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Illinois Issues
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Ends and Means: Quinn has the Courage to Tell Taxpayers the Truth

Charles N. Wheeler III
WUIS/Illinois Issues

Gov. Pat Quinn is no Rod Blagojevich. Most obviously, he’s not just days away from being indicted by federal prosecutors on political corruption charges.

More importantly for the state’s fiscal well-being, Quinn has the courage to remind Illinoisans of a basic truth his disgraced predecessor preferred to ignore: If you want government services, you have to be willing to pay for them.

The governor’s proposed 50 percent hike in state income tax rates — to 4.5 percent for individuals and to 7.2 percent for corporate taxpayers — forms the centerpiece of his plan to close an estimated $11.6 billion budget deficit the state faces through June 2010. A portion of the new income tax revenues, bolstered by higher vehicle fees and fewer business tax breaks, would help bankroll a $26 billion public works program designed to provide some 340,000 jobs in the coming months.

To lessen the sting of the first state income tax increase in two decades, Quinn called for tripling the personal exemption to $6,000, which he said would result in lower taxes for almost half of the state’s population. His aides calculated the break-even point at about $60,000 for a family of four. Earn less and you pay less in state income taxes.

Quinn also proposed a back-to-school sales tax holiday, a 10-day period in August when the 5 percent state levy would not be added to the purchase price of clothing, footwear and school supplies.

Such sweeteners won’t appease the anti-tax crowd, the critics who argue that all that’s needed is eliminating legislative pay raises or other wasteful spending, to note a common refrain.

Such folks appear woefully ignorant of how the state spends its money. Or maybe they just don't comprehend exactly how much $11.6 billion is. Suppose legislative pay raises were rolled back, or even more dramatically, let’s cut legislative salaries altogether and make all 177 lawmakers work for free. With that savings, we’d have the deficit erased sometime in FY 2773. Do away with the entire General Assembly, in fact, and the red ink wouldn't be gone until FY 2156.

The reason such apparent no-brainer solutions won’t work is that almost 70 percent of the dollars spent from the state’s main checkbook account goes for health care for the poor, the elderly and the disabled, or for education, mainly grants to local public school districts. Both are priorities that enjoy broad popular support, and Quinn declared them off limits for cuts. The rest of the general funds budget, the allocation for virtually everything else state government does, is less than $9 billion.

Yet Quinn realizes that belt-tightening has to be part of the solution, if for no other reason than to show that he tried. So his budget plan includes a 2 percent across-the-board cut in other grant programs, saving about $80 million. In addition, he wants to dock state workers four days’ salary and require them to pay more for health care and retirement, worth slightly less than $240 million. Other, unspecified “efficiencies” would save about $400 million, to go along with $500 million already trimmed from the current budget.

All told, such economies would save about $1.5 billion over the next 15 months, just about the amount that the state is behind in paying health care providers right now, a problem that Quinn pledges to remedy. And a good chunk of the savings might never be seen. The governor can’t impose unpaid furloughs or higher health care and pension costs on state workers without their consent because of existing union contracts.

Union leaders also are unhappy with Quinn’s proposal to cut back retirement benefits for new employees, thus creating a two-tiered pension system that would save the state an estimated $162 billion in pension costs by 2045.

The pension reform idea provides some cover for Quinn to justify his plan to slash state payments into the retirement systems by $2.8 billion this year and next, a move that evokes a wisp of Blago-style smoke-and-mirrors.

Lawmakers could well go along, as they did with Blagojevich to the tune of $2.3 billion a couple of years ago. Not funding pensions adequately always has been easier than raising taxes or cutting current program funding.

Similarly, Quinn wants to “restructure” the state’s payment schedule for past borrowing, a move that would reduce by an estimated $500 million the principal and interest the state otherwise would have to pay in 2010. But that would push payments much higher within a few years later. Before the schedule can be reworked, though, lawmakers would have to remove several safeguards written into the law after Blagojevich engineered a bond sale in 2003 with no principal payment until 2007.

The governor also trotted out a handful of loopholes he wants to close, most of them the same tax breaks that legislators refused to eliminate for Blagojevich.

Factor in almost $4 billion in federal stimulus money, and the numbers in Quinn’s plan come within $334 million of closing the gap, according to budget documents. That bottom line might be overly optimistic, of course. About the only sure element of the governor’s plan is the federal money, while higher taxes, pension reform and pay cuts for state employees all are rather uncertain, dependent on legislative approval or union agreement.

One could argue that Quinn’s plan embodies too much wishful thinking, or that despite a 50 percent income tax hike, it does nothing to remedy the stark inequities in school funding produced by overreliance on local property taxes.

Whatever its flaws, the governor’s budget proposal also has the great virtue of being an honest attempt to address the state’s most pressing problem, despite the obvious political risk. Let’s hope lawmakers debate its merits with the same spirit of statesmanship. 

 

The reason such apparent no-brainer solutions won’t work is that almost 70 percent of the dollars spent from the state’s main checkbook account goes for health care for the poor, elderly and the disabled, or for education, mainly grants to local public school districts.

The governor also trotted out a handful of loopholes he wants to close, most of them the same tax breaks that legislators refused to eliminate for Blagojevich.

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois at Springfield. 

Illinois Issues, April 2009

The former director of the Public Affairs Reporting (PAR) graduate program is Professor Charles N. Wheeler III, a veteran newsman who came to the University of Illinois at Springfield following a 24-year career at the Chicago Sun-Times.
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