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Localized Disease: When the State Budget Suffers, Municipalities Feel the Pain, Too

WUIS/Illinois Issues

“I told them, ‘It’s going to get worse before it’s going to get better,’” Sen. John Sullivan, a Democrat from Rushville said of a recent string of a dozen town hall meetings where he explained state budget cuts to voters in his district. 

After lawmakers trimmed the state budget this spring, local governments — many of which have seen their own budget shortfalls during the recent economic crisis — will feel an even greater pinch as the reductions trickle down. 

“As the state gets sicker and sicker financially, it’s just like the flu. If Springfield is sick, I’ll guarantee you most local and county governments will catch it, too,” says Bill Black, a Danville alderman and former Republican state representative. “The rubber meets the road in a local government first. That’s where most people get their services … [and] they get their first taste of reductions of services at the local level.” Danville, an east-central Illinois city of more than 32,000 residents, has kept its budget balanced through the economic downturn. 

Personnel has been one of the areas hardest hit as local officials have tried to keep their budgets in line. “About 70 to 80 percent of municipal budgets are people,” says Karen Darch, Barrington village president. Barrington is a northwestern suburb of Chicago with a few more than 10,000 residents. Darch says her village has cut its workforce by 20 percent during the last three years. Some of the reduction came from leaving positions vacant as workers left or retired, but some employees were laid off as well. “That meant people picking up work — those who stayed trying to fill the gaps,” she says. “Then, maybe you don’t get as much done as you might have. It hasn’t been easy, and yet we know that we have to balance our budget.” Barrington has managed to stay in the black through the recession. Darch says the village board took note of diminishing tax receipts and started in on cuts quickly. “They were saying, ‘Look we’re seeing the decline, so we need to get a handle on our revenues.’ I think our board got a jump on reducing staff and cutting expenses.”

Barrington is also saving money by automating services, such as allowing residents to pay parking tickets and water bills online. “In the last few years, we’ve gotten that really perfected.” But she notes that some jobs will always require a human touch. “When the pothole has to get filled or the sewer line has to be repaired, there’s hands-on work every day.” 

It is exactly these workers that local governments have been laying off en masse, says Joe McCoy, legislative director for the Illinois Municipal League. Municipalities have given pink slips to employees in their clerical, administrative, public works and other service departments to avoid cuts to public safety employees. “The big concern this year is there really isn’t much more you can cut without getting absolutely vital core services that people expect,” he says. 

McCoy says the layoffs of police and fire personnel throughout the state are indicators that local officials have run out of things to cut. “When we start to see massive layoffs of public safety employees, we know we are really scraping the bottom of the barrel.”

Black, who served as a county official for a decade before entering state politics, says many smaller rural communities are looking to their county sheriff and the Illinois State Police to help pick up some of the slack. “Many counties, they don’t want people to know how many cars they have on duty from 11 p.m. to 7 a.m. They can’t park their sheriff’s cars and open up a substation in every small community in Illinois.”

McCoy predicts more public safety cuts to come. “I think we are going to see very large numbers of police officers and firefighters laid off … because it is the last possible place to go. … It could get really ugly out there if the economy doesn’t improve.”

Education is another high profile area of government that local officials say is suffering under state budget cuts. Transportation funds, which the state uses to reimburse districts for busing kids to school, were cut 42 percent in Fiscal Year 2011, which ended June 30. The FY 2012 budget approved by the General Assembly would put back some transportation funds, but Gov. Pat Quinn used his veto pen to remove $89 million in transportation dollars restored by lawmakers. Legislators, however, could still override his cuts. 

“Is it a state responsibility to make sure the kids get to school? Or is that a local district responsibility, a parental responsibility, to get the kids to school?” asks Quinn’s budget director, David Vaught. “This is not the highest priority when you weigh objectives and priorities against one to the other. And so, we see a cut here. … We think the districts and the parents can handle that on their own.” Quinn says it is all about making tough choices at a time when schools are also facing cuts to early childhood education and general state aid. He says he wants to shift state spending to the classroom.

But Mathew Plater, superintendent of the Schuyler-Industry district in western Illinois, says because the state dictates the requirements for busing students to school — along with a ream of other state-mandated requirements on schools — local districts do not get to prioritize their dollars in the same way. “By law, we have to provide [transportation]. We don’t have choices.” At 424 square miles, Plater’s recently consolidated district is geographically the second largest in the state. The district closed one elementary school this year, which Plater says saved about $500,000, and eliminated one bus route. The district has also gotten rid of some buses, and the ones it kept are smaller. 

Plater says the only way left to save money would be to lengthen the students’ bus rides, which are now often up to an hour or more. If lawmakers do not override Quinn’s veto when they are back in session this fall, he says his district will have to dip into general state aid funds to pay for buses next fiscal year. “We’re deficit-spending our transportation fund by about $300,000 this year.” As with many other funds owed to local governments and school districts, the state is late making reimbursement payments. “We’re halfway through the year before we even start to get the money. … If they wanted to get square, they owe us six payments,” Plater says. “We’ve been in this boat of them not having the money to pay for things for about four years now.”

