Fact Finder: Why HJRCA 61 Isn’’t Right for Illinois

Controlling the future growth of government spending is key to solving Illinois’s budget crisis. Done properly, tax and expenditure limits are a good way to ensure that government outlays do not grow faster than the public’s ability to pay.

Download the full report here.

Controlling the future growth of government spending is key to solving Illinois?s budget crisis. Done properly, tax and expenditure limits are a good way to ensure that government outlays do not grow faster than the public?s ability to pay.

All spending limits are not created equal, however. A closer look at HJRCA 61 shows how the measure, far from being a true spending limit, could act as a ?blank check? for runaway government spending.

Graphic 1 shows the difference in spending levels between HJRCA 61 and a better-crafted spending limit. Both are based on a per capita personal income growth spending factor, but the strengthened spending limit differs from HJRCA 61 in two key ways: 1) the spending growth limit takes affect in FY 2011, and 2) the pension payment and debt service are included within the spending cap.

*Spending limit is tied to 5-year average annual change in per capita personal income and starts in FY2014. Pension payment and debt service have been added to general spending baseline as HJCRA 61 excludes them from spending limit; sum of operational spending, pension payment, and debt service indicated by red line.
**Spending limit is tied to 5-year average annual change in per capita personal income and starts in FY2011. The blue line is inclusive of pension payments and debt service.

Over the 2011 to 2024 timeframe, HJRCA 61 permits $132 billion more in spending than the strengthened spending limit ($632 billion vs. $500 billion). This is largely due to the fact that the additional revenue from a 66 percent income tax increase would be factored into the spending baseline before the limit goes into place. Should the governor decide to utilize the ?limit busting? emergency spending provision in HJRCA 61, the potