Highland is considering creating its own grocery tax to replace the one eliminated by the state earlier this month.
Gov. J.B. Pritzker signed a bill that eliminates the 1% grocery tax statewide, effective Jan. 1. That tax primarily benefits local governments, including Highland, and many are scrambling to figure out how to make up for the lost revenue.
At issue is a 1% tax on food and prescriptions for home consumption. According to economist Elizabeth Powers of the University of Illinois at Urbana-Champaign, grocery taxes are controversial because low-income households spend a much higher share of their income on food than wealthier households, so low-income families carry more than their fair share of the tax, she said.
“Even with inflation cooling off, every dollar counts, so I’m proud we’re doing what we can to make trips to the grocery store a little easier,” Pritzker said in a statement . “It’s one more important part of lifting the burden on Illinois families.”
Illinois is one of only 13 states that taxes groceries. The tax had been suspended in fiscal year 2023, but cities were reimbursed for the loss by the state. With the permanent elimination of the tax, Pritzker also left cities with the option to create their own grocery tax to replace the lost funding.
Highland estimates the elimination of the grocery tax to cost the city approximately $330,000 to $350,000 a year. This is approximately 10% of the city’s sales tax revenue.
At the moment, Highland’s grocery sales taxes are primarily divided between public safety, streets and parks programs, according to a memo from Highland City Manager Chris Conrad. Approximately 58% of the tax goes to public safety, 26% to streets and 16% to parks. Keeping the cut in proportion, that would mean cutting the public safety budget by $192,000, streets by $86,000 and parks by $53,000.
Overall, the city has reduced its full-time employee headcount by 17 employees since 2019, which means there isn’t much room to make payroll cuts. Conrad made several proposals to the city council.
For public safety, the police department was already anticipating some reductions in personnel costs due to pending retirements, as well as reducing an administrative position. Reallocating the public safety director’s salary among the other departments may also help alleviate the impact on police, Conrad wrote.
It will take about 2-4 years of deficit spending to allow general sales tax to grow enough to bring the revenue back up, he said. However, they will not have to cut any personnel in public safety to absorb the cuts.
The street department has seven employees and a supervisor, and many jobs require multiple employees for safety. Therefore, Conrad recommends deficit spending for a few years and freezing equipment purchases and replacements until sales taxes rise back up.
“This will put an increased importance on maintenance and support to keep things operational,” Conrad wrote.
The only personnel cuts will likely be in parks. Conrad said that labor costs have increased with the increase in the minimum wage, and playground equipment has gotten more expensive. Therefore he proposes spreading the duties of Parks Director Mark Rosen among two existing employees after his retirement next year, and appointing two “superintendents” to delegate more of the responsibility for a small increase in pay.
Conrad also suggests an increase in fees at the Korte Rec Center, the municipal pool and some other programs and rentals. Those increases would be about 4% to 5%, on programs that have not increased in quite some time, he said. They also expect to increase the cemetery perpetual care fees, which are subsidized with about $20,000 a year from sale taxes.
Conrad said the city has three options: it can choose to implement the cuts he detailed to cope with the loss of the grocery tax; it can choose to add their own grocery tax by Oct. 1, 2025; or it can wait and see how much they actually lose before deciding whether to create a new tax or implement the cuts.
Most of the council members were inclined to create their own grocery tax.
“We’ve already been cutting service, we’re down 17 people,” said Councilman Richard Frey. “We’re just getting deeper in the hole.”
Councilwoman Peggy Bellm agreed, stating that a city grocery tax would make no difference to residents who were already used to paying the 1% tax.
Conrad said the amount comes to about $10 per $1,000 of groceries purchased.
Mayor John Hemann pointed out that the grocery tax is also levied on non-residents who come into Highland to shop. He said he plans to speak with other mayors at upcoming conferences, but most he’s spoken to already plan to reinstate the tax locally.
“We still have to provide services for our citizens,” he said.
In a report prepared by the Illinois Municipal League, estimated losses from eliminating the grocery tax range widely from city to city. Among those estimates: Collinsville will lose $1.2-1.5 million; Glen Carbon $1 million; O’Fallon $1.2 million; Shiloh $14,098. The highest loss was estimated for Chicago, at $60-80 million, with significant reductions estimated for Rockford, Aurora, Bloomington, Schaumburg, Joliet, Normal, Naperville and Peoria.
The council has until October 2025 to decide.
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