Forbes - Worse than City Hall - Fighting an 'Instrumentality of the State'

March 31, 2015 08:47 PM
By: Adam Andrzejewski
The powerful Illinois Municipal League (IML) demands taxpayers pay more but hasn’t filed its own income tax return since 1979. With a membership comprised of 1,211 municipal mayors, managers and administrators, it is one of the most dominant organizations in Illinois.
On their website, the IML brags about helping establish the Illinois income tax and increasing sales and gas taxes.  They helped establish a policy that distributes back to local units of government a portion of the state gas, sales, and income tax. They even got a state law passed ensconcing themselves as a tax collector and re-distributor of the "foreign fire insurance fund" – a 2 percent tax on out-of-state fire insurance companies.
But, that’s not all. The IML competes against private enterprise with its very own Illinois Municipal League Risk Management Association insurance company. By having its own insurance company, IML is able to compete on a less-than-level playing field. The IML has great penetration into municipal government relationships and isn’t subject to the same reporting requirements as others in the commercial insurance marketplace.
IML lives in some very rarified air. According to new Executive Director Brad Cole, the IML auditors claim "instrumentality of the state" status.  Consider the following: since 1979, the IML has not filed an income tax return. For decades, their employees have been clouted into the state’s public pension plan. IML is not exactly "government." But, as an "instrumentality of the state," it’s also never on the ballot of any election and is therefore exempt from the basic standards of transparency and accountability taxpayers expect.
Furthermore, the IML doesn’t even comply with government regulations – of government.  The Illinois Comptroller requires a new government entity to register. A quick look up shows that the League has not registered there either.
IML is not a corporation or a non-profit so the Cincinnati office of the IRS has no record, and neither does the Illinois Attorney General Charitable Trust Bureau. Of course, the Illinois Secretary of State has no corporate, LLC, or partnership entity records for the IML. And, the Illinois Comptroller has no record of them as government.
Still, the IML – acting primarily as a powerful lobbyist – has consistently advocated for higher taxes and spending.
Currently, the IML is trying to crush legislation designed to stop the egregious practice of charging local businesses up to $1 million in water and sewer installation and tap fees (SB1815). Their lobbyists are fighting much needed legislation reforming the Open Meetings Act (HB248). Last month, when Gov. Bruce Rauner proposed a 50 percent reduction in the amount the state sends back to local municipalities from the state income tax – a small amount equal on average to just 3% of local budgets – the IML made sure the proposal was dead on arrival.
In a state begging for entrepreneurial business growth, the IML is able to kill legislation designed to curb the local government tax and spend culture. The private sector and local businesses bear the brunt of IML legislative lobbying victories.
Last year, legislation was introduced to bring transparency to the IML management of the "foreign fire insurance fund."  One Springfield journalist questioned whether IML administration of the fund was the "worst public policy in Illinois history."  Yet, the reform legislation went nowhere – thanks to the IML clout.  Internet speculation was that IML is making up to $1 million per year in administration fees through this policy. To this day, all of this is administered without basic transparency.
But, there’s a whole lot more. IML employees enjoy the government perks including the public taxpayer funded pension system. According to data at, in 2014, state taxpayers guaranteed public pensions for 8 retired IML employees, including former Executive Director Kenneth Alderson’s $200,832 annual annuity. Twenty-one current employees are eligible for this egregious taxpayer-funded largess.
Still, muscling into the public pension plan wasn’t enough. IML has a history of spiking end-of-career salaries. From 2005 – 2014, the annual compensation of Executive Director Larry Frang was spiked by 200 percent – from $130,812 to $390,423. Although taxpayers had absolutely no oversight of Frang’s salary and spikes, they are on the hook to fund and guarantee his lifetime pension.
So what is the IML?  In an on-the-record statement for this article, the IML auditors argued that they are an "instrumentality of the state." But, it may not be so simple.  In a recent 2015 Amicus Brief to the Illinois Supreme Court, the League described itself as, "a not-for-profìt, non-political association of l,l2l municipalities in the State of lllinois."
Here’s our conclusion: the Illinois Municipal League seems to be a lot of things.  More than anything else, however, it is above the law.
Adam Andrzejewski is the founder of and Chairman of American Transparency 501(c)3 non-profit organization.
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