Your Turn
Too many 'fiscal years' complicates process of planning and governing

By CHARLES TOKAR

Wouldn't it be easier if all governments shared the same fiscal year? The present situation is like everyone reading the same book, but starting and ending on different chapters.

The federal government begins its budget year on October 1. The state's fiscal year currently begins July 1, though this has changed over the years. And local governments throughout Illinois operate under a hodgepodge of budget years:
Cook County's runs from December 1 through November 30; Worth Township's from March 1 through February 28. And, until January 1990, the Village of Chicago Ridge was, like most municipalities, operating on a May 1 through April 30 fiscal year. (At that time, the village trustees accepted my recommendation to change the fiscal year to coincide with the calendar year.) Meanwhile, the budget years of all public school districts coincide with the state's fiscal year, except those in Chicago, which begin their budget year September 1.

Why such a range? Illinois law ties a municipality's fiscal year to its general election. However, if municipalities have populations over 500,000, the fiscal year begins January 1. Municipalities also have the option to change their fiscal years by ordinance. Many have. But when asked why a particular town's fiscal year begins on a certain date, many local officials say, "because it's always been that way." Apparently, apathy, bureaucratic inertia and an unquestioned loyalty to precedent have combined to maintain a system with no reasonable rationale.

However, I would suggest there are many positive reasons for bringing the various fiscal years into harmony with the normal calendar year.

First, there is that mother of all bureaucracies, the fear-inspiring, all-pervading Internal Revenue Service. This necessary (?) evil empire imposes its will on all government units alike. It does not matter if you are the state of Illinois, Cook County or tiny Chicago Ridge. Your employees' income and Social Security taxes are figured on a calendar year basis. For most government units, this means having to figure an employee's pay partially from one year and partially from the next. If a raise is given, it is generally given at the beginning of a fiscal year, rather than at the beginning of a calendar year, and this makes accurate reporting even more difficult. Why not simply keep track of everything the way it must be reported?

Second, when governments negotiate contracts with their employees' unions, both the governments and the employees look to see what comparable employees in other jurisdictions are getting for their services. There is always a desire to compare what policemen, firemen or secretaries make in different towns. The comparisons, when averaged, are a valid indicator of what a fair salary is within a given geographic region. The problem arises because these comparisons are almost always made on outdated information. Because of the different fiscal years, governments are probably not comparing apples to apples. One town may be ending a fiscal year while facing negotiations with a union looking for a 10 percent raise. Raises may have just taken effect in another town, giving it the highest paid employees in the area. In either case, the comparisons are faulty.

Only if the government units being compared had the same fiscal year, with equivalent payroll years, would these comparisons be valid and accurate.

Finally, and most important, budget preparation under a coterminous fiscal year/calendar year allows for budgeting the receipt of all property taxes due a unit of government from the same levy year. With the May 1 through April 30 fiscal year, which prevails in most towns, there is a split in the receipt of property taxes:
The larger, second installment of taxes paid in the fall is received from one levy year, while the next receipt comes in the spring of the following year's property tax levy. Because it's very difficult to accurately predict how much a government unit's equalized assessed valuation will increase from one year to the next, budgeting revenues truly becomes a guessing game, played in the dark. It is quite a bit simpler knowing that your equalized assessed valuation is going to stay the same for a full fiscal year of property taxes. If one year's property tax receipts come within the same fiscal year, prediction is easier and certainly more accurate.

I strongly urge our state legislators to consider adopting legislation which would put in place a uniform fiscal year/calendar year for all municipalities, or even all units of government within Illinois, including the state itself. In the meantime, municipalities themselves should look seriously at a coterminous fiscal year/calendar year. It has certainly made my job here in Chicago Ridge easier, and it would be so nice to do a salary survey of neighboring communities that was truly an apples-to-apples comparison.

Charles E. Tokar is the village clerk and budget officer for the Village of Chicago Ridge. He is an attorney and holds a master's degree in public administration.

12 / November 1994 / Illinois Issues