Editorial: Illinois’ spending plan is divorced from its fiscal reality

The state has enormous debts, and state leaders must pay it down or legally restructure obligations. Until they do, the painful reality is we can’t afford new spending.

Fact: Illinois is sitting on $140 billion in pension debt, and that’s the conservative estimate. Despite spending $11.6 billion on pensions in this year’s budget, we are failing to keep the systems afloat.

Fact: Illinois just passed a $53.1 billion budget, the most money the state has ever spent, up from $38.5 billion just five years ago. And only $10.5 billion of that money is going toward paying down its pension debt – an additional $1.1 billion in contributions to the state’s pension funds will come from funds outside of the General Revenue Fund – which is still billions of dollars less than what’s needed to keep the state-run pension systems solvent.

How can these two things be true? How can we be spending more money than ever and still our unpaid bills grow? Our state budget is nearly $15 billion more expensive than it was when the governor took office.

The state has enormous debts, and state leaders must pay them down or legally restructure our obligations. In the meantime, we can’t afford new spending on other things. That’s just the painful reality.

But instead of facing the truth, Illinois pols decide what to spend and then ask: How do we get the money?

That’s the big problem, but there are other problems with this budget. For example: The grocery tax. A provision within this budget package allows home rule units of local government to implement their own 1% tax on groceries. Non-home rule units of local government will now be allowed to raise their local sales tax rate by 1%.

Both changes are permitted without a referendum for voters. Meaning the state’s decision to unilaterally end its state-mandated 1% grocery tax – the revenues from which flowed to local governments – was a farce. Perhaps it will temporarily provide relief because the statewide tax won’t be eliminated until Jan. 1, 2026. But that’s more than enough time for locals to get their own tax in place.

Now, it’s very likely the people who collected and spent that revenue in the first place will simply reinstate the grocery tax or raise local sales taxes. If there’s going to be a grocery tax, residents should get a say and the people who collect it should be the ones accountable for it. While Illinoisans were told the governor felt their pain and wanted to ease the burden in the checkout aisle, now it’s apparent the state just wanted to notch a PR win.

One of the other major pain points in this budget is the cap on the retailer’s discount. What’s that, you might ask? It’s what the state pays businesses for collecting sales tax for the government. This budget reduces that payment, from 1.75% of the sales taxes to a flat $1,000 a month. My colleague Bryce Hill wrote:

“The tax hike is expected to yield an additional $186 million for state and local governments – $101 million for the state, $85 million for local governments. Illinois levies the highest sales taxes in the Midwest at a combined state and average local sales tax rate of 8.86%, the seventh highest in the nation. Capping the retailer’s discount will make the state’s sales tax system even more detrimental to businesses.”

The Illinois Chamber of Commerce opposed this change, describing it as “a stealth tax increase on our retail sector, which is managing increased operating expenses because of rising labor and raw materials forcing them to operate on already razor-thin margins.”

This budget ignores the need for reform because it’s easier to put off painful corrections, especially in an election year. But, just like a credit card bill, someone always has to pay. How much the tab hurts depends on how long you let the late fees accumulate.

While politicians would rather keep on spending with abandon, reality finds a way of setting in. It’d be much better to face it head-on than to wait until the delinquent bills get to collections.