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77 Final Report General Assembly Task Force on Library Finance
OFFICE OF THE SECRETARY OF STATE SPRINGFIELD, ILLINOIS 62756 April 30,1996 Dear General Assembly members, As chairman of the General Assembly Task Force on Library Finance, I am transmitting this report which addresses the requirements of House Joint Resolution 13, adopted by both houses of the Illinois General Assembly in 1993. The task force, appointed by the legislative leaders, carefully reviewed the status of library funding throughout the state with special attention to the impact of new technologies on library budgets and library service. Libraries play a strategic role in the state as the foremost information providers for everyone. With growing amounts of information only available electronically, an infusion of new funding is necessary to help libraries meet expanded technology-driven demands. My office has utilized federal and state funds to purchase computers for all types of libraries. Other efforts include Live & Learn-funded projects for library Internet access and training of library staff in the use of new technologies. These initiatives are a good beginning, and the task force carefully investigated how Illinois can build on this foundation. The task force also examined a broad range of revenue sources to address identified technology needs. The ensuing overall recommendation, to increase fees assessed by my office in order to address key library technology needs, is a reasonable and appropriate solution. I urge you to review this report and its implications for information access to citizens of Illinois. Strong libraries are a necessity in the information age, and library service as well as the state's overall economic vitality will be strengthened through the implementation of the recommendations in this report. The task force appreciates the opportunity presented by the General Assembly in commissioning this in-depth study of library funding. My heartfelt thanks are extended to the task force members for their diligent work in developing the recommendations in this report. Sincerely,
GEORGE H. RYAN 78 EXECUTIVE SUMMARY The task force recommends a technology initiative to provide enhanced opportunities for public access to electronic information by improving technology in libraries. Thenew initiative will enhance services by: • creating new electronic networks for libraries that will reduce the telecommunications costs necessary for high speed access to the Internet and other resources • upgrading hardware and software to support the new technology that the secretary of state's office is making available to libraries • providing state-of-the-art access to electronic information, including the conversion of Illinois information not currently available in this format. The task force recommends an increase in several fees assessed by the Office of the Secretary of State to provide the necessary funding for this technology initiative. BACKGROUND Task Force Establishment: When House Joint Resolution No. 13 was approved by the legislature in 1993 to establish the General Assembly Task Force on Library Finance, it marked the beginning of the first comprehensive legislative examination of library funding in Illinois since 1973-74. In 1974, the report. Financial Structure of Public Libraries, was issued by the Library Financing Subcommittee of the House Revenue Committee. Chaired by then Rep. Ralph Dunn, the Dunn Report, as it became commonly known, studied the financial structure of public libraries in order that the "local library system may be restored to financial stability." Furthermore, the study was required to include "a survey of alternative means to the property tax of financing local public libraries," according to House Resolution 456, approved on June 22,1973. Secretary of State and State Librarian George H. Ryan was a member of the Library Financing Subcommittee in his capacity at the time as representative from the 43rd District. Most of the recommendations of the Dunn Report have been addressed in the 20 intervening years and its crowning achievement is the impetus it gave for the public library per capita grant program, first funded in 1978. Two main factors prompted the legislature in 1993 to establish another task force to examine library funding: the impact of electronic technologies and the ongoing discussion about the role of property taxes in financing libraries. Members of the General Assembly Task Force on Library Finance (Appendix B) were appointed in according to the requirements of House Joint Resolution No. 13 (Appendix A). The task force held its first meeting on March 4,1994. A summary of the topics discussed at each of the meetings is included in Appendix C. 79 LIBRARIES IN ILLINOIS — CURRENT STATUS The Illinois Library and Information Network: The Illinois Library & Information Network (ILLINET), established in 1975, is a nationally recognized model of cooperation among different types of libraries. Over 3,000 libraries of all types (academic, public, school and special) have become ILLINET members upon joining one of the twelve regional library systems funded by the Office of the Secretary of State. The purpose of the library network in Illinois is to foster cooperation in meeting shared needs through interlibrary loan, cooperative automation systems, statewide delivery and other services. The foundation of ILLINET is the recognition that the libraries in the state are interdependent. Illinois library cooperation ensures that the state's citizens receive the best possible library and information service through resource sharing and the maximum use of those resources. Library Funding: State and federal grant funds spent in support of library service in Illinois supplement local library budgets. With growing technological needs, Illinois libraries are faced with difficult choices about how to spend money that is losing ground to inflation. The impact of property tax caps in the Chicago metropolitan area has also been felt by public, school and community college libraries, especially since public libraries in Illinois derive 84 percent of their revenue from local property taxes. Illinois academic libraries rank 30th in the country in library expenditure per full-time-equivalent student/faculty. Public school libraries in Illinois rank 31st in pupil/librarian ratio, and Illinois public libraries rank 19th nationally in expenditures for books and serials. Meeting the information needs of library patrons is a challenge, particularly in determining how scarce funds can be used best when people want information immediately. Automation/Technology in Libraries: Libraries throughout Illinois have received microcomputers and modems for accessing electronic information through a series of programs funded by "Live & Learn," general revenue fund monies in the secretary of state's budget and federal funds. The Access Local Library (ALLY) grant program has provided microcomputers and modems to 1,355 libraries at a cost of more than $2.1 million. In FY96, multimedia computers with video and sound capabilities have been given to 779 public libraries and public library branches. Grant funds have also been used for other automation efforts that provide access to library collections throughout the state via electronic card catalogs. Some specific examples of how grant funds have improved library service follow: The Norris City School District is concentrating on preparing its students for the complexities of international issues. The automation grant awarded to the school through the Office of the Secretary of State in 1995 is helping children understand the real world and global issues. By making available such electronic resources as the Social Issues Resources Series, Opposing Viewpoints Series and Current Controversies, students are making informative and balanced decisions with fact-based viewpoints. 