City now facing $8M deficit thanks to state cuts

By Jim Hagerty

ROCKFORD — As if Rockford’s Finance Task Force didn’t have an already monumental task on its hands to close a looming $6.5 million budget gap, an across-the-board cut in Springfield will push the city even further into the red.

Because the Local Government Distributive Fund (LGDF) was reduced in the current state budget, the first in more than two years, municipalities will see an overall payout reduction of 10 percent. For Rockford, that’s a $1.8 million hit. That means a deficit of $8 million for the upcoming fiscal year.

“It complicates things,” Rockford Finance Director Carrie Eklund said.

Eklund said the additional shortfall could be especially tricky for the task force because the amount that will affect Rockford is equal to what is usually allotted for entire city departments.

“It’s a more than some departments,” she said. “It’s our legal and HR departments combined. It might not seem like a small amount compared to $135 million, but it’s not an insignificant amount for us operationally because it translates to a significant number of staff.”

Making matters worse, Moody’s Investor Services Monday hit the city with a credit downgrade, which means borrowing money will come at a higher cost.

“We had expected a change in this rating, as we know the financial challenges faced by the City are severe,” Mayor Tom McNamara said in a statement.

Moody’s cited accelerated pension costs, the city’s operating deficit and growing operating expenses, and the inability to raise more revenues as concerns. However, the investment group did praise the city’s operating reserves.

But city officials say the one-two punch of the budget cut and the credit downgrade will impact hard, and that it’s early to tell what cuts the city will make in their wake or if layoffs could be the result.

The finance task force is scheduled to bring its recommendations to the city in September. Members are reportedly eyeing a plan like the one implemented in 2009 when Rockford faced a $9 million deficit.

“Obviously, their job is harder,” Eklund said. “But now at least we know where the state has landed and we don’t have that uncertainty over our heads. We can plan for it even though it’s going to be painful.”

McNamara says while he’s pleased a budget has finally been passed, the unwelcome prospect of adding to the city’s deficit makes it a tough pill to swallow, saying it “only makes our decisions that much more difficult.”

Because the Local Government Distributive Fund is not based on need but population, Gov. Bruce Rauner has long claimed it has encouraged overspending on the local level. In 2015, Rauner proposed cutting the LGDF by 50 percent as part of his turnaround agenda. Earlier budget proposals this year had cuts of up to 25 percent for the fund.

As it stands, slashes in towns with populations over 5,000 could save taxpayers $1.75 billion throughout the state. However, in some Illinois cities, reductions could result in wage reductions for police, fire and other city employees. The new Illinois budget also calls for 2-percent sales tax administration fee that will be charged to local municipalities.

Rockford is not the only mid-size city to feel the crunch. Aurora stands to lose around $2 million. In Joliet, LGDF slashes will represent $1.4 million. Orland Park is set to see around $500,000 in cuts. R.

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