By: Ted Dabrowski and John Klingner
It’s bad enough that Illinoisans are forced to pay the nation’s highest property taxes. It’s even worse if many of those dollars sit idly in the coffers of their local governments. Recent reports reveal that some local governments are hoarding taxpayer funds in the form of reserves – far in excess of what they need.
That’s definitely the case in Maine Township – which includes Des Plaines, Park Ridge and some of Niles – where the board has amassed reserves equivalent to 1.6 years of operating revenues.
No township needs that much in reserves. And unfortunately, Maine Township isn’t alone. Any local government that holds excessive reserves should return that money to taxpayers.
Maine Township’s build-up
While Maine Township as a whole has excess reserves – $11.6 million in total (see appendix) – there’s one part of its budget that’s particularly egregious: its General Assistance (GA) fund.
The GA is used to provide support services for financially-distressed residents. It spends about $870,000 a year but has more than $2.4 million in reserves.
The services the fund provides are important, but that $2.4 million in reserves is nearly three year’s worth of expenditures sitting in an account doing nothing. It’s far more than the typical three months of reserves a government should have to cover any short-term budget emergencies.
It’s also against the law. Illinois townships can’t hold fund reserves bigger than 2.5 times the fund’s annual expenditures (expenditures defined as the average of the previous three years). That law, now codified as ILCS1/85-65, was passed in 2017 and sponsored by Shelbyville state representative Brad Halbrook.
The fact that such a large surplus exists makes the Maine Township Board’s December 2018 approval of a 2019 $827,000 levy for the GA irresponsible and, on its face, illegal. Taxpayers shouldn’t have to keep pouring more money into a fund that doesn’t need it.
And seeing how the General Assistance fund only spends money on annual health and welfare services, there is no need for it to accumulate money for capital projects. Worse, the money isn’t even transferable to other township funds. (On the other hand, the GA may receive transfers from the township fund and the road fund, if necessary.)
So what to do with the excess funds? Give them back to taxpayers say Maine Township Trustees Susan Sweeney and David Carrabotta. Sweeney wants to “stop the tax and spend the 2019-2020 budget out of the reserves.”
Under Wirepoints calculations, if the township were to target a reserve level equivalent to just one year, for example, it could avoid taxing its residents for the General Assistance fund for nearly two years. And that’s exactly what the township should do.
Excess reserves in other local governments
Maine Township’s numbers may be small in the overall context of the mess in Illinois, but the issue of excess reserves affects all sorts of local governments, from school districts to townships to library districts.
Jake Griffin of the Daily Herald has covered the issue in detail. For example, last year he reported “that two-thirds of the 93 school districts in the Daily Herald’s coverage area grew their reserves from 2016 to 2017. Eighty-seven of them were holding more than 25 percent in reserve – including 18 with enough in reserve to cover an entire year’s expenses.”
Or consider Griffin’s report on library districts. Years ago, Lake Villa voters rejected a call for a new library. Today, the library district is constructing a new building anyway – using $20.4 million in reserves it amassed over the years. Local officials circumvented the will of the Lake Villa public by hoarding taxes. Because they now have the money for the building, officials don’t need to ask for permission to build it.
How local governments accumulate unneeded reserves comes back to how they raise property taxes. Most governments can hike property taxes by up to 5 percent annually, depending on inflation. And some do so, every year, whether they need the money or not.
The result is growing surpluses that elected officials can spend when they want.
Excess reserves need to be given back to residents, either through rebates or by freezing/reducing levies until the reserves are back to appropriate levels.
The good news is, as reported recently by the Illinois News Network, that one township has begun the rebate process. Shelbyville Township, near Springfield, is rebating $735,000 back to taxpayers because its reserves exceeded the 2.5-year reserve limitation. For the 2,000 homeowners there, the rebates ranged from a low of $20 to a high of a few thousands dollars.
The bigger question for hoarding governments is, why bother collecting the levies if they’re going to be rebated anyway? Just don’t take taxpayer money in the first place. It would be a lot cheaper and certainly less messy.