* In the days leading up to Gov. JB Pritzker’s budget address, the Illinois Municipal League pushed a plan that would cost the state’s budget $800-875 million per year…

The [Local Government Distributive Fund] share is 6.47% of individual income tax collections and 6.845% of corporate income tax collections. Before 2011, 10% of state income tax dollars were dedicated to LGDF and distributed to cities and counties. IML is supporting a bill to reinstate the 10% number.

Tons of mayors, including Chicago’s, hotly opposed the state income tax increase back in 2011.

* In seeming reply, the governor’s budget office noted in its analysis of the proposed spending plan how much the state is spending on local governments since Pritzker took office…

The operations of local governments are a critical part of the state financial infrastructure. When possible, the State has provided additional funding mechanisms to help local governments, including one-time and permanent revenue supports to minimize the need for local property tax increases. Examples of on-going support, totaling over $1.3 billion annually, enacted since Governor Pritzker took office include:

• An additional $200 million a year in sales taxes from the passage of internet sales tax language following the Wayfair decision, including the Leveling the Playing Field for Illinois Retail Act, to help ensure compliance with state tax laws on internet sales.
• Over $680 million annually in additional motor fuel taxes directed to local governments and transit districts to support needed transportation projects through the passage of Rebuild Illinois.
• Granting $1.5 billion in state transportation bond funds directly to local governments for road and highway project expenditures, saving local governments $110 million annually in debt service costs from not issuing local bonds.
• Authorization of adult-use cannabis, generating an estimated $100 million in additional revenues for local governments.
• Increased allocations through the Local Government Distributive Fund process totaling $46 million annually from business loophole closures included in PA 102-0016.
• Increased tax rates and positions for video gaming operations expected to generate an additional $80 million a year for local governments Additional local revenues from the opening of new casinos authorized under the Rebuild Illinois plan, including the first revenues from the new Chicago casino licensed in 2023.
• Increased percentage of individual income taxes that state government shares with municipalities and counties from 6.16 to 6.47 percent of total individual income tax collections. This increase is worth $88 million annually.

Illinois distributed to smaller local governments $250 million from its Coronavirus Relief Fund allocation and established the infrastructure necessary to distribute the $740 million Local Fiscal Recovery Fund payment received pursuant to ARPA. These key sources of funding helped small local governments maintain services during uncertain fiscal times.

* So now, instead of focusing on expanding the LGDF, the Municipal League is playing defense against the governor’s proposal to eliminate a state-collected but locally distributed and very regressive tax…

A major element of the governor’s proposal of eliminating the 1% grocery tax will be entirely on the backs of local governments.

“That’s for the rest of time, hundreds of millions of dollars annually impact against local governments,” Cole told The Center Square. “That grocery tax solely goes to municipalities. There is no state money in there at all. So when the governor offered to reduce that, he eliminated local funding. So, take away three- or four-hundred million dollars, [cities] are going to have to come up with it somehow.”

* Some local government officials are unclear on the concept…

Illinois Governor J.B. Pritzker’s plan to eliminate the grocery sales tax will result in an $800,000 loss in revenue to the village of Montgomery.

At Monday’s Montgomery Village Board meeting, trustee Steve Jungermann voiced opposition to the proposal: “State officials, you need to do your jobs and pass an honest, balanced budget.”

After the meeting, Jungermann was interviewed by WSPY News: “…The state, they need to pass an honest, balanced budget and not depend and fall back onto the municipalities. You’re essentially stealing money from the municipalities. We depend on that money.”

To be clear, Pritzker isn’t proposing that the state spend the $350 million or so per year from the grocery tax. He just wants to get rid of the tax altogether and allow locals to impose their own replacement if they want.

* At an unrelated press conference today, a reporter noted “there’s a lot of pushback on this bill.”

“They say ‘If you take this away and you save taxpayers $1 for every 100 they spend on groceries … they’re gonna have to raise taxes elsewhere.” So, the reporter asked Pritzker, “Are you willing to reconsider this? Because it’s going to hurt communities across the state of Illinois by taking away that source of revenue.”

Pritzker’s response…

No, I’m not willing to reconsider it. Here’s what I’m saying about the grocery tax. It’s the most regressive tax you could have, really We think about all the regressive taxes that exist in the state of Illinois. This one goes after people who are just trying to buy food. And when you say it’s, ‘Oh, it’s a dollar out of every 100.’ Well, that could be hundreds of dollars for a family across a year. So you know that that matters to many people.

And the grocery tax, by the way, we’re in the vast, vast minority of states that still have a grocery tax. Almost every other state has gotten rid of their grocery tax. We still have one, that’s not right.

Now, municipalities I absolutely believe that the state should be supporting municipalities. And indeed, as long as I’ve been governor, we’ve added $1.3 billion to the coffers of local governments across the state. That didn’t happen under my predecessor. It’s because I believe in investing in local government. It’s closest to the people. They deserve to have the kind of funding that they need to support local projects and local government, but the grocery tax doesn’t seem like the best way to do it.

But I want to be clear, I have said that the bill that would be put forward should include the ability for local governments, if they want to impose a grocery tax on their local residents, they should be able to go do that. I don’t think it’s the right thing to do. I wouldn’t do it locally. Having said that, I understand the need for the dollars and if they feel like they need them, they should think about imposing that tax on their own.

I have increased LGDF, that’s the Local Government Distributive Fund, which is one of the ways in which we send money from the state to local governments. I have increased the dollars that local governments get for infrastructure. By passing rebuild Illinois sending dollars directly without any conditions other than as for us for infrastructure to local governments. So I’m you know, I’m a believer in continuing to fund them. But you know, we have a tight budgetary situation this year, so we won’t be able to do as much more as we have done in previous years, but we’ll continue to look at ways to support them. Grocery tax, it seems to me, it’s time for us to end this regressive tax.

I’m thinking the mayors absolutely do not want to have the power to impose the tax on their own, up to and including Chicago’s progressive mayor.

Thoughts?

…Adding… Good point in comments…

I do wish the governor had chosen his words more carefully when talking about the savings that families will see. I doubt many families will even see $100 of savings in a year let alone “hundreds of dollars” a year as he said. I know groceries have gotten more expensive but a family would have to spend $10,000 on groceries a year to see even a $100 savings.