80 Automation provides librarians with the tools to quickly determine if another library might own a particular book. One librarian in a small rural school library stated that the library's computer, purchased through a state library grant program, allows her students to no longer be the stepchildren to large schools. Small school libraries have the same capabilities as larger libraries through automated access to information. Augustana College Library in Rock Island has used grant funds to scan rare and brittle historical documents, diaries and photographs and to make them available as digitized images over the Internet. As a result, a child or any library patron can use the Internet to "surf" to Augustana College and view the actual handwriting of a diary written during a Civil War battle or look at historic photographs. The patron need only press the print key to hold a copy of these rare and otherwise inaccessible materials. While the original documents are carefully secured for preservation purposes, patrons have unlimited 24-hour access to electronic reproductions of these valuable materials via the Internet. Growing demands include increased support for library automation to ensure that libraries become essential information and education centers. Libraries are in danger of becoming the holders of limited, outdated collections that lack the computer hardware and software, telecommunications and other tools necessary to find and access the vast array of information now available. The $2 million provided in "Live & Learn" for library system technology is still needed to maintain and expand this infrastructure, which includes converting card catalogs at hundreds of libraries to electronic databases. Because of the extensive media attention and interest generated by the Internet, everyone from professionals to students expects more and better information more quickly. Until recently. Internet access was discussed infrequently. Now, with growing amounts of information available only electronically, libraries are pressured to expand their automation efforts and to use telecommunications to meet immediate information demands. A digital library is no longer a novelty; it is essential. The specific automation/technology needs of libraries include keeping current with computer equipment that becomes obsolete and gaining affordable access to electronic information. Telecommunications charges incurred from electronic networking are another major barrier to many libraries, particularly rural libraries. This prohibitive cost was one of the major concerns expressed during the hearings held by the members of Secretary Ryan's Rural Library Panel in 1991. There are 129 public libraries throughout the state with budgets of less than $25,000 per year. Telecommunications costs of hundreds of dollars per month to access electronic information are much too expensive for these libraries. Hence, computer usage is limited in spite of the available technology. Other types of libraries are also hindered by access charges. 81 GUIDING PRINCIPLES Throughout its deliberations, the task force generally agreed on the following principles: 1. Libraries throughout the state have diverse needs and a one-size-fits-all solution may not be appropriate. 2. Perceptions of "adequate" library service vary in different communities. 3. All types of libraries are important components in the Illinois library network, but the task force should focus its primary attention on publicly-funded libraries. 4. Property tax caps in the Chicago metropolitan area continue to impact library service, resulting in decreased tax revenues for important library services. 5. In order to best serve library needs in the state, the task force should be open to the possibilities of building on existing funding programs and establishing new funding programs. 6. A variety of funding sources should be explored that may or may not be tied directly to libraries. However, having a tie to libraries would help the revenue source's chances of success. For example, the "Live & Learn" initiative was successful because it addressed revenue under the secretary of state's jurisdiction. 7. Local autonomy in library governance continues to be of paramount importance and task force recommendations should not undermine the strength of locally-governed library service. 8. Library service is facing growing financial pressures including spiraling increases in the cost of materials, particularly serials, and immediate demands for up-to-date information. 9. Libraries need financial assistance to implement new technologies that improve access to information. 10. The state has a continuing responsibility to supplement local financial support for school and public libraries by recognizing the statewide benefits that accrue through stronger library service. 11. Funding recommendations should be indexed to reflect the impact of inflation and other economic factors. 12. Task force recommendations should be reasonable and politically astute, not grandiose recommendations that face inevitable defeat. 13. School and public library cooperation is necessary in order to make the best use of public funds. 14. If another group is simultaneously trying to institute a new or expanded revenue source at the same time as libraries, the likelihood is neither effort will succeed. Recent initiatives for education addressing an increase in taxes on riverboat gambling, as well as a proposed increase in the state income tax, were identified by the task force as possibilities the library community should not explore any further, despite the link to education. 15. A potential revenue source unsuccessfully attempted by another group is unlikely to be successful for libraries. 