Earlier this month, groups from the Barrington Area Council of Governments (BACOG) and McHenry County Council of Governments (MCCG) met with various state legislators to express concerns with pending legislation. Undoubtedly the primary focal point was the Local Government Distributive Fund (LGDF).
Several municipal officials seem to accept that LGDF funding cuts are inevitable and approach Gov. Bruce Rauner’s proposed 50% LGDF reduction as a negotiation, or as Ringwood’s Village President Rick Mack repeated to various legislators: “We’re looking for a number closer to 0 than to 50.” Mack also stated that a 50% LGDF cut could drive smaller municipalities like his out of existence. Senate President John Cullerton echoed municipal concerns about having to reduce necessary services, such as laying off firefighters and police officers. Rep. Mike Tryon also expressed sympathy for what a drastic cut in LGDF funding would mean to local governments, suggesting that a 2-3% cut could probably be tolerated.
Unfortunately, the consensus of the legislators, including Rep. Tryon, Rep. Barb Wheeler, and Sen. Pam Althoff, was uncertainty that anything could be done to prevent a substantial LGDF funding reduction as part of the state’s comprehensive financial overhaul. Most legislators encouraged municipalities to focus on opposing legislative expenditure requirements, as a compromise, such as against the 59 unfunded mandates the Illinois Municipal League has identified appearing in proposed bills this legislative session, on top of the hundreds of preexisting mandates.
Rep. David McSweeney took a more intransigent position on proposed legislation that would both decrease local government income and increase local government liability. Rep. McSweeney proposed a bill which would eliminate 100% of the LGDF, along with bills which would freeze property taxes through 2017 (HB 0177), add a “discovery rule” to increase the time that people can allege Open Meetings Act violations (HB 0175), and outlaw red light cameras (HB 0173). When addressing MCCG, McSweeney told the group that nobody could convince him that red light cameras improve traffic safety and was not phased when provided statistically significant reports of accident rate reduction at intersections controlled by red light cameras.
New IML Executive Director Brad Cole, in addressing the Home Rule Attorneys Meeting last week, stated the IML opposed any reduction in the LGDF. However, Cole acknowledged that preliminary discussions between Gov. Rauner and House Speaker Mike Madigan for the remaining 2015 fiscal year honed in on a $37 million LGDF reduction which would hit municipalities in April and/or May, with no assurances that the 2016 fiscal year would not include an LGDF reduction.
Speaking editorially, the seemingly inevitable reality is that the LGDF is going to be cut and cut significantly. A realistic number is probably in the 15-35% range, although it’s possible the reduction could ramp up over the course of multiple years. While the reduction of unfunded mandates could be one avenue to help municipalities cope with a substantial reduction in revenue, reductions alone will not offset a significant funding decrease. The singular way the General Assembly could meaningfully offset a LGDF decrease is to amend the Prevailing Wage Act (PWA). The Governor has been recently touring the state in large part to promote municipal support for reductions in unfunded municipal mandates and amending or even repealing the PWA. In theory, amending the PWA is a win-win for the State and municipalities because it would not require the State to expend funds, and it would directly reduce municipal expenditures for one of the biggest expense categories municipalities have: labor-intensive, contracted projects.
However, the foreseeable conflict that will arise is that both legislative chambers are overwhelmingly Democratic (House: 71-47, Senate: 39-20). Where the Democratic majority, especially in Cook County, generally opposes LGDF reductions, Senate President Cullerton and Speaker Madigan are also longstanding supporters of labor unions and prevailing wage legislation. The Governor needs Democratic support to pass his budget reductions, and the Democratic chambers are unlikely to agree to meaningful compromise on prevailing wage.
What may end up being the path of least resistance for the General Assembly and Governor regarding the budget and LGDF funding is to strike a Chicago/Cook County compromise whereby LGDF is reduced for most of the State at a higher rate, while Chicago/Cook County experience a lesser reduction. Perhaps a minimum threshold for prevailing wage projects will be implemented, such as the bill proposing a $20,000 minimum threshold for prevailing wage to apply to municipal projects, but larger projects would still be subject to the PWA.
Another consideration is that State officials endorsing the LGDF cuts cannot be oblivious to the plight of substantial funding reductions to local governments. Adding to this awareness are several proposed bills addressing local government consolidation (HB 0174) and enabling local governments to file bankruptcy (HB 0298). There is no reason to think that the consolidation and/or elimination of several local governments, including municipalities, is not a known consequence of the proposed LGDF cuts.
The concern of all local governments in the eventual fate of the LGDF is very real, especially for smaller municipalities for which the LGDF represents their largest revenue source.
In the past 24 hours, Governor Rauner signed into law two new bills that would cure a $1.6 billion deficit in the 2015 Fiscal Year budget. As mentioned in our earlier article, Governor Rauner had considered a Local Government Distributive Fund (LGDF) reduction for Fiscal Year 2015. However, according to an Illinois Municipal League article, the 2015 Fiscal Year budget fix does not reduce the LGDF.
While this is good news for the immediate future, please note that nothing has been decided in regards to the LGDF for the 2016 Fiscal Year and beyond.
Author: Brad Stewart