The Local Government Distributive Fund (LGDF) was enacted in Illinois following the passage of the state income tax in 1969. A key element of the agreement was the establishment of revenue sharing, with local governments receiving a percentage of the income tax revenues on an annual basis. From the establishment of the state income tax until January 2011, this percentage held firm at 10 percent.
However, due to a recession and amidst budget shortfalls, that percentage was reduced to six percent in 2011 by the Democratic-led General Assembly. It has never been made whole since, dropping to a low of 5.45 percent in 2017. In the most recent budget that was passed for fiscal year 2024, local governments are receiving 6.47 percent, a tiny climb from the 6.16 percent figure in the 2023 budget.
Illinois House Republicans have fought to restore this critical revenue source for local communities back to the intended 10 percent figure. State lawmakers have put forth income tax increases in 2011 and 2017 while at the same time reducing the percentage of money to be shared with local governments. LGDF revenue helps local governments fund essential services and programs, such as public safety, public health, and basic infrastructure and repair. This shared revenue also helps reduce the amount of revenue local governments collect through local taxes.
“Today, over 10 years later and despite claimed budget surpluses, we continue to shortchange our local communities and we owe it to them by restoring the share of revenue distributed back to our local hometowns from six to 10 percent,” stated Rep. John Egofske (R-Lemont). “As mayor of Lemont, I understand the importance of these additional funds and see how they work every year. Any responsible state budget should include re-establishing this funding back to 10 percent.”
Despite claims of a ‘balanced’ budget by the Democrats and Gov. Pritzker, the state is continuing to shortchange local communities and utilize revenue earmarked for municipalities to cover its own budget shortfalls. The budget is already loaded with gimmicks by the Democrats, with a Department of Revenue reallocation that shifts $700 million from the Personal Property Replacement Tax into the General Revenue Fund. And while the Democrats and Gov. Pritzker are playing games with every citizen’s tax dollars, local governments’ budgets continue to be stretched thin.
LGDF accounts for sizeable portions of a municipality’s operating budget, in some cases between 10 and 20 percent. This amounts to millions of dollars annually, and in addition to skyrocketing costs due to inflation and continued residual effects of the pandemic, municipalities are faced with ever-rising pension costs, which account for substantial budget increases each year.
“This budget represents an extremely partisan plan that includes pay raises for Springfield politicians and insufficient funds being returned to local governments,” added Rep. Amy Grant (R-Wheaton). “This money belongs to the local communities and the funding level needs to be restored.”