Illinois Towns Could See COVID-19 Budget Crunch With Additional State Pressure

By Cole Lauterbach, The Center Square:

The pandemic-induced economic damage will fade slower for cities and towns in Illinois, according to a report from Fitch Ratings, but more budgetary strife could be ahead for local elected officials.

Released earlier this month, Fitch Ratings predicted local municipalities in Illinois and New Jersey will see especially pronounced budget pressure in 2021.

“Scrutiny will, not surprisingly, be most intense around lower-rated states on Negative Outlook like Illinois and New Jersey, which are susceptible to modest erosion in credit quality as the economic impact of the pandemic continues to stifle revenues,” the report said, noting that they’re not expecting to downgrade many local entities.

Illinois’ local leaders have fewer levers to pull than those in many other states before they’re forced to raise taxes, many options restricted by the Illinois Legislature.

In Rockford, Mayor Tom McNamara was forced to lay off a dozen employees from his already bare-boned staff but managed to enact a balanced budget without raising property taxes.

“Before we did this, we had one-third fewer employees than all of our comparable cities,” he said.

State lawmakers are also keen on enacting unfunded mandates that must be paid for by local revenue, such as law enforcement training.

“The state of Illinois has a long history of writing checks and then forcing local municipalities to cash them,” McNamara said.

Like most other municipalities in the state, McNamara said Rockford’s pension payments eat a sizable portion of the city's annual budget.

“This year alone, our pensions increased by more than nine percent, to well over $20 million,” he said. “In 2013, our payment was around $9 million.”

Public safety pension benefits, and those for municipal employees, are mostly defined by state law. This rigidity leaves local tax dollars to pay for public worker pension bills without any say in their cost beyond who they currently employ.

In 2018, those costs came to a head, when their local aldermen were told by the nonprofit Natural Resource Network that they should reduce their fire and police employee count, close a fire station, and sell off their water treatment plant to avoid insolvency in the next five years. They were instructed to make a pension payment of up to $100 million, more than two-thirds of their newly passed budget, in order to relieve their pension bill.

“They put all of these burdens, unfunded mandates, they choose the benefits on the pension side then tell us that we have to cash the checks they wrote. They cut our funding through the Local Government Distributive Fund and then say ‘I don’t know why our local governments have such high property taxes,’” McNamara said.

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