New Illinois fee on municipalities could hurt local budgets - WSIL-TV 3 Southern Illinois

New Illinois fee on municipalities could hurt local budgets

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WSIL -- The Illinois Municipal League says under a provision in the new state budget local municipalities that impose their own sales taxes will have to pay the state of Illinois, which collects the tax on behalf of municipalities, a two percent administrative fee.

In other words, two percent of the money that belongs to local communities, will stay in Springfield.

The Illinois Department of Revenue estimates the two percent administrative fee will bring in $60 million per year.

In a report sent to local government leaders, the Illinois Municipal League warned "this two percent fee could have drastic implications on existing city budgets."

Mt. Vernon is one of the municipalities that has to pay the fee, which is estimated to cost the city $145,000.

Its leaders say it couldn't come at a worse time.

"Over the past two years, we've made a lot of cuts," said Mt. Vernon city manager Mary Ellen Bechtel.

In fact, the city had to make $3 million dollars worth of cuts and had to lay off seven employees.

Losing two percent to the state through a new administrative fee, leaves city leaders with more tough choices.

"We're not exactly sure how we're going to maintain a balanced budget this year based on the revenues that'll be retained at the state," said Bechtel. 

On top of that, the city manager says more people shopping online and declining sales in four of the city's retail sectors, grocery stores, household furnishing, auto and manufacturing, makes things much harder.

City leaders will now, consider cuts to overtime and eliminate equipment purchases.

"We'll do everything we can to go through out budget, see if there's more we can cut," said Bechtel.

Given the financial struggles Mt. Vernon already faces, Mt. Vernon city councilman Jim Rippy blames state lawmakers for adding to them.

"All this stuff you read about a balanced budget, there's nothing balanced about the budget at all," said Rippy. "If you look at the exodus out of this state, at how many they're losing out of Illinois...It don't say a lot for us right now."

Under another provision, municipalities will receive 10 percent less in state income tax payments this year. However, the total number of payments they'll receive will go up from 12 to 14. The Illinois Municipal League says that means some communities will see a slight increase in the amount of money they'll receive. 

But Bechtel said the new budget provisions, both the administrative fee and the income tax payment reductions, will still cost Mt. Vernon $251,000.

News 3 reached out to several other communities across Southern Illinois to see how the budget provisions will impact them.

Only Du Quoin responded to our message by deadline.

Du Quoin city clerk Andrew Croessman said the administrative fee would cost the city about $21,000 in revenues and the state income tax payment reductions would cost an additional $55,000. 

"Of course, there are other spillover effects that are uncertain such as the increases in income and corporate tax rates that decrease real income and the greater probability of folks fleeing the State, all of which affect our bottom line negatively," said Croessman. "Taking the knowns and unknowns together, it could easily amount to $100,000 hit to our General Fund, which supports fire, police, street, and administration Departments. To put it into perspective, the General Fund had revenues of $4.32 million versus expenditures of $4.29 million for FY2016. We would all certainly feel a $100,000 hit."

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