Chicago`s suburbs will lose millions of dollars in state income-tax surcharge revenue as a result of Wednesday`s House-passed budget compromise, and many collar-county communities will be hit doubly hard because the plan also limits their ability to raise taxes to replace the lost money.
The compromise plan, reached during the 17th day of the overtime legislative session, prompted outrage from some municipal leaders, who predicted it would result in service cuts at a time when city budgets already are stretched.
”State legislators who have a difficult time coping with their own budget (are) lecturing local governments about how they should maintain their budgets,” said Al Larson, village president of Schaumburg. ”It`s like having a mass murderer lecture you about the sanctity of life.”
The impact will be greatest in the collar counties-Du Page, Lake, Will, Kane and McHenry. Not only will municipalities lose income-tax revenue, but a state-imposed property-tax cap also would limit increases by local government to no more than 5 percent annually.
”It`s a double-hit,” said Christine Martin, legislative liaison for the Du Page Mayors and Managers Conference.
Some collar-county mayors and city managers said that double-whammy could force them to raise property taxes or cut services by laying off employees, slashing purchases of new police cars and computer equipment, or postponing street repairs.
”We are losing $285,000 that we use to pay for police protection and maintaining streets,” said Joseph Misurelli, city manager of fast-growing Crystal Lake.
Under the budget accord announced Wednesday by Gov. Jim Edgar and legislative leaders, municipalities throughout Illinois will see their share of the state income-tax surcharge cut almost in half over the next two years, a drop from $700 million to about $384 million.
”It means that everybody`s going to have to tighten their belts awfully tight,” said Paul Neal, executive director of the Lake County Municipal League. ”Everyone`s going to have to take a whole new look at every expenditure they make.”
However, some suburban leaders said their towns would not be drastically affected by the budget compromise because they treated surcharge revenue as a windfall and used the money for one-time capital improvements such as new police and fire stations-not for everyday operating expenses like salaries.
”We allowed for a 50 percent decrease in the surcharge because everyone knew what was coming,” said Romeoville Finance Director Christine Braasch.
”Everybody was preaching for a long time that it was temporary, and I think evrybody was prepared for it.”
In Villa Park, Finance Director Ellie Hogan was grateful that muncipalities would still be getting some surcharge money. ”Something is better than nothing,” Hogan said.
But in Westmont, where officials used about $1 million in surcharge revenue over the last two years to lower property taxes, Mayor Frank Bellerive said that residents could expect to pay higher property taxes next year or face cuts in services.
”There`s no other choice that you have,” said Bellerive. ”What are the alternatives?”
The General Assembly in 1989 approved a two-year, 20-percent increase in the income tax. That measure raised the state rate from 2.5 percent to 3 percent and divided the new revenue equally between schools and
municipalities, giving each about $350 million a year.
The deal reached Wednesday calls for a permanent boost in the income tax to 2.75 percent, with the increase funding education statewide. The state and municipalities would split revenue from a two-year, quarter-percent surcharge, with each receiving about $156 million in the first year.
In the second year, the state would get about $99 million, while the municipal share would rise to approximately $228 million.
The agreement may have ended the deadlock between the Republican governor and Democratic leaders, but some collar-county municipal officials predicted that it marked the beginning of a new round of budget woes at the local level- and would force them to impose or increase user fees for everyday services.
”It`s a double-barrel hit,” said Haig Paravonian, mayor of Waukegan, which will lose about half of the $1.7 million it received from the surcharge last year. ”We will get less from the surcharge, and they are proposing to put a cap . . . on the amount of money we propose for taxes.”
To recoup the loss, he said, city officials will have to consider raising local taxes, such as boosting the 4 percent utility tax to 5 percent.
In suburban Cook County, the budget deal would impose a one-year freeze on property assessments. But the measure may have a limited impact on property-tax bills in Cook County suburbs because most units of government still would be able to adjust their tax rates upward.
Schaumburg, which is almost entirely in Cook County and thus unaffected by the 5 percent tax cap, has received $2.4 million over the last two years from the income-tax surcharge. The village spent the money on one-time capital projects including a new fire station and road reconstruction, according to Larson.
With its share of the surcharge reduced, Schaumburg expects to receive about $650,000 to $700,000 next year and perhaps approximately $975,000 two years from now, Larson said.
Winter, of the Du Page Mayors and Managers Conference, predicted that the tax cap would force collar-county suburbs to pay higher interest rates on bonds used for public works improvements because investors prefer no limits on property-tax rates, in case muncipalities need to raise rates to pay off bonds.
Rita Athas, executive director of the Northwest Municipal Conference, which represents suburbs in both Cook and Lake counties, said that if in the future lawmakers burden communities with new mandatory expenditures, ”they just won`t be able to respond . . . without cutting basic services.”
She said that some collar-county communities would simply seek the maximum, 5-percent property tax every year just to protect themselves in the event of an unanticipated expense later in the year.
”Caps won`t lower taxes, and they`ll take away local officials` ability to respond to fiscal circumstances,” Athas said. ”It`s going to be real tough.”
