IML estimates that the total FY2015 LGDF loss to cities and counties would be $1.485 billion (income tax and use tax). This means that each municipality would lose $115.80 per resident. A loss of this magnitude for Chicago, as an example, would be approximately $314.4 million. Illinois’ second largest city, Aurora, would lose approximately $23.2 million. Rockford, Illinois’ third largest city, would lose approximately $17.5 million. A quick way to estimate the loss of revenue for any municipality is to factor a loss of about $1.15 million per 10,000 residents.

Deputy Legislative Director Joe Schatteman presented excellent testimony about the LGDF-funded services provided to local residents. He also discussed the assortment of cuts and layoffs that would be a consequence of the amendment being enacted. He explained that the municipal budget process was almost complete in many communities and that the loss of LGDF revenue would cause financial chaos.

At the conclusion of the discussion, Senator Trotter took the amendment out of the record and no vote was taken. The discussion about LGDF is ongoing and tied-in with the debate about making the current state income tax rates permanent. This amendment is still in the Committee and could potentially be considered during a future hearing.

The Committee had the following witness slips on file.

Amendment Advances to Halt Certain Automatic Transfers – Includes LGDF

A second LGDF amendment was approved by the Appropriations II Committee by a vote of 11-4. SA#2 to SB 277 (Sen. Kotowski, D-Park Ridge) was amended with language to require that the General Assembly approve several transfers that now occur automatically. LGDF is included among the many transfers that would be subjected to legislative approval. SB 277 also represents a threat to LGDF revenue, as legislators would have more opportunities to halt or reduce distributions. IML OPPOSES

Key Legislative Deadlines

The spring session is approaching the scheduled May 31 adjournment date. The key dates for both chambers are as follows:

· May 16 - Deadline for Bills Out of Committee

· May 23 - Third Reading Deadline

· May 31 - Adjournment

More information is available at http://legislative.iml.org/

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