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COMPTROLLER'S CORNER
PROPERTY TAXES
IN ILLINOIS
By Loleta A. Didrickson, Comptroller, State of Illinois
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If you look back at Illinois' state and local taxes 30
years ago, you will find that this state was much more
reliant on property taxes than it is today. In 1957,
property taxes in Illinois comprised 51.7% of total
state and local taxes, while the national average was
44.6%. By 1993, as a result of many states imposing or
increasing income and sales taxes, property taxes in
the nation represented an average of 31.8%, while
property taxes in Illinois were 38.4% of total state and
local tax revenues. Although Illinois is not as reliant on
property taxes as it once was, property taxes continue
to present a significant component of the total taxation structure in Illinois.
Despite its unpopularity, the property tax is the
major source of locally controlled revenue for local
governments and school districts. In Illinois, this tax
raised $11.4 billion in 1993. It provides more than half
of all local revenue to more than 6,000 local governments and school districts.
As a funding source, Illinois' reliance on the property tax is considerable. Total adjusted estimated property value or Equalized Assessed Valuation (EAV) and
the amount billed (extensions) grew substantially between 1989 and 1993. The total EAV for the state, in
1993 was $144.5 billion, up 35% from 1989. Total extensions increased to $11.7 billion, up 32% from 1988.
The drastic increase and growth of the property
tax over the last 10 to 20 years is one of the primary
reasons the public's frustration with the property tax
continues to grow. The Illinois Economic and Fiscal
Commission's 1990 report on property taxes statewide
indicated the tax grew by 42% during the 1980s - 15.1% above the rate of inflation. The Department of
Revenue noted that Illinois property taxes had grown
twice as fast as the tax base. Moody's reported that extensions in the Chicago metropolitan region increased
by 105%, and the Taxpayers Federation of Illinois reported a 113% increase for DuPage County during the
'80s. Over the same period, the consumer price index
grew by 41%.
Even though Illinois is considered a moderate tax
state in terms of taxes paid per citizen, it is not true of
the property tax. Per capita state tax receipts for
Illinois ($1,317), for FY 93 were $119 below the nation
average ($1,436). However, the US average for property taxes paid by state is 31.8% of its taxes from the
property base.
In Illinois, schools and local governments are very
dependent on the property tax. More than 90% of the
local governments in Illinois are property tax supported. Of every $100 in taxes that go to fund government
in Illinois, $27 comes from property taxes compared
with about $18 from sales taxes and $16 from income
taxes. Nationwide only $22 out of every $100 comes
from property taxes.
The complexity of the Illinois property tax system
is exacerbated by the fact that Illinois has more property tax supported districts than any other state. In
1994, there were 6,041 such districts. The number of
districts by category were: counties (102), townships
and road districts (1,427), road districts in commission
counties (94); municipalities (1,289); schools, including community colleges (953); and special districts
(2,176).
To make matters more difficult, taxing districts
usually do not share boundaries. A school district may
August 1996 / Illinois Municipal Review / Page 15
include two or more municipalities and several townships. Most Illinois residents live in 7 to 9 different taxing districts.
The breakdown of contributors to the property tax
are as follows: residential property tax 52.3%, commercial 29.8%, industrial 13.7%. The remainder is
paid by farmers 3.6%, railroads 0.4% and minerals
0.1%.
Cairo has the highest effective tax rate, while
Northbrook once again has the lowest rate, according
to the Taxpayers' Federation of Illinois. Data from the
Illinois Department of Revenue, as calculated by the
Federation, shows a resident in Cairo would pay $3,790
on a home with $100,000 market value. At the same
time, a resident in Northbrook would pay only $1,207
on a $100,000 market value. However, because property values in Northbrook are much higher than Cairo,
homeowners in Northbrook generally have higher tax
bills.
One reason that effective tax rates are much higher for residents in Cairo as well as many other downstate communities is that these areas are much more
reliant on property taxes because of the lack of other
types of revenue sources, such as sales taxes.
Additionally, EAV in these downstate regions has not
grown as dramatically, if at all, as in suburban areas.
As was previously mentioned, Illinois is a moderate tax state. Based on the major general taxes, like income and sales, it is a low tax state. When factored
with a higher than average property tax level and higher than average federal tax bill (due to higher personal income levels) Illinois taxpayers still have only a
moderate tax burden when compared to the rest of
the country and a revenue structure unique to this
state.
Comptroller's Fiscal Reforms
Signed Into Law By Governor
A comprehensive fiscal reform legislative package
initiated by Comptroller Loleta Didrickson has been
signed into law by Governor Jim Edgar. The legislation has sweeping impacts on state government budgeting, spending, revenue and debt collection practices. Many of the reforms had been frequently and
unsuccessfully proposed in previous years.
The legislation reduces the lapse period from 3
months to 2, ending the practice of allowing fifteen
months of state spending out of twelve months of revenue. The current policy has resulted in using the
next fiscal year's revenue to pay for three months of
the last year's bills. The new legislation cuts the lapse
period by a third, and prohibits lapse period spending
for new services provided after June 30. It also establishes for the first time a definition of the nature and
purposes of reappropriated expenditure authority.
Another major focus of the legislation is management of debt collection activities. Under the new legislation's last call provisions, the Debt Collection
Board would establish timetables and procedures for
uncollected debt not subject to a repayment plan, including the final evaluation on which delinquent accounts would be assigned to private debt collection
agencies.
"The Comptroller's Office is currently developing
proposed rules and procedures to implement these
provisions," Didrickson noted. "And while this is a
step in the right direction, the key is to attack the debt
in the first 90 days. The next step is to shorten the period of time before debts owed the state by its vendors
and employees are assigned to the Comptroller's offset
program."
Unpaid child support, income and sales taxes and
student loans make up the largest amount of money owed
to the state. At the end of calendar 1995, the total
amount owed to the state stood at $5.87 billion. The percentage of older debt labeled "problematic" - past due
and difficult to collect - had increased to 47%, or $2.74
billion.
"Aging is fine for wines, but not receivables,"
Didrickson said, pointing out that the state loses millions
of dollars each day that debt more than 90 days old goes
uncollected. These debts depreciate in collectibility at the
rate of 1/2% each day after 90 days. Currently, state debt
collection efforts are de-centralized, with each agency following its own internal processes for collection and writeoff of debt.
"At a time when the state is looking for more money
to fund its critical needs, we cannot afford to let this money go uncollected," Didrickson said. "Coupled with the
measures we've already taken, this new legislation will
make it easier for the state to dog these deadbeats. Every
dollar collected is cash to the bottom line."
The law takes effect January 1. 1997. •
Page 16 / Illinois Municipal Review / August 1996
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