The Illinois Senate’s proposed budget deal is full of tax hikes because it lacks the necessary spending reforms needed to right Illinois’ fiscal ship.
The Illinois Senate’s “grand bargain” budget plan is no more than a taxpayer bailout of Springfield’s failures.
Politicians have made a mess of Illinois for decades, and rather than pass the spending reforms that would fix the state’s problems, those politicians want Illinoisans to pay up.
Tax hikes on struggling taxpayers and businesses won’t solve the state’s crises. Illinoisans know that.
A recent poll by Anzalone Liszt Grove Research says 66 percent of Illinoisans oppose income tax increases. Nearly 50 percent strongly oppose such tax hikes.
That’s not only because Illinoisans can’t afford another tax hike; it’s also because taxpayers know tax hikes won’t work. Illinois took in an additional $31 billion over the course of the 2011 income tax hike. Politicians claimed this money would be used to pay down the state’s pension debt and unpaid bills and solve the state’s fiscal crisis. In 2011, Illinois’ unpaid bills totaled $8.5 billion – today, the state has more than $12 billion in unpaid bills. In 2011, Illinois’ unfunded pension debt was $82.9 billion. Today, it’s more than $130 billion.
A “bargain” with more taxes, borrowing and spending – but little in the way of reform – is no bargain for Illinoisans.
Here’s why the Senate’s proposal, in its latest form, is a failure:
- More tax hikes. The core of the senators’ deal raises taxes on Illinoisans by nearly $7 billion. The plan would hike personal and corporate income taxes by 33 percent and expand sales taxes to include services, food and drugs. An expansion of the sales tax to services exposes Illinoisans to a slew of new taxes, broadening politicians’ ability to hit up taxpayers yet again in the near future.
- Another tax: More casinos. The income tax hike is not the only revenue source senators push in their plan. They also include six new casinos across the state, including one in Chicago, and slot machines at race tracks. Relying on gambling revenue is no way to fix Illinois.
- Another bailout: CPS pensions. The senators don’t just bail out state politicians. The bargain also calls for the state to pay more than $200 million annually to Chicago Public Schools, or CPS, teachers’ pensions going forward. The senators’ rationale: The state pays the pension costs of every other school district in Illinois.But covering the CPS pension payment ignores the other school funding deals – such as the block grant – that only CPS gets.The Senate proposal also promotes the wrong policy. Rather than pay CPS’ pensions, the state should stop paying for the pensions of Illinois’ school districts. Under current law, districts dole out higher pay, end-of-career salary hikes and perks that spike pensions, knowing the state pays the pension costs.Districts will only moderate the benefits they offer when they are required to bear their own pension costs.
- More borrowing, which means more future tax hikes. Politicians also plan to borrow $7 billion to pay down the state’s unpaid bills. But with no major accompanying spending reforms, the unpaid bills will only pile up again. The Senate’s plan simply clears the state’s credit card so politicians can begin spending again.
- Meaningless pension reform. Illinois senators also propose retirement changes that do little to end the $130 billion pension crisis. Their main proposal, the Cullerton plan, will likely be thrown out by the Illinois Supreme Court. That plan offers two diminished benefit options to current workers – something the court has basically struck down already.The Senate’s smaller pension changes give Illinoisans only the slightest taste of real reform – ending pensions for new legislators and enacting a tiny self-managed plan – when the Senate should be doing far more to end the crisis.
- Prioritizing Wall Street over Illinoisans. A key part of the grand bargain creates a new legal structure that ensures bondholders – lenders to Illinois local governments – are first in line in times of financial distress. The Senate’s plan puts Wall Street ahead of essential government services.
- A toothless property tax ”freeze.” The plan proposes a two-year property tax freeze, but excludes some of the biggest drivers of rising property taxes – debt service, pension payments and public safety – from the freeze. CPS pensions and public safety pensions are also excluded from Chicago’s freeze, meaning Chicago homeowners could still see property tax hikes.The relief to taxpayers will be limited, especially as localities will simply hike taxes again when the freeze expires. And the Senate’s plan is even more insulting than that: The property tax freeze lasts only for two years, but the proposed income tax increase is permanent.
- Limited, nonstructural reforms. There are small reforms in the overall package – limited changes to workers’ compensation, some procurement reforms, small changes to state mandates and local government consolidation reforms – but no reforms that slow the growth in government spending.
- Not a grand bargain for taxpayers. The Senate’s plan to hit Illinois with another round of record tax increases – with virtually no reforms – is extreme. It’s nothing more than a bailout of politicians’ bad decisions.The plan’s tax hikes will only drive more people away. A poll conducted by the Paul Simon Public Policy Institute found that 47 percent of Illinoisans say they want out of Illinois, and 20 percent reported they are likely to leave in the next year. The biggest reason they cited for leaving? Taxes.
- There’s a better way. The Illinois Policy Institute has already provided the road map for a balanced budget that provides the reforms needed to turn around the state. Illinoisans need a budget plan that grows the tax base – one that keeps its residents and businesses here and attracts new ventures and families. That’s what the Institute’s Budget Solutions 2018 offers: a balanced budget based on structural spending reforms, not tax hikes.