State Budget Continues Trend of Diverting Personal Property Replacement Tax Revenues


State Budget Continues Trend of Diverting Personal Property Replacement Tax Revenues

Jun 17, 2020

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Written by M. Neal Smith

The Illinois State Fiscal Year Budget for the fiscal year beginning July 1, 2020 was passed by the General Assembly on May 24, 2020 and signed into law by Governor Pritzker on June 10, 2020.  Unfortunately, and to the detriment of local governments, the budget continues to rely on a diversion of funds that are generated by personal property replacement taxes.        

Personal property taxes were abolished by the 1970 Constitution, but the Constitution also mandates that tax revenues lost by units of local governments as a result of abolishment be replaced by a tax on the classes of taxpayers relieved of paying the abolished personal property tax.  State law creating personal property replacement taxes and the Personal Property Replacement Tax Fund (PPRTF) implemented this Constitutional mandate. 

However, since the FY 2009 budget, the State has been diverting funds from the PPRTF and in recent years the amount of diverted funds has sharply increased.  In FY 2009 the diversion was just over $21 million, but by FY 2017 the amount had jumped to over $220 million.  For the FY 2021 budget just signed into law, the diversion amount is nearly $312 million.   The money is being diverted to cover State expenses and would otherwise be distributed to local governments as an unrestricted source of funding for those local governments. 

We will continue to monitor these and other issues that could impact your revenue.  For assistance with strategies in communicating with local legislators concerning this problem and for questions concerning the State budget and its impact on local government revenues, please contact your Robbins Schwartz attorney.