State revenue cut would hit villages hard, officials say

By on April 16, 2010

Proposal would reduce municipalities’ income tax share
by Martha Quetsch
ELBURN, MP—A proposed reduction in state income taxes disbursed to municipalities would cause more financial challenges for the revenue-strapped villages of Elburn and Maple Park.

The 2010-11 state budget draft proposed by Gov. Pat Quinn in March calls for cutting municipalities’ share of their residents’ state income tax from 10 to 7 percent.

Under Quinn’s proposal, Maple Park’s revenue would drop by about $30,000 and Elburn’s would decrease by an estimated $100,000, village officials said.

“This deep of a cut would put us into a situation potentially using reserve funds,” Village President Kathy Curtis said.

To deal with its budget crunch, Maple Park already has frozen employee raises for the past two years and drastically cut its engineering and legal costs, Curtis said.

Elburn also has slashed its budget to cope with revenue constraints. The village did not give employee raises this year and reduced its staff. If the state income-tax disbursement drops, the village will have to look at other ways to reduce expenses, and also would likely have to dip into its reserve funds, Elburn Village President Dave Anderson said.

“We’re at the bare-bones end of things now,” he said.

The villages set money aside in reserve funds to use for emergency infrastructure projects and other unexpected expenses. Those funds currently total about $5 million in Elburn and $740,000 in Maple Park. Village officials are concerned that those monies could quickly be depleted if they have to use them for operating expenses. State income tax money benefits the villages’ general operating fund.

“God forbid that we have a catastrophe—where is the money going to come from?” Anderson said.

State lawmakers are expected to vote next month on a final budget following a legislative review including House and Senate appropriation committee meetings.

Hearings are in full swing in Springfield this week, said Rep. Kay Hatcher (R-Dist. 50-Yorkville), who strongly opposes Quinn’s proposed cut in income tax disbursements to municipalities.

“It (the proposal) is really even more onerous than it seems at first sight,” Hatcher said.

Hatcher said that because of the economy, local funding already is down 40 percent.

“That is more than any municipality can handle,” Hatcher said.

For 2008-09, the village of Elburn received $437,931 in income taxes from the state; that represents 10 percent of income taxes collected by the state from Elburn residents. The 10-percent disbursement dropped to about $375,000 for 2009-10.

“And if they (state lawmakers) decide to diminish the 10 percent to 7 percent, that’s another whack,” Anderson said.

Hatcher does not believe the Senate and House will approve a budget that includes Quinn’s proposed cut in income taxes for municipalities.

“There are going to be a lot of negotiations going on,” Hatcher said. “The state can’t cut that (income tax to municipalities) without General Assembly approval, and I don’t see that happening,” Hatcher said.

Gov. Quinn’s

Under Illinois Gov. Pat Quinn’s proposed state budget for 2010-11, the amount of state income tax that goes to local governments will decrease by 3 percentage points.

Currently, the state disburses to each municipality 10 percent of income taxes from its residents. Quinn proposed decreasing the disbursement to 7 percent. That represents a 30-percent reduction in local tax revenue.

Maple Park is receiving up to $101,000 in income taxes from the state for this fiscal year 2009-10, which ends April 30, said the village’s accounting clerk, Cheryl Aldridge. Under the proposed state cut, the village’s share next year would be about $70,000.

Elburn is receiving about $375,000 in state income taxes this fiscal year, and under the proposed cut would receive approximately $275,000 in 2010-11.