Frequently Asked Questions

This is a state fund into which a portion of state income tax revenue is deposited annually. Cities and counties currently receive 8% of total state income tax revenues through this fund. It provides a way for the income tax citizens pay to the state to find its way back to their local community to fund essential services.

When Illinois first enacted a state income tax in 1969, instead of allowing municipalities to impose a separate local income tax, the state collected and distributed an additional portion of income tax for local governments.

In addition to funding core everyday services to Warrenville citizens for over 46 years (almost the entire time Warrenville has been incorporated), LGDF distributions play a role in keeping the local tax burden low. Without LGDF, Illinois communities would need to explore increases to local taxes.

Governor Rauner’s proposed budget would cut LGDF in half, from 8% to 4%. The local distribution of income tax revenue for 2015 is estimated to be approximately $99 per capita. The Governor has also been reported to be seeking immediate elimination of the LGDF payments due municipalities for the last quarter of the current state fiscal year, which covers April 1 through June 30, 2015. Additional proposals by Governor Rauner to freeze all property taxes and take no action to reform municipal public safety pensions will greatly amplify the negative impacts that an LGDF cut would have on municipal residents and businesses.

Until January of 2011, 10% of total income tax collections were deposited into LGDF for distribution to cities and counties. Distributions occur on a per capita basis. The percentage share of state income tax revenue was reduced from 10% to 6% following the enactment of the temporary income tax increase in 2011. The percentage was decreased because the state opted to keep the entirety of the new increased revenues for itself. When the income tax rates declined in January 2015, the LGDF share increased to 8% of total collections. In the absence of any statutory changes, this percentage will remain the same until 2025 when it will return to approximately 10% of total state income tax collections.

The City would lose approximately $650,000, or 6.5% revenue, from the general operating budget. Making up for that loss in revenue would have to come from severe cuts in services, programs, and personnel costs.

Reduction in LGDF does not actually decrease government expenditure, but instead shifts the fiscal and political burden of balancing the state’s budget onto local governments and local taxpayers.

Illinois collected approximately $20.8 billion in state income tax revenue during Municipal Fiscal Year 2014. The amount of revenue deposited into LGDF for this period was only $1.25 billion. Good management and efficiency at the local level make LGDF dollars the best return on investment that taxpayers will ever get and it’s a direct return of their dollars to their community. Illinois cities have managed their LGDF revenue responsibly over the years while receiving just a small portion of state income tax collections. Illinois cities will continue to balance their budgets and fund core municipal services while receiving 8 cents of each state income tax dollar during the upcoming municipal fiscal year. Despite receiving 92 cents of each income tax dollar, the State will continue to be mired in debt and unable to pay its bills in a timely manner for the foreseeable future. This record of excellent fiscal stewardship by municipal governments, encouraged by accountability to local voters, is a compelling argument to drive additional value for taxpayers by maintaining, and even increasing the municipal share of LGDF revenue. Additional LGDF revenues could be used to help offset the growing costs incurred from unfunded state mandates, the most notable of which includes paying for pension benefits that were increased by the State.

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