Illinois Governor suggests freezing money provided to local governments from Illinois income tax

Economic times are tough so Illinois Governor Pat Quinn has floated the idea that the state limit how much income tax is shared with local governments:

Gov. Pat Quinn has proposed that the state bolster its own troubled finances by freezing the amount of state income taxes shared with local governments at 2012 levels, which could cost some towns hundreds of thousands of dollars.

Quinn estimates the plan would generate an additional $68 million for the state budget. Because income taxes are disbursed on a per capita basis, the impact to local budgets would be $5.30 per resident, according to the state.

But the Illinois Municipal League estimates the impact would be more than twice that — a $148 million payday for the state, but an $11.50-per-resident cut to local budgets…

Illinois’ income tax, enacted in 1969, was meant to be a shared venture between the state and local municipalities, said Larry Frang, executive director of the Illinois Municipal League. Both the state and local governments alike felt the effects of any dips or spikes in revenue, he said.

This is not a huge surprise given the issues of tax revenue facing various levels of government. To some degree, local governments should get used to this. Plus, if local government is at least partly about local control, then how much do some communities want to rely on money from higher levels of government anyway? On the other hand, raising property taxes and introducing new fees is not attractive to local governments.

Thinking more broadly about the connections between local and state government, does these ongoing economic issues suggest the relationships between the two bodies are more fragile than we might think? When times are good, this probably doesn’t come up much. What recourse do communities, or lower levels of government, have to fight back if the higher level of government, like the county, state, or federal government alter the existing relationship?

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