Thursday, February 28th, 2013

I’ll Gladly Pay You by 2015 for 6.6 Million Municipal Dollars Today?

Illinois House Speaker Michael Madigan is one of four sponsors behind Senate Bill 622 which would transfer $6.6 million from funds collected in the Local Government Tax Fund (LGTF) into the Illinois Medical Disciplinary Fund (IMDF).  The amended bill provides that the money will be repaid from the IMDF in three $2.2 million installments ending Jan. 1, 2015.  We believe this is a bad piece of legislation that does nothing to help local governments who have been careful about reducing their spending and carefully monitoring expenses during this time of financial uncertainty and contraction.

Because  this legislation mandates that the funds must be repaid in full, at least in theory it should not be problematic.  However, we have several concerns about this proposal.  First, any legislation that might further delay or compromise payments to local governments is, by its nature, problematic.  Second is the dangerous precedent this may create for Illinois legislators who have long eyed the Local Government Distributive Fund (LGDF) as a possible answer to some of their financial woes; they are now looking to the LGTF as another available pool of money to address fiscal shortcomings.  In light of these concerns, the Illinois Municipal League and the McHenry County Council of Governments, among others, oppose the legislation.

According to the House Committee, this proposed bill, in part,  “will allow the Department of Financial and Professional Regulation to immediately restore funding for 18 employees who were recently laid off,” which is expected to translate to “a positive fiscal impact of $11.4 million.”  It is easy to understand the appeal to state lawmakers desperately seeking funds for the already heavily strained state budget.  Indeed, the Illinois Senate voted by a 2-1 margin in favor of the bill on Feb. 14.  However, we can identify no compelling policy reason beyond fiscal desperation for asking local governments – and their taxpayers – to subsidize the state’s medical regulation procedures.

Moreover, although the proposed legislation would increase various professional licensing fees that would ultimately be used to repay the LGTF, in light of ongoing budget concerns, it seems reasonable to ask what happens if the IMDF does not generate sufficient revenue with which to maintain itself and pay back the LGTF?  The repayment is not guaranteed by general funds of the Illinois Senate, so local government money would be at risk if these fees do not generate enough income to meet this repayment obligation.  Furthermore, nothing stops legislators from adjusting the repayment terms in the future and delaying repayment to the LGTF for several additional years.

Perhaps, a larger concern for local governments is the precedent this creates.  Even if the legislation works as planned to save the medical licensing scheme, municipalities are in no better position than they were before the legislation.  In fact, the success of this legislation might send a signal that the LGTF is something of a slush fund for the state to tap into whenever it is desperate – a scenario more and more likely to occur until the state gets its finances in better order.

Regardless of the importance of sustaining the regulation of the medical industry, we believe municipalities and other local governments should be aware of the long and short-term risks that Senate Bill 622 creates to municipal finances.


Ruth Alderman Schlossberg

Author: Ruth A. Schlossberg