Local governments' finances getting back to pre-recession levels

It took a while, but the three biggest local governments in Champaign County either have finally regained their financial footing from the recession of 2008, or they expect to do so this year.

In Champaign, for example, the city government took in more sales tax revenue in the fiscal year ending June 30, 2012, than in any year since the fiscal year ending June 30, 2008. Urbana reported similar revenue growth.

And budget projections for Champaign County government show that the county's regular quarter-cent sales tax finally will take in more money this fiscal year (which ends Nov. 30) than any period since the year ending Nov. 30, 2008.

Income tax revenue also is rising again although it isn't believed to be at 2008 levels. Inconsistent payments by the state — 13 reimbursements in some years, 11 in others — make comparisons difficult, local officials say.

Still, part of the economic recovery could be affected by Gov. Pat Quinn's plan to cut into the income tax revenue the state shares with local governments. Quinn's budget proposes freezing income tax reimbursements to municipalities at fiscal year 2012 levels.

That would hurt communities like Urbana, where income tax revenue growth is about three times sales tax growth.

Urbana Comptroller William DeJarnette said that so far this budget year, the income tax has been the "shining star" in the city.

"Right now it's up 8 or 9 percent," he said. "That's the surprise performer. And I think it shows that the local economy is starting to percolate a little bit."

But that money is threatened by Quinn's proposal to freeze the local government distributive fund payments.

Urbana Mayor Laurel Prussing said she hopes the governor and representatives of local municipalities can compromise.

"I think there are a number of ways this can be worked out," she said. "If they want to take money from cities I think the only decent thing to do would be to give cities relief on some of the expensive things they impose on us.

"And we could split the difference. If revenue went up 2 percent give 1 percent to the state and 1 percent to the cities. We're digging ourselves out of a hole, but we didn't engage in the decades-long, postponed reality that the state did with the pensions. It's not Quinn's fault but he's the guy who is left to deal with this."

She said she didn't object to Quinn targeting the income tax.

"It is the state income tax and it is state-shared revenue, so there is a certain logic to it," she said. "They're desperate and it hurts us too when the state can't do certain things. We all have an interest in getting the state straightened out and I don't think it's good enough for all of us to stand here and scream, 'No.' It affects all of us if the state government fails."

The local economic recovery, slow as it is, appears to be driven by vehicle sales more than any other sector, according to experts.

The county's three different sales tax revenue streams allow for some analysis of which parts of the economy are healthier than others. One quarter-cent sales tax stream counts all sales countywide, another quarter-cent sales tax excludes vehicle sales and a third covers only sales in unincorporated Champaign County, and is considered a measure of the agricultural economy.

Last year the sales tax stream with the strongest growth rate — nearly 3 percent — was the general, all-county rate that includes vehicle sales.

It's a finding confirmed by DeJarnette, Urbana's comptroller.

"The reality is that the state sales is doing a little better than home rule (tax that excludes vehicle sales)," he said. "That's the nature of the recovery, that people are buying cars. Car sales look good. Look at the interest rate for cars now. That's looking healthy."

While overall sales tax revenue is up so far this year, said both DeJarnette and Champaign County Administrator Deb Busey, it was up only slightly in December.

"It has flattened out," DeJarnette said. "November looked pretty good but December was not impressive."

Busey said December was a relatively poor month countywide as well.

"It was up a half a percent in December," she said. "October was up 7.8 percent, November was down and December was up slightly."

Both the county and Urbana had projected sales tax increases of around 2.5 percent this year. If the county reaches that level for the overall quarter-cent levy it would mean a yield of $5.38 million, exceeding the previous record high of $5.16 million collected in fiscal year 2008. In the following year, fiscal year 2009, sales tax revenue plunged 8 percent to $4.75 million and has been slowly climbing since.

The city of Champaign sales tax brought in $30.8 million in fiscal year 2012, surpassing the fiscal year 2008 level of $30.5 million.

Statewide, according to the Legislature's Commission on Government Forecasting and Accountability, sales tax revenue was up 3.1 percent in December.

Growth in income tax receipts has been healthier, according to COGFA. Corporate income taxes were up 20 percent and individual income taxes were up almost 7 percent in December. They were even better in January: 27 percent for the corporate income tax and 14 percent for the individual income tax, according to COGFA. But both weakened in February.

Local governments won't get their January and February sales and income tax revenue reports until later.

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