82 TASK FORCE DISCUSSION TOPICS Library Funding Issues: During task force meetings, a variety of key library funding issues emerged. These issues included: • The scarcity of money for new technology and access to the information superhighway, including telecommunications costs, in order to address the role of libraries as key access points to the national information infrastructure • 1.2 million Illinois residents without tax-supported public library service • Training and retraining of library staff • Construction and remodeling costs, especially the costs involved to comply with the Americans with Disabilities Act • The need for legislative and/or regulatory reform in the telecommunications arena • The spiraling costs of employee fringe benefits, especially health care • The need to strengthen public library service to the business community • The impact of property tax caps • Increased costs for library materials, particularly serials, coupled with the cost for access to online databases Many issues were identified but the predominant concern was the variety of costs involved in accessing electronic information. Ultimately, the top priority became helping Illinois libraries meet information needs through funding for telecommunications, equipment and database access. Technology enables library staff to perform their jobs more efficiently and effectively. Library service is improved, benefiting library patrons with their business, personal and educational information needs. In 1995, an estimated 37 percent of households owned microcomputers, but many of these computers were not used to access remote electronic databases. Clearly, libraries must be positioned as the access points to electronic information. Potential New Revenue Sources for Libraries: The most successful effort in recent years to obtain new state funding for specified programs was the "Live & Learn" initiative launched by Secretary of State and State Librarian George Ryan during the spring of 1993. With bipartisan support from the General Assembly, the initiative was enacted by the governor on July 8,1993. The effort was successful primarily because of the sponsorship of leaders from both political parties, intensive lobbying by the Illinois library community and the relatively modest fee increases for vehicle registrations and title transfers. Since the "Live & Learn" program was enacted, there has continued to be increased sentiment against new taxes and increased user fees. In fact, central to the task force's discussion and strategies was the realization that efforts to obtain new funding for libraries will face challenges. During the past two years, various political candidates have 83 pledged "no new taxes," and there has been a groundswell of support for statewide tax caps. Concerns have also emerged about generating new revenues through new or increased user fees. Illinois state government currently imposes more than 2,000 user and license fees, collecting $1.64 billion per year. But Illinois ranked last in user fees collected in 1990, according to the Tax Foundation in Washington, D.C. The multiple technological demands facing Illinois libraries in this information age provide a compelling justification to recommend an increase in state support for library service beyond the resources generated by the "Live & Learn" program. Additional state funding for library technology is a sound investment that yields many gains for Illinois. With improved access to electronic information, Illinois libraries help the business community as well as the educational community. Libraries become better positioned as the information access points for all citizens, including those who do not have the same technological advantages at home and at work. Libraries are essential to an informed citizenry to help it locate and navigate the immense amounts of information that are now a part of daily life. The task force examined a wide variety of possible new funding sources for statewide library development. New or increased state taxes and fees were considered, as were such other options as eliminating or lessening state tax incentives in various areas to benefit libraries. Some of the revenue sources have ties to libraries or the Office of the Secretary of State and State Librarian. The revenue projections in Appendix D are estimates, not definitive numbers, and are based on a variety of statistical sources. The variety of revenue sources that were examined are listed below. These revenue sources are described in detail in Appendix D. Following initial study, the task force discarded most of these revenue sources. Possible sources of new revenue
Increased fees for drivers' licenses
84 TASK FORCE RECOMMENDATIONS Overall Recommendation: To seek funding from fee increases in the Office of the Secretary of State to provide a total of $4 million each year in new state funding to enable Illinois libraries to support and extend their roles for Illinois citizens. Since the secretary of state also serves as state librarian, the task force recognizes that a revenue source under the secretary's jurisdiction has the best opportunity for success in the legislature. The proven benefits of the "Live & Learn" program also support extension of a complementary program. The task force deliberated the possible new sources of revenue to meet major library technology needs and recommends modest increases in fees. Fees under the jurisdiction of the Office of the Secretary of State that have not been raised recently are appropriate, since the funding will be used to benefit the information infrastructure of the state. Priority Areas for New Funding: Technology is the priority need in Illinois libraries. Libraries need financial assistance to "ramp up" to the information superhighway in order to meet the increasingly sophisticated needs of library users. Furthermore, technology enhancements are needed by all types of libraries, large and small, urban and rural, to equalize access to information. Three primary uses for new funding have been identified by the task force. These initiatives build upon the successes of previous and current statewide projects and enhance the infrastructure and information content available in this age of digital information. The plan provides libraries with recurring funding for information technology enhancements into the 21st century. The three objectives are listed in priority order. 1. Creating New Electronic Networks for Libraries Libraries continue to register their legitimate concerns about the cost of telecommunications in their limited budgets. These telecommunications services, however, are necessary in building a viable electronic infrastructure for the Illinois library network. The new funding will be used as seed money for the installation of more Internet connections for Illinois libraries. Coupled with the recent passage of the federal Telecommunications Act of 1996, which provides for affordable rates for libraries, schools, and rural health care providers, the new funding will be allocated so libraries can be positioned as information access points for everyone. This initiative addresses compelling concerns expressed by the library community, which has been hit hard by large monthly telecommunications bills in its efforts to meet the immediate information needs of their patrons.
85 Partnerships are essential to make the best possible use of this funding. For example, the Illinois State Board of Education is developing a plan to link the 900 public school districts. Working together to link school libraries is critical. 2. Upgrading Hardware and Software to Support the New Technology Libraries face an endless need to purchase computer hardware, either new equipment or upgrades of existing equipment. The state librarian already has used federal and state funding to purchase computers for libraries throughout the state under Project ALLY, Access Local Library, and multimedia personal computers have been purchased for public libraries throughout the state under another state library grant program. These successful programs will be augmented to enable libraries to purchase ancillary hardware (such as printers and scanners) to expand their services. Additionally, libraries are faced with a continuing cycle of necessary hardware upgrades as technologies continue their rapid evolutionary pace, a pace more rapid than most local library budgets can accommodate. Upgrading existing computer equipment will be another important component of this initiative. 3. Providing State-of-the-Art Access to Electronic Information Through matching programs, outright purchases and negotiated database licenses, Illinois libraries will have much greater access to electronic information to meet patron needs. State-funded contracts already have brought the very popular FirstSearch™ product to Illinois libraries. Through a statewide licensing agreement with FirstSearch™, all Illinois libraries have access to nine databases that locate information about a wide variety of topics. These efforts will be expanded to include favorable statewide pricing for the purchase of products, such as online encyclopedias. In addition to the cost-effectiveness of volume buying, access is increased by simultaneous use of the information by library patrons in different locations, which is not possible in traditional paper formats. The state's libraries have a number of special collections, such as the Native American materials at the Newberry Library in Chicago, the Sangamon Valley Collection at Lincoln Library in Springfield and the Henry Homer Lincoln Collection at the Illinois State Historical Library. Collections such as these will be converted to a digital format to provide statewide access beyond the communities in which the central collections are physically located. People will be able to access the materials without traveling to a particular library. Many of these materials are very rare and in brittle condition, which places constraints on physical access. Digitization will enhance their availability. 86 Outcomes: With funding for the three initiatives cited above, the role of libraries as information access points for the public will be enhanced. Through funding for telecommunications costs, equipment and access to electronic resources, libraries will be better positioned to offer patrons direct access to electronic information. Internet access will be available for library patrons breaking down any differences between the information "haves" and "have-nots." Illinois libraries will be strongly positioned as information access points for every library patron, including those who do not have computer access at home or at work. Information is wealth, and libraries will be the focal points in providing this wealth to Illinois citizens. The guiding factor that will be used in allocating funds is providing public access to information. Recommended Sources of New Funding for Libraries: The potential sources of new funding were debated at length by task force members. During its examination of new or increased fees and taxes, the task force compared fees in Illinois government to other states. A report from the State Comptroller's office. Fee Imposition Report, shows that per capita fees paid in Illinois totaled $66 in FY93, compared to the national average of $81. Key factors in the deliberations about sources of new revenue included what types of revenue sources were most rational and the amount of money that potentially could be generated for library services. Following an extensive examination of the possible alternatives, the task force recommends that fees in the Office of the Secretary of State be increased to raise an additional $4 million per year. The $4 million amount was targeted as a reasonable goal that would improve libraries' technological capabilities considerably without imposing large increases in a number of fees. A legislative review of the need for and the public benefits derived from the library technology program is also recommended several years after the implementation of the program. Increased fees from the Office of the Secretary of State could include: • Annual report filing fees for corporations and not-for-profit corporations • Certificate of Limited Partnership filing fee • Partnership fees; change of name; document copy fees; computer information transfer fee • Share exchange fees • Security salesperson registration fees • Uniform Commercial Code fees
87 These fees were identified because they met the following criteria: 1. Every Illinois citizen is not directly affected by a change in these fees. 2. No significant decrease in the quantity of payments is anticipated as a result of the fee increases. 3. The fees have not been raised recently. 4. Revenue from these fees is earmarked for the state's general revenue fund, not a specific separate fund with limited use such as the road fund. Action Needed: Depending on the fee change(s) that are chosen, legislative and administrative rule changes will be needed. Most of the fees cited above are set by statute, with a few fees cited in the state's administrative rules. Additionally, state legislation establishing the Live and Learn Fund [30 ILCS 105/6z-34] must be amended to provide for the transfer of funds from the fee increases. The Library System Act [75 ILCS 10 et. seq.] must be amended to clarify how the increased funding will be used to benefit library service. Other funding possibilities were discarded due to a variety of factors. These factors included: • The limited chances for success in obtaining the source of new revenue • The very limited amount of new funding that would be generated • Previous unsuccessful efforts by other groups to generate funding from these sources SUPPLEMENTAL RECOMMENDATIONS NOT REQUIRING ADDITIONAL FUNDING FROM THE STATE: A number of supplemental recommendations have been derived from the task force's discussions. These recommendations, which do not require revenue from the Office of the Secretary of State, include: 1. To work with the Illinois General Assembly and the Illinois Commerce Commission to implement the provisions of the federal Telecommunications Act of 1996 which speak to affordable rates for schools and libraries. 2. To promote increased partnerships with the private sector. 3. To work toward a legislative solution allowing public libraries to obtain impact fees. 4. To work toward legislation eliminating the optional utility tax for publicly-funded libraries.
