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New budget has a surprise for local governments

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While finally having a state budget for Illinois is good news, there’s a cost for local governments and residents. The new budget includes a sales tax collection fee of 2 per cent, meaning the state will keep some of the revenue generated by local sales taxes.

The official reason for the sales tax collection fee is to pay the state’s administrative cost - of collecting the money and remitting it to local governments. Unofficially it’ll help Illinois make up for its huge past due bills and big budget deficits.

Kathy Carr, Finance Director for Moline, says the new fee will cost her city 172,000 dollars a year - Moline has been using sales tax revenue for the general fund and for road construction and repairs. […]

East Moline will lose about 9,000 dollars per year according to Finance Director Megan Petersen - her city also uses this money for street maintenance and repairs.

* ~~That’s mostly true, but not 100 percent.~~ There’s also this problem. From the Illinois Department of Revenue…

In accordance with current statute, the Illinois Department of Revenue is required to provide an estimated entitlement* of the amount of Personal Property Replacement Taxes for Fiscal Year 2018.

The FY18 replacement tax allocations are estimated at $1,117 million. This is a decline of 23.84% from FY17 replacement tax allocations that totaled $1,467 million.

Replacement tax allocations are estimated to be lower for several reasons:

* Replacement tax revenues are expected to decrease by approximately 2% due to weak domestic profits suppressing replacement tax receipts.

* The reconciliation of the tax year 2015 and 2016 returns involved with the tax calculation split was completed last year which resulted in additional monies of $235.6 million being deposited into the PPRT fund during FY-17. The income tax/replacement tax deposit percentages have been adjusted for FY-18, therefore no additional monies have been built into this estimate for FY-18.

* The statutory refund fund transfer to the PPRT fund is $10.1 million because more replacement tax refunds were paid in FY-17, whereas last year’s transfer amount was $63 million.

* The business income tax refund fund percentage has increased from 17.25% in FY17 to 17.5% in FY18.

* Public Act 100-0021 authorized $297 million in expenditures out of the PPRT fund for FY-18.

The PPRT distribution will fall by $350 million ~~, and $297 million of that is due to the state’s new sales tax collection “fee.” So, about 85 percent of the reduction is due to the new fee.~~ ADDING: Too much road traveling last night and not enough coffee this morning. These are two different things. Sorry. The point is, locals are gonna be up in arms.

I would expect this story to grow as more and more local governments discover what’s going on. You can click here for the full list of governments and what they’re getting.

posted by Rich Miller
Tuesday, Aug 22, 17 @ 10:13 am

Comments

Everyone is responsible for the fiscal mess of the State of Illinois - everyone. Therefore we won’t get out of the mess without everyone bleeding a bit. Local’s will scream and yell, but the party is over and someone has to pay the tab.

Comment by allknowingmasterofracoondom Tuesday, Aug 22, 17 @ 10:21 am
I am having trouble following the trail on this one. “* Public Act 100-0021 authorized $297 million in expenditures out of the PPRT fund for FY-18.

The PPRT distribution will fall by $350 million, and $297 million of that is due to the state’s new sales tax collection “fee.” So, about 85 percent of the reduction is due to the new fee.”

How is the $297 million out of PPRT related to the new sales tax fee? PPRT has nothing to do with sales tax, it is corporate income tax. So if money is being transferred out of there, isn’t it just corporate income tax being transferred out? Just trying to understand where the new 2% collection fee fits into this.

Comment by Smalls Tuesday, Aug 22, 17 @ 10:22 am
Haven’t we all come to the agreement that the entire state was going to have to suffer a wee bit? I think there should have been a larger cut to LGDF as well.

Comment by blue dog dem Tuesday, Aug 22, 17 @ 10:26 am
Smalls, you may be right. Hmm.

Comment by Rich Miller Tuesday, Aug 22, 17 @ 10:28 am
Hey, SOMEone needs to pay on that $2M a day in fees for unpaid backlogged bills, amirite?

Comment by Don Gerard Tuesday, Aug 22, 17 @ 10:29 am
There is no question that there is a reduction of the PPRT going to local governments. I am just not sure that the 2% collection fee has anything to do with it. I believe that is an entirely separate reduction for local governments.

Comment by Smalls Tuesday, Aug 22, 17 @ 10:33 am
Looks like this is another way the school districts will get hit. For instance:

ARTHUR CUSD 305
2018 estimated $296,908
2017 payments $389,837.12

Estimated Reduction of $92,919.12

Any of this figured into Rauner’s AV or SB1?

Comment by Anon221 Tuesday, Aug 22, 17 @ 10:42 am
===I think there should have been a larger cut to LGDF as well.===

Well golly gee willickers, imagine that, you and the Governor agree. I believe he actually wanted to end LGDF though.

Comment by Ducky LaMoore Tuesday, Aug 22, 17 @ 10:47 am
The allocations are $1.117 Billion from PPRT.
The $297 million is what was the State transfers from the PPRT annually. This has been ongoing for several years for pensions, regional superintendents of schools, and higher education, and the amount is spiking.

Comment by Jake From Elwood Tuesday, Aug 22, 17 @ 10:48 am
Ducky. Just offering my take. A 20% reduction would be painful to many. I get it. But getting back to the age old argument of raising taxes or spending cuts. I like(not really but conceded) a blend of both.

Comment by blue dog dem Tuesday, Aug 22, 17 @ 10:53 am
This post is completely confused. PPRT has nothing to do with the 2% sales tax fee. PPRT is based on corporate income and is supposed to compensate local govs for money lost when the State abolished local personal property taxes.

Comment by Philo Tuesday, Aug 22, 17 @ 11:05 am
This story is really nearly 2 months old….if the local govt guys try readin’ the bills they might have been aware. Guesssin’ GovJunk failed to make a call askin’ for help on his veto.

Comment by Annonin' Tuesday, Aug 22, 17 @ 11:09 am
The Illinois Municipal League has been on this 2% fee issue for months. They say it will cost local govs collectively about $60 million a year.

Comment by Philo Tuesday, Aug 22, 17 @ 11:18 am
“Haircuts” at the local level would be easier to take if local governments had some latitude, but so much of what drives local expenses are derived from mandates and state legislation.

Comment by Shemp Tuesday, Aug 22, 17 @ 11:33 am
— blue dog dem - Tuesday, Aug 22, 17 @ 10:53 am:

Ducky. Just offering my take. A 20% reduction would be painful to many. I get it. But getting back to the age old argument of raising taxes or spending cuts. I like(not really but conceded) a blend of both. —

My hometown has reduced spending over the last several years and is running lean. Why should we take a hit for State mismanagement?

I thought the Governor was in favor of local control.

Comment by illini97 Tuesday, Aug 22, 17 @ 12:12 pm
Will 2% be taken from the collection of county school facility sales tax as well?

Comment by Bobby Hill Tuesday, Aug 22, 17 @ 12:27 pm
Illini97. My hometown(and yours) just had its income taxes raised to allow the LGDF kickback. I had no local control over that. Just gotta find the right blend.

Comment by blue dog dem Tuesday, Aug 22, 17 @ 12:27 pm
I’ll bet a $1 that the lobbyists at the Illinois Minicipal League were aware of the chargeback and agreed not to oppose it.

98% of Something > 100% of Nothing

Comment by Juvenal Tuesday, Aug 22, 17 @ 12:37 pm
The 2% collection fee also amounts to $24 million for the Regional Transportation Authority (RTA). Springfield rakes in that cash from taxpayers in the collar counties and it impacts the over 2 million daily workers and students who rely on the CTA, Metra and Pace to get to work and schools. The new state budget reduced other mass transit sales tax monies, funds for transporting people with disabilities as required by federal law and its share for mandating free and reduced rides….over another $30 million. Those are mandates–albeit unfunded– which the CTA, Metra and Pace can NOT eliminate. Not a pretty picture if you have to get to work or school in Chicagoland!

Comment by Kirk Dillard Tuesday, Aug 22, 17 @ 4:29 pm
KD. Did CtA sign their latest contract?

Comment by blue dog dem Tuesday, Aug 22, 17 @ 8:42 pm