IL state lawmaker pushes back as analysis finds municipalities lost
$10.9B
[January 09, 2026]
By Catrina Barker | The Center Square contributor
(The Center Square) – A new Illinois Policy Institute analysis estimates
local governments have lost $10.9 billion since 2012 due to reduced
state revenue sharing, prompting pushback from a state lawmaker.
The change stems from a decision more than a decade ago to lower the
Local Government Distributive Fund, or LGDF, from 10% of state income
tax revenues to less than 7%, a move that continues to squeeze city and
town budgets statewide, according to state Rep. Steve Reick,
R-Woodstock.
“It goes back to a deal made when Illinois adopted the income tax,” said
Reick. “Local governments agreed not to impose their own income taxes in
exchange for a guaranteed share of state revenue. When the state changed
the percentage in 2012, municipalities were pushed to the back of the
bus.”
Illinois Policy author Patrick Andriesen said the 2012 reduction was
initially framed as temporary during a budget crisis under then-Gov. Pat
Quinn, but the funding was never restored.
“The understanding at the time was that once the state got out of that
tight spot, the share would go back to 10%,” Andriesen said.
According to the analysis, returning LGDF to 10% in 2024 alone would
have sent roughly $1.17 billion more to municipalities. Instead, many
local governments have turned to higher property taxes, fees and
borrowing to cover basic services, according to Andriesen.
“The state took away revenue, then handed local governments the
political heat,” Reick said. “People don’t yell at Springfield officials
at the grocery store. They yell at their mayor.”
Reick said pension costs for police and fire have done nothing but
increase, and those are non-negotiable.
“Home rule communities have more flexibility when it comes to raising
revenue, but non-home rule municipalities have to go to referendum,”
Reick said. “If the state isn’t going to step up, I wouldn’t oppose
giving local governments limited home rule authority to address revenue
needs and ease taxpayer fatigue.”
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The Illinois State Capitol is shown in Springfield. Photo: Greg
Bishop / The Center Square
Andriesen said LGDF funding makes up about 25% of day-to-day
municipal operations, leaving smaller communities especially
vulnerable when state support declines.
“Chicago can introduce new taxes and spread the cost across millions
of people,” Andriesen said. “Smaller towns in central and southern
Illinois don’t have that luxury. They’re reaching a boiling point.”
Some lawmakers have floated allowing municipalities to levy local
income taxes. Andriesen said that approach would further strain
residents.
“We’d just be feeding the fire,” he said. “Illinoisans are already
paying some of the highest taxes in the country. Asking them to pay
even more for the same services isn’t reform.”
Reick argued the issue reflects spending priorities at the state
level, pointing to recent budget growth.
“We’re running a $50-plus billion state budget,” he said. “We spent
about a billion dollars to insure illegal immigrants. That’s a
billion dollars that could have gone to local governments to ease
their suffering.”
Andriesen said restoring LGDF to its previous level would offer a
direct path to property tax relief, if lawmakers are willing to give
up control of the revenue.
“This was money meant to keep local taxes down,” Andriesen said.
“Returning it would put resources closer to the people who know best
how to use it and give taxpayers a real break.”
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