88 APPENDIX A. RESOLUTION ESTABLISHING TASK FORCE______ HOUSE JOINT RESOLUTION 13 BE IT RESOLVED BY THE HOUSE OF REPRESENTATIVES OF THE EIGHTY-EIGHTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, THE SENATE CONCURRING HEREIN, That a Library Finance Task Force is hereby created to study the problems of library finance throughout the State, including public and non-public, academic and special libraries and be it further RESOLVED, That the Task Force shall consist of the Secretary of State ex officio in his capacity as State Librarian, who shall be chairman; plus a total of sixteen other persons, consisting of two members of the General Assembly, one librarian, and one member of the general public with expertise in the area of finance or government, appointed by each of the four Legislative Leaders; and be it further RESOLVED, That the State Librarian is requested to provide any clerical or technical support needed by the Task Force; and be it further RESOLVED, That the Task Force shall report its findings and recommendations to the Governor and the General Assembly by January 1,1995 and is thereafter abolished. (Adopted by both houses of the Illinois General Assembly, 1993) 89 APPENDIX B. LIST OF TASK FORCE MEMBERS_____________ Secretary of State and State Librarian, George H. Ryan, Chairman The Honorable Miguel del Valle, State Senator, Chicago The Honorable Ralph Dunn, State Senator, 1993-1995 The Honorable Doris C. Karpiel, State Senator, Roselle The Honorable Penny Severns, State Senator, Decatur, 1994- The Honorable Grace Mary Stern, State Senator, Northfield, 1993-1994 The Honorable Bob Biggins, State Representative, Elmhurst The Honorable John Dunn, State Representative, Decatur, 1993-1994 The Honorable Judy Erwin, State Representative, Chicago, 1995- The Honorable John C. "Jack" McGuire, State Representative, Joliet, 1995- The Honorable Terry Steczo, State Representative, Oak Forest, 1993-1994 The Honorable David Wirsing, State Representative, DeKalb Mary Dempsey, Commissioner, The Chicago Public Library David J. Dyer, Trustee, Elmhurst Public Library Kathryn Harris, Director, Illinois State Historical Library, Springfield Joel Herter, Senior Partner, Wolf & Co., LLP, Oak Brook G. Victor Johnson, Trustee, Arlington Heights Memorial Library and Director, Urban Libraries Council, Evanston Karen Danczak Lyons, First Deputy Commissioner, The Chicago Public Library William McCully, Director, Park Ridge Public Library Sheila Schultz, Mayor, Village of Wheeling 90 APPENDIX C. SUMMARY OF MEETINGS March 4,1994, Chicago The inaugural meeting of the task force included introductory comments by each of the task force members about their perceptions of the funding problems facing all types of Illinois libraries. Issues that were raised included the need for adequate funding for use of new technologies; the number of people without tax-supported public library service; the potential for consolidation of library services; and the need to avoid division into information "haves" and "have nots." Initial ideas that were proposed included looking at a sales tax on printed, dated materials; a guaranteed cut of the state income tax for libraries, and incentive grants for consolidation. Telecommunications costs and reliance on property taxes for public libraries were raised as significant and urgent concerns. April 13,1994, Springfield Six leaders in the library community provided expert testimony on a variety of library funding issues. Jay Wozny, president of the Illinois Library Association, spoke about the impact of inadequate budgets on sharing of materials throughout the state. John Moorman, Decatur city librarian, gave an overview of the Illinois Library Association's proposal in the early 1990s for alternative funding for public libraries. Jim Ubel, director of the Shawnee Library System, spoke about the 1.3 million people in the state without tax-supported public library service. The director of the Indian Prairie Public Library District, Lee Schacht, talked about public library mergers, and Lynn O'Dell, the director of the Carol Stream Public Library, spoke about the wide variety of services offered by suburban public libraries. Increased demands for library service were addressed by Pam Feather, director of the DuPage Library System. July 7,1994, Elmhurst The task force held a lengthy discussion on the amount of new funding needed for Illinois library service and potential sources of new revenue for libraries. The members also discussed how to best package a funding request, tied to specific programs or a more generalized approach. The variety of new revenue sources that were identified would be researched by Illinois State Library staff for further consideration at subsequent meetings. Revenue possibilities included video rental fees, income from riverboat gambling, a sales tax on magazines and newspapers, special vanity license plates and a modest increase in the gasoline tax. The task force stressed the importance of earmarking new revenue sources that are likely to increase or at least remain stable in the future. A consensus did not emerge on whether Illinois public libraries should be primarily funded by income tax rather than property taxes. September 14,1994, Chicago The task force reviewed a preliminary working report on potential sources of new funding. Discussion included the need to index fees to the rate of inflation in order to avoid legislation at a later date to increase a fee. Dollars needed to address library needs were also discussed at length. The task force requested information about additional potential funding sources.