Quinn also used his veto pen to cut salaries for regional superintendents. Those administrators oversee Regional Offices of Education, whose responsibilities include school safety inspections, teacher certifications and alternative schools for struggling students. Quinn says if local districts want regional superintendents, they should pay them from local revenues. Again, Quinn says he is trying to shift dollars to classrooms by freeing money up for general state aid. The budget that lawmakers approved in May included a reduction to general state aid that will become more severe near the end of the fiscal year. Some legislators close to the education budgeting process hope to find additional revenues before then to stave off the cut. 

To restore funding for regional superintendents, lawmakers would have to override Quinn’s veto, so regional superintendents are stuck in budget limbo for now. “What they’re doing right now is that they have decided to continue to work, even though they are not getting paid,” says Michael Chamness, spokesman for the Illinois Association of School Administrators. He says regional superintendents wanted to help districts start the school year smoothly, but they cannot continue to work for no pay indefinitely.

Plater says that the budget crunch on many districts makes regional superintendents all the more necessary because someone who is not concerned with the budget bottom line needs to make sure that schools are refilling their fire extinguishers and keeping their bleachers up to code. “The problem is that nobody will be watching. … You’re going to start getting people who are trying to cut corners and save money.”

Chamness says that transportation cuts and pushing the cost of Regional Offices of Education onto local districts will force schools to spend general state aid on such expenses. “The end result is going to be taking money out of the classroom.”

School districts may also soon be scrambling to find a way to pay for their employees’ pensions. The state currently foots the bill through the Teachers’ Retirement System. However, Senate President John Cullerton has called for local districts to assume that responsibility. He argues that state government should not have to pay for local employees’ pensions, which are based on salary decisions made at the local level. He also says it is only fair because Chicago Public Schools picks up the bulk of its pension costs. 

“I can understand why John’s looking at something because those unfunded pension liabilities are just eating the [state] budget alive,” Black says. “There’s no way, unless there is a local revenue source that I am unaware of, that 800 school districts could finance the Illinois Teachers’ Retirement System.” 

Black says moving such costs to the local level will eventually mean an increase in property taxes. “If there’s a tax that everybody universally hates, it’s the property tax.” 

But tax increases are not a universal solution. Different taxing bodies across the state have various limits on what taxes they can impose and how much they can ask for. Non-home rule communities, which wield less local power, have few options for expanding their tax base to items outside sales or property taxes. “If you’re home rule, you can do anything that isn’t explicitly prohibited by [state] statute. If you’re non-home rule, you can only do things that are explicitly included in statute,” says McCoy. Out of approximately 1,300 municipalities, only 206 have home rule powers, according to the Illinois Municipal League. Barrington is a non-home rule community, but Darch says that even if villages like hers had broader taxing powers, “people aren’t going to vote for a tax increase.” Black agrees. “In the middle of this recession? You can’t be serious.”

Local revenues could have fared much worse under the new budget if lawmakers had approved a proposal by Quinn to reduce the share of income tax dollars the state sends back to municipalities. Local officials and the Illinois Municipal League launched a successful lobbying effort and media campaign to push back against the cuts, and Quinn backpedaled from the idea. But McCoy says as long as Illinois is running a budget deficit, lawmakers may consider skimming from the fund to patch up the state budget. “It’s going to be a perpetual [sword of] Damocles hanging over our heads.”

“Local governments get a lot of money from the state, most of which is done kind of more implicitly than explicitly,” says David Merriman, an economics professor and associate director of the Institute of Government and Public Affairs at the University of Illinois. In FY 2010, the state filtered about $1.2 billion back to municipal governments through the Local Government Distributive Fund. Merriman says it would be irresponsible for local officials not to consider that they may lose some of those dollars. 

Sullivan says that as Congress tries to balance its budget, the outlook for municipalities gets even worse. He says trillions in federal cuts — included in the compromise package to raise the debt ceiling — begin in October with the new fiscal year and will eventually hit home in the cities, towns and villages of Illinois. “It’s just like a domino effect. … When the feds cut money to the states, the states ultimately have to cut money to local government. We’re put into a very difficult situation.”

Rather than increasing taxes, some local governments are looking to share services with their neighbors to cut costs. “Cities and villages, mayors and city councils have also learned a lesson from this,” says Gerald Bennett, mayor of Palos Hills. “We learned how even greater efficiency can take place.” Palos Hills, a southern suburb of Chicago with more than 17,500 residents, ran a budget deficit from 2008 to 2010. Both Palos Hills and Barrington share emergency dispatching services with nearby communities. Bennett says it saved his city about $100,000. 

“You’re going to have to learn to share,” Black says of local governments. He says legislators must seriously consider proposals such as a recent plan from Sen. Terry Link to eliminate some of Illinois’ almost 7,000 taxing bodies and Quinn’s pitch to consolidate more school districts. Senate Bill 173, the proposal by Link, a Democrat from Waukegan, received a meager 14 “yes” votes out of a possible 59 when called in the Senate. 

Black acknowledges that it is difficult for towns to compromise on shared services when they have always done things a certain way. Consolidation of taxing bodies and school districts can make residents fearful of losing their identity as a community — especially when it comes to long-beloved traditions, such as local sports. “If Danville wouldn’t play Champaign in football, I think the world would end,” Black quips. 

Illinois Issues, September 2011

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