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Apr 24

[ARCHIVED] Local Government Distributive Funds

The original item was published from July 21, 2017 11:21 AM to January 1, 2019 12:20 AM

The City of Geneva's municipal services will not be impacted by Gov. Bruce Rauner's budget proposal to reduce the local share of state income tax.

This would have a large impact on Geneva. The Governor announced in February during a budget address his proposal to cut the Local Governments Distributive Fund (or LGDF) to help fix the state's financial problems. In Geneva, that would translate to about $1 million on an annual basis.

The local share has been an important revenue stream for municipalities since the income tax was first instituted in Illinois in 1969. Local communities have counted on it for 50 years to help fund key public services like police, fire, water and sewer treatment, infrastructure repair and construction and snow removal.

In 2015, Geneva Mayor Kevin Burns joined other municipal leaders from across the region expressing concern about the governor's call to reduce the local share of the state income tax by 50 percent. A few years later, the issue remains a concern to the City of Geneva as leaders in Springfield continue to consider this option as part of the ongoing state budget discussions.

Watch Mayor Burns talk in April 2018 about the challenges regarding a proposed change to the LGDF funding formula would pose on local municipalities. 

The Impact On Geneva
The State Income Tax equals 12 percent of the City’s General Fund Budget and helps pay for important services such as:

Police Protection Senior Care Program  Prescription Drug Disposal
Child Seat Inspections  Vacation Watch Program Fire Protection
Risk Watch Class TriCity Ambulance Tri-Com Emergency Dispatch
Fire Safety Education Fire Safety Inspections Street Maintenance
Sidewalk Maintenance Snow Plowing Ride In Kane Program
Mosquito Abatement Stormwater Management Community Events
Beautification (Flowers) Student Government Program Internal City Support Services
City Communications Development Reviews Business Support & Assistance

These are but a few of the City of Geneva programs and services supported by your income taxes. Spent locally, you can see the result that affects your quality of life.

How You Can Help

We need your help contacting local state legislators and the Governor to implore them to leave your tax dollars here at home where directly affect your quality of life. Visit Protect My Town's website for more details.

Please feel free to contact Mayor Kevin Burns at 630-742-8916 or City Administrator Stephanie Dawkins at 630-262-8495 for more information.

State Income Tax History
Below is a history of how the state income tax has been collected and shared with municipalities, as well as the financial impact the most recent proposal may have on Geneva.

Deal No. 1:

In 1932, Illinois approved its first income tax – a progressive income tax, which taxed income at ever-increasing rates. But the Illinois Supreme Court immediately voided the progressive income tax, ruling that an income tax in itself was unconstitutional.

Then the State of Illinois implemented a flat income tax in 1969.  At that time, there was disagreement between the State and municipalities regarding who should implement and collect the tax. With the adoption of the 1970 Illinois Constitution, the State agreed to collect income taxes at the state level and distribute back to cities and villages their “share” if they agreed not to collect the taxes at the local level. Cities and Villages agreed to allow the State to collect the tax from employers and then distribute a local share back to each community.

The agreement also established the tax rate as well as the amount that the State would keep and the amount that the local governments would receive. The State approved legislation to receive 90 percent of the income taxes collected and cities and villages agreed to receive 10 percent based on a per capita basis (pro-rated by population). 

Deal No. 2:

The State income tax rate was raised from three to five percent on individuals in 2011 with a promise to pay down the state’s unpaid bills and make needed pension payments. Part of the deal was making this a temporary tax increase, with it declining on Jan. 1, 2015. When the tax rate increased to 5 percent, the local share distributed to cities and villages decreased to 6 percent (rather than the 10 percent they had been receiving) in order for the State to receive all of the additional revenue to address their budget deficit.

During the same period of time, cities and villages have cut local budgets, reduced expenditures, laid off employees, deferred capital investments while experiencing the costs of unfunded mandates and rising public safety pension costs.

When the State income tax rate automatically declined on Jan. 1, 2015, cities and village share was raised to 8 percent instead of the original agreed upon 10 percent share.

Deal No. 3

Gov. Rauner has proposed that 50 percent of the income tax distributed to cities and villages be cut and kept by the State to address their financial shortfalls. This change in the law is without any discussion with local elected officials, without understanding the structure of local government and the difference between home rule and non-home rule communities and their respective authorities, and without consideration of what a 6 percent cut to our General Fund Budget means to Geneva.

Income Tax History