91 October 5,1995, Springfield Specific proposals for increased funding for libraries that were discussed included revisiting the idea of increased registration fees for corporations and a tax on dated, printed materials. The idea of expanding the "Live & Learn" program was discussed since the program is already identified with libraries and has shown good, tangible results. The role of libraries with technology was mentioned as a means to tie any program to a technology-related fee. Task force members leaned toward recommendations to increase existing fees rather than implementing new levies.
92 APPENDIX D: POTENTIAL FUNDING SOURCES EXAMINED BY TASK FORCE Increased Fees for Drivers' Licenses Drivers' license fees are under the jurisdiction of the Secretary of State and State Librarian. An increase in a relatively modest fee would still generate strong funding for Illinois library service due to the large number of licensed drivers. The standard $10 fee for four years for most drivers was last increased in 1984. There are approximately 7.4 million licensed drivers in Illinois and 1 million people with photo ID cards. By estimating that 1/4 of the drivers' licenses and IDs expire each year, an additional $17 million would be generated annually if the license renewal fee were raised from $10 to $20 for most drivers and the photo ID fee were raised from $ 4 to $ 8. A legislative change would be required since the fees are set by statute (625 ILCS 5/ 6-11/8). Because this service is administered by the Secretary of State/State Librarian, there is a tie to libraries. The revenue currently goes into three separate funds: the road fund, the drivers' education fund, and the drunk and drugged driving prevention fund. Overall, the Drivers Services department generated receipts of $33.4 million. Data from the U.S. Department of Transportation Federal Highway Administration shows that Illinois drivers' license fees in 1992 were low compared to most other states. However, the statutory requirement to use the fee receipts in funds other than the General Revenue Fund made this revenue source less appealing to the task force members. A New Tax on Services "We eat at McDonald's instead of buying groceries, and we rent videos instead of buying books. Consumers in 1990 spent smaller proportions of their money on durable and nondurable goods than in 1960. . . but expenditures on services . . . grew from 25 percent to 42 percent of consumer expenditures." (State Legislatures, August 1994, p. 19). With the growing use of services, a tax on services is viewed by many as equally logical as the long-standing sales tax on tangible goods. Illinois imposes taxes on very few services compared to other states. A total of 16 services are taxed according to State Tax Notes (June 27,1994); only four states tax fewer than sixteen services. Twenty-two states tax over fifty services, and the following states tax over 100 services: Delaware, Hawaii, New Mexico, South Dakota, Washington, and West Virginia. However, several states, including Florida and Massachusetts, failed in recent attempts to enact service taxes, and the attempt by former Illinois Rep. Laurel Prussing to enact a services tax to fund Medicaid was unsuccessful in 1993. The Prussing legislation would have taxed 67 services as an alternative to the existing Medicaid funding system, which generated $750 million from provider taxes. Just because most other states tax more services doesn't make service taxes more palatable to Illinois legislators, and a specific tie to libraries does not exist. Other groups, including Voices for Illinois Children, have also expressed interest in a sales tax on some services but have not taken any action.
