Illinois Governor Pat Quinn signed into law Thursday legislation that increases income taxes by 66 percent. Residents and corporations have been given clear figures as to how much they will be losing from their paychecks for the next four years. However, the state of funding for the local municipalities that supplies services to residents remains unclear.

Currently, municipalities receive 10 percent of the revenue generated from state income taxes. But under the new legislation, this amount will be cut to 6 percent, to prevent local governments from receiving any additional revenue.

For villages like Wilmette and Kenilworth, that means they should be receiving the same  amount in income-tax revenue they have been—not more or less.

“The village is not receiving any financial increase that we can see, at least not directly,” Wilmette Village Manager Timothy Frenzer told Patch. “But it could have always been worse. They could have cut even more.”

But it can get worse.

The new legislation temporarily raises the individual income tax rate from 3 to 5 percent, and the corporate income tax rate from 4.8 to 7 percent. These revenue increases are tied to a state spending cap that restricts spending growth to 2 percent annually over the next four years.

If this spending cap is violated, there’s a provision in the law that would repeal the tax increase. But, at the same time, the distribution levels for municipalities would not be reverted.  

According to the Illinois Municipal League: “If the tax rates fall due to the State’s overspending, then municipalities will have a lower distribution percentage of a lower tax rate. For example, if the individual tax rate reverts to 3 percent, then instead of receiving 10 percent of the 3 percent rate (under the status quo), municipalities would receive only 6 percent of the 3 percent rate. In that case, municipalities will lose out on LGDF [Local Government Development Fund] money.”

Kenilworth’s village manager, Brad Burke, is also concerned by this element in the new bill.

“The village does have a concern that the distribution system could be affected if the state exceeds spending limits that are outlined in the statute, and then the village’s portion of that shared income tax revenue may be reduced,” he said.

The other issue, Frenzer noted, is that the state is frequently late on its income-tax-revenue payments to the village.

“At any given time the state can be four to seven months in arrears,” Frenzer said. “For more than a year or two, [the state has had] a floating zero interest loan at the Wilmette taxpayers’ expense. And nothing in the legislation indicates when the state will come current.”

He said the village has been able to maintain its budget and services levels by inter-fund borrowing until the state comes forth. In 2007, the village cut its full-time staff by 7 percent, bringing it down to the smallest workforce since 1995.

“It’s frustrating when you’re in local government,” Frenzer said. “We have to pay our bills on time. We have to submit tax levies on time. It’s frustrating when the state owes us and Cook County fails to pay its property taxes on time. It undermines what we do.”

Newly elected Rep. Daniel Biss (D-17th District), who represents Wilmette and was sworn into office about 10 hours after the legislation passed the Senate Wednesday, said he’s not sure how the state’s backlog in payments to local governments will be addressed under the new revenue package. Biss added that, to his knowledge, nothing has been passed this week to fix the problem.

As he is brand-new to the Illinois General Assembly, Biss said he is not sure how he would have voted on the legislation given the opportunity. At first glance, Biss said he’s not sure the bill does enough to address spending restraints, despite the governor’s assertion to the contrary.

“I’m not qualified to say this is a nightmare,” Biss said. “But you don’t increase the income tax lightly. I’m not sure [the legislation] was drafted in the most cautious way.”

He said his top priority as House representative is to help make sure spending restraint within Illinois is enforced, “by not voting for a budget that’s too big.”

Rep. Robyn Gabel (D-18th District), who represents Kenilworth, was among the 60 House representatives who voted for the bill. Sen. Jeffrey Schoenberg (D-9th District), who represents both Wilmette and Kenilworth, was among the 30 senators who voted for the bill. Both votes were close, with the House voting 60 to 57, and the Senate voting 30 to 29 to approve the initiative. Not a single Republican voted for the hike. Neither Gabel nor Schoenberg were available for comment.

Quinn has stated that the new income tax rates are temporary. According to the law, in 2015 the individual tax rate would go down to 3.75 percent and the corporate tax rate would go down to 5.25 percent. In 2025, the individual rate would decrease again, to 3.25 percent, and the corporate rate would go back to its initial rate of 4.8 percent.

“The reason we had to do this is because we had a fiscal emergency – our fiscal house was burning in Illinois,” Quinn told reporters at a press conference in Springfield on Wednesday. “As the last couple months have ensued, it was pretty clear from talking to major entities that lend money to the state of Illinois that the opportunity to borrow was fast eclipsing. … Our state was careening towards bankruptcy and fiscal insolvency. … The governor has to act at the moment and that’s what I did.”