Illinois State Capitol

Municipal leaders are pushing back on a proposal by Gov. J.B. Pritzker that would further reduce state funds given to local governments each year.

Several municipal groups held a virtual news conference on April 20 to outline their concerns with the governor’s suggestion, representing over 200 municipalities in the Chicago-Metro area. Elmhurst Mayor Steve Morley, who serves as vice president for the DuPage Mayors and Managers Conference, acted as a moderator for the event.

Morley said local governments cannot afford cuts to the share of state income taxes directed to municipalities, known as the Local Government Distributive Fund, or LGDF, in light of the disastrous effects of the coronavirus pandemic on city revenues.

“We’d like to address really two issues as it relates to LGDF. One is, we want to protect against further cuts,” he said. “The other thing that we want to talk about is not only halting any further reduction in the distribution of funds that rightly belong to the municipalities, but we actually want to discuss how we restore the distribution of these funds to the original levels that were agreed upon over 50 years ago.”

According to Morley, when Illinois first adopted its flat income tax in 1969, it was agreed that 10 percent of the revenue generated from the income tax would be redistributed by state government back to municipalities.

This was the case until 2011, when Democratic former Gov. Pat Quinn reduced the LGDF share of income tax revenue, while also raising Illinois personal income tax from 3 to 5 percent, and its corporate tax rate from 4.8 to 7 percent in an attempt to balance the state’s budget.

Illinois currently has a 4.95 percent income tax rate and a 7 percent corporate tax rate, and the LGDF contribution has fallen to 6.06 percent of state income revenue.

In 2020, Pritzker pushed an amendment to the Illinois Constitution that would have allowed for the state’s income tax to be graduated rather than flat.

According to the Illinois Department of Revenue, accompanying legislation passed by the General Assembly would have kept taxes the same or lower for the vast majority of Illinoisans while raising personal income taxes for those earning over $250,000 annually. The top rate would have been 7.95 percent on those earning more than $1 million.

The state Department of Revenue projections estimated the tax increase would affect about 3 percent of Illinoisans.

Following a lopsided defeat for the amendment in November, Pritzker promised to not raise the flat tax, but suggested “painful cuts” would be necessary to balance the state’s budget.