5 things Illinoisans need to know about House Democrats’ budget

Ted Dabrowski

Vice President of Policy

Ted Dabrowski

John Klingner

Policy Analyst

John Klingner
June 29, 2017

5 things Illinoisans need to know about House Democrats’ budget

Much like other plans in the General Assembly before it, the House Democrats’ budget plan does nothing to structurally reform state government and bring down costs, but instead increases the burden on Illinois taxpayers.

On June 28, Democrats in the Illinois House of Representatives officially presented a 2018 budget plan for the first time.

Like most of the plans lawmakers in Springfield have introduced, the House Democrats’ plan balances the budget by hitting struggling Illinoisans with a $5 billion tax hike because it fails to enact any of the structural spending reforms Illinois needs.

An analysis of the House Democrats’ funding proposal found the following:

  1. The proposed budget spends $36.5 billion in fiscal year 2018. This is over $5 billion more than the state is expected to collect in revenues.
  1. The plan hikes taxes by over $5 billion. Although this latest plan doesn’t yet have its own revenue component, the House Democrats expect to “live within the confines” of the $5 billion-plus in revenues Senate Bill 9 created. That bill:
  • Hikes personal and corporate income taxes by $5 billion. The personal income tax rate increases to 4.95 percent from the current 3.75 percent rate. The corporate income tax rate rises to 7 percent from the current 5.25 percent rate.
  • Expands the sales tax to laundry and dry-cleaning services, as well as storage and other services to bring in an estimated $300 million.
  • Raises an estimated $54 million in new cable and satellite TV taxes
  • Closes corporate income tax loopholes worth an estimated $125 million.
  1. It pays for an ineffective education funding program. The House Democrats’ plan increases spending on K-12 education by $743 million compared to last year. $350 million of those new dollars will go to fund the first year of a proposed “evidence-based” funding program. At the same time, the proposal cuts over $118 million in funding from other parts of education, including funding for free breakfast/lunch programs, Illinois State Board of Education operations and regular transportation program reimbursements to districts. The “evidence-based” model will send Illinois down the path of yet another tax hike. The full program calls for the state to spend an additional $3.5 billion to $6 billion a year on education. Not only is that money the state does not have, but it will be spent on a program that doesn’t work. Evidence-based funding has failed to improve student achievement wherever it’s been tried, whether in Wyoming, Arkansas, North Dakota or Ohio.
  1. It funds higher education without demanding accountability. The House Democrats’ plan funds higher education operations at a rate of 95 percent of the state’s FY 2015 budget. Other critical programs such as MAP grants for low income students are 100 percent funded. However, that 2018 funding comes with no reforms to ensure those state dollars are spent effectively. Much of the financial crisis in higher education is self-inflicted. Universities have raised student tuitions and squandered state funding on larger administrations and more expensive administrators, according to a 2015 report by the Senate Democratic Caucus. The House budget restores funding to higher education without requiring a single reform of universities and their administrative costs.
  1. It cuts spending without reforming costs. The House Democrats’ plan contains a little less than $2.4 billion in spending reductions. A vast majority of those reductions are due to straight cuts to department operations, fund transfers and other gimmicks – not the structural reforms needed to actually reduce the growth in state spending.
  • Pension funding changes. The House Democrats’ plan includes over $800 million in pension cost cuts by smoothing changes in actuarial assumptions over time and shifting the cost of high-salary employees’ pensions to local governments, among other items. These small reforms will help in the short term but do nothing to actually solve the state’s pension crisis. Only moving away from pensions and giving new workers 401(k)-style plans can do that.
  • Transfers transportation and local subsidy costs. The plan shifts $135 million of transportation project costs and $282.5 million in general and transportation subsidies to local governments out the state’s general fund. That simply shifts those costs to other funds in Illinois’ overall budget without reforming them.
  • Makes general cuts to state operations but includes little restructuring. The House Democrats’ budget is a mixed bag for government departments and programs. Many departments’ have their funding reduced by 5 or 9 percent off their FY 2015 funding levels. Other programs and departments, such as the state EPA and Medicaid are fully funded at their proposed 2018 levels.

In total, the plan cuts department and programs by about $1 billion. But those cuts will do little to actually reform the cost of government. Real, structural reforms are needed to programs like Medicaid to ensure government costs grow slower. The Democrats’ plan has none.

Illinois is broke. Illinoisans are tapped out. The economy is broken. Yet the Illinois House Democrats’ only solution to the current crisis is a multibillion-dollar tax hike on Illinoisans.

Like all the previous budget plans before it, the House Democrats’ plan imposes $5 billion worth of higher taxes on struggling Illinoisans because it doesn’t contain any of the structural reforms Illinois needs to make government more affordable.

Instead of more taxes and more spending, state lawmakers need to pass a balanced budget that actually solves the state’s structural problems without resorting to tax hikes.

The Illinois Policy Institute has provided a reform plan – Budget Solutions 2018 – that does just that.

The plan provides tax relief through a comprehensive property tax reform package and makes state government affordable through a move to 401(k)-style plans, and through reductions in bloated administrative expenses throughout state government.

Those are the structural reforms Illinoisans need, not cuts and tax hikes.

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