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After Gov. JB Pritzker presented his budget proposal last month, the immediate reaction was fairly ho-hum. At first blush, the plan looked like a make-no-waves budget designed largely to keep state government on cruise control. 

But as often happens in Springfield, the devil is in the details. And as more emerges, we’re learning that the governor’s proposal could shift additional financial pressure onto local governments, leaving municipal leaders with a familiar set of choices: raise taxes, cut services or both. 

The concern centers on the Local Government Distributive Fund, the long-standing revenue-sharing mechanism that sends a portion of state income tax collections to cities and towns across Illinois.

Illinois mayors are warning that Pritzker’s proposed fiscal year 2027 budget plan reduces the share of state income-tax revenue distributed to local governments, a shift that would force many municipalities to make tough choices.

The proposal would lower the municipal share of income tax revenue distributed through the fund from 6.47% to 6.23%, meaning cities and villages would receive about $60 million less than they would under the current formula. Lawmakers have reduced that share significantly over the years, starting with a substantial cut from the 10% level that persisted prior to 2011 when lawmakers significantly increased the income tax.

While the change would send more money to the state, it would squeeze local governments that rely heavily on property taxes to fund services. Pulling additional dollars from the LGDF risks shifting the burden onto Illinois homeowners, who already face some of the highest property tax bills in the country. Property taxes are set locally, but state decisions about revenue sharing inevitably shape how much local governments must rely on them. 

As an example, consider the city of Chicago. Last year, Pritzker signed an onerous bill sweetening firefighter and police pensions that will cost Chicagoans tens of millions of dollars more annually without extra help from the state. This LGDF reduction adds insult to injury.

Springfield faces real fiscal pressures, including slowing revenue growth and rising costs for pensions, health care and education. The state faced limited options in a tight budget year, given a lack of appetite for meaningful spending reforms as well as reluctance to raise taxes with elections looming. But balancing Springfield’s books by pushing the pressure onto localities risks deepening Illinois’ reliance on local taxes. Just like the rest of us, local governments are experiencing rising costs. While Pritzker’s proposal would hold LGDF funds flat in dollar terms, the Illinois Municipal League rightly told Capitol News Illinois that “flat funding is not neutral.”

Before this maneuver, localities would have shared in the modestly higher income-tax revenues the state is collecting. Instead, Pritzker proposes to keep the entirety for his own budget-balancing purposes. With Springfield’s watchword of the year being “affordability,” municipalities are crying foul.

“Any reduction in shared revenues results in a direct cost increase to residents — this means property tax increases, sales tax increases or any number of other local tax increases to make up the difference. Any discussion about affordability has to recognize that cuts from the state to local governments actually impact the residents negatively – this doesn’t help affordability on any level. If we want real reform in areas like property taxes, the state has to stop cutting the dollars that go to local government,” IML Chief Executive Officer Brad Cole said in a statement.

He’s right.

This isn’t the first time Springfield has shifted financial pressure onto local governments. When Pritzker eliminated the state’s 1% grocery tax effective Jan. 1, the move was framed as relief for consumers. But the revenue had long gone to local governments, and the legislation allowed municipalities to enact their own 1% grocery tax to avoid losing significant funding — for example, IML estimated Aurora would’ve lost $4.5 million if it hadn’t adopted a local grocery tax. Unsurprisingly, hundreds of communities did exactly that.

You can quibble over the wisdom of revenue redistribution, but the reality is that municipal leaders have local governments to run — and their own budgets to balance. They shouldn’t always be forced to pull the short straw. And Illinois cannot keep solving its budget problems by pushing costs down the ladder to cities and towns — and ultimately onto the same taxpayers the state claims it wants to protect.

Submit a letter, of no more than 400 words, to the editor here or email [email protected]

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