93 The revenue projections vary widely depending on how many services are taxed and what rate is charged. In many cases, a state's service tax rate is the same as the state sales tax rate. The issue of State Tax Notes cited earlier includes analysis of taxes on 164 different services. A service tax on admissions and amusements is the most widely taxed category, and only four states, including Illinois, do not tax any services in this category. However, the City of Chicago taxes many admissions and amusements. Legalized Gambling The task force looked at state revenue already derived from legalized gambling, including the lottery, horse racing, and riverboat gaming. Americans spend $330 billion a year on legalized gambling which is enough to fund public libraries nationwide for 75 years. Obstacles to obtaining some additional state revenue in this area for libraries included the fact that a significant part of the revenue already goes to the education community. With the proliferation of various forms of legalized gambling, the anticipated revenue in any particular area cannot be expected to increase or even remain level. A new legislative initiative was introduced in February 1996 to increase riverboat gambling taxes with the new revenue earmarked for education. Motor Fuel Tax Increase A one cent increase in the state gasoline tax, excluding farm and diesel fuel, would generate an estimated $58 million in one year. Task force members were reluctant to endorse this source of revenue for libraries, based primarily on two factors: The gasoline tax was last raised in 1990, and state gasoline tax revenues are earmarked for highway improvements, not other programs. A "Fax" Tax The possibility of assessing a special, additional tax on Illinois fax machines was investigated. Issues raised included the rationale for the tax and how high the costs of collection would be in comparison to the limited revenues expected. Information on the number of fax machines purchased in Illinois each year is difficult to determine. Many persons use fax boards in their computers instead of fax machines, and with changing technologies, electronic mail is replacing a number of fax transmissions. Some faxes are sent via multi-use lines, so assessing a tax on phone lines installed specifically for fax machines would result in a special tax on only some of the fax transactions. All phone calls are already taxed. A Special Tax on Cable Television An added tax on cable television billings of $.25 per subscriber per month would generate almost $8 million per year. An estimate of 2.6 million cable subscribers in Illinois was used in preparing this calculation, based on 1994 statistics of 11,000 systems with 59 million subscribers nationwide. The costs to cable companies and the state for implementing and administering the program would be fairly significant. Additionally, with the implementation of the federal Telecommunications Act of 1996, competition in the cable and telephone marketplaces will blur the lines between providers and services, making this special tax difficult to justify.
94 Automobile Dealer License Plates Increasing the fee for automobile dealer license plates was suggested during a meeting of the task force. Current fees for dealer plates are $36 for the initial set and $10 for duplicates. Approximately 65/000 dealer plates are purchased annually. A $14 increase in the fee for dealer plates and a $10 increase for duplicates would generate approximately $710,000 per year. A legislative change would be required since the fee is set by statute (625 ILCS 5/3-810). A major influx of funds for libraries would not result because of the limited number of dealer plates issued. Fees for test vehicle plates are $75 for the initial set and $20 for duplicates. The revenues from these fees are earmarked for the Road Fund, not the General Revenue Fund. Vanity and Special License Plates Fees for vanity plates are as follows: $75 for new vanity plate $40 for new vanity plate for a motorcycle $10 for annual renewal of vanity plate $ 11 for personalized plate No additional charge for renewal of personalized plate An estimated 400,000 new vanity plates and personalized plates are issued each year. This potential revenue source has the advantage of being tied to the Office of the Secretary of State/State Librarian. A $5 increase in the fee for new plates and renewals would generate a substantial amount of money if an additional 1 million special plates also are renewed each year. The annual revenue would increase by $7 million. A legislative change would be required since the fee is set by statute (625 ILCS 5/3-806.1 and 5/3-405.1). The net result, however, might be a decrease in the number of people requesting and renewing vanity plates. The State of Maryland generated more than $1 million in four months from a special Chesapeake plate. Other special plates, including the Illinois environmental plate, have raised funding for special causes, but the revenue is not substantial. For example, less than $210,000 was generated by the environmental plate through August, 1994. Collegiate plates generated a total of $1.5 million in Texas during the last five years. Legislation has been introduced by the Secretary of State's Office in 1996 to provide for generic charity license plates. Business Filing Fees There are 286,000 registered business corporations in Illinois, with an average of 35,000 new corporations registering each year with the Secretary of State's Office. The incorporation fee is $75, and the annual report filing fee is $15. Increases of $25 for new corporations and $10 for filing annual reports would generate over $3.4 million annually.
95 Seeking a 50% increase in the annual report filing fee only would generate over $1.9 million per year. A 20% increase in all partnership filing fees would generate an additional $3.3 million per year. According to a report issued by the Illinois Tax Foundation in 1991, $81.6 million is collected each year, compared to estimated costs of $3,081,301 to administer all business services fees in the Office of the Secretary of State. These also include filing requirements for 54,000 not-for-profit corporations. The fees are set by statute (805 ILCS 5/ 15.10 and 805 ILCS 5210/1102). Additional fees are collected by the Securities Department of the Office of the Secretary of State. Increases in these fees also have potential for meeting library funding needs. Notary Commissions In 1991, 42,307 notary commissions were issued, resulting in revenue of $423,070. These commissions are valid for four years and are registered with the Office of the Secretary of State/Index Department. Doubling the fees would not generate a lot of money, even if the number of notaries did not drop as a result of the increase. Public Utility Taxes The state already assesses a public utility tax of 5% which includes the following: Natural gas tax, lesser of 5% of gross receipts or 2.4 cents per therm Electricity tax, lesser of 5% of gross receipts or .32 cents per kilowatt Telecommunications billed to Illinois consumers, 5% of gross receipts (interstate and intrastate) These public utility taxes generated $784 million for the state in FY94. In addition, municipalities have the option of assessing utility taxes at approximately the same level as the state tax. The City of Chicago may levy a tax of up to 8%. Calls to 900 numbers are taxed in Illinois as part of the 5% public utility tax mentioned above. The State of Missouri has explored the possibility of a monthly tax of 30 cents per telephone bill in addition to any other telecommunications tax. This type of tax would generate almost $10 million each year in Illinois from residential telephone billings. Business billings would add to this total. Sales Tax Increase During the spring of 1994, an effort to approve an increase of 1/8 cent in the state sales tax, with the proceeds earmarked for libraries, was initiated in the Missouri legislature. This effort was unsuccessful, although it will most likely be revisited. A one-eighth of a cent increase would generate $60 million in Missouri.
96 A similar increase in Illinois would generate over $100 million. Illinois has a uniform state and local sales tax base of 6.25%; the state receives 5% of this amount. $4.649 billion was generated in Illinois by this tax in 1994. Recent discussions by the Illinois Conservation Congress included the possibility of an increased state sales tax (1/8 of 1%). Video Rental Tax Annual video rentals in Illinois are estimated at 184 million. A 4% use tax (based on $2 per rental) would generate $14,720,000 in Illinois. The City of Chicago has already implemented a tax on video rentals, however, and the entire video rental marketplace may decrease annually as video-on-demand cable service becomes more prevalent. The Illinois Conservation Congress delegates suggested a video rental tax at their meeting in October 1994. Income Tax Increase Earmarked for Library Service If the state income tax were increased by 10% with the proceeds earmarked for library service, revenue of $555 million would be generated. If public library property taxes ($415 million in FY92) were concurrently abated, public library service could continue budgeting at the same level and an additional $140 million per year would be available. The impact on building bond levies and the impact of varying tax rates levied by public libraries throughout the state would need to be carefully considered. Advertising Tax A 3% tax on local newspaper advertising would generate an estimated $5.2 million per year in Illinois. Efforts in 1993 to impose a 6% tax on advertising in Washington, D.C. were withdrawn due to widespread opposition from the business community who said the proposal would be harmful to economic development efforts. Tax on Mail Order Sales This is a very complicated issue that has been the subject of a number of recent court cases. The sales tax would be applied on purchases by Illinois residents from out-of-state catalog companies. The August 22, 1994, issue of State Tax Notes estimated that over $200 million could be generated per year. Direct marketers and tax officials from a number of states reached a standstill in negotiations on this proposal in early 1993. Sales Tax on Dated, Printed Materials Implementing a sales tax on newspapers and magazines has met with a great deal of opposition in some other states. Although the purchase of other materials containing information such as books and videos is already taxed, some people feel that this tax would limit access to the printed word and be considered a tax on reading. Efforts to implement the tax could damage library relationships with vendors. Arguments have been raised that the tax violates the constitutional right of a free press.
97 Income Tax Check-off Program The possibility of a library check-off on state income tax returns was explored. Nationwide, taxpayers contributed $25.7 million to various programs funded by checkoffs in the 1994 processing year. This amount represented a $2.1 million decrease from 1992 contributions, with 156 check-off programs available to taxpayers in 41 states and the District of Columbia. In Illinois, a total of $876,503 was contributed to seven checkoff programs in 1994. Income Tax for Corporations Over 60% of corporations that file Illinois income tax returns owe no money. Implementing a $100 filing fee for corporate income tax returns was considered by the task force, although it was recognized that this fee would tend to discourage corporations from registering in the state. Another issue that was raised by the task force is the repeal of the corporate income tax deduction for out-of-state insurers. Implemented in 1980, the annual impact of this deduction is now estimated at $59.6 million.
98 APPENDIX D: BIBLIOGRAPHY OF PRIMARY REFERENCE SOURCES Federation of Tax Administrators. "State Taxation of Services: An Update". State Tax Notes, June 27,1994. Illinois. Comptroller's Office. Fee Imposition Report. Fall 1995. Illinois. Comptroller's Office. Tax Expenditures Report. Fall 1995. Illinois. General Assembly. House Revenue Committee, Library Financing Subcommittee. Financial Structure of Public Libraries. Illinois State Library, [1974]. Illinois. Office of the Auditor General. Management Audit: User Fees Charged by State Agencies. April 1993. Larison, Richard W. Non-Tax Revenue Raising: A Survey of Illinois' User Charges and Fees. (A report of the Budget Watch Project), Illinois Tax Foundation, Winter 1991. Snell, Ronald, ed. Financing State Government in the 1990s. National Conference of State Legislatures, 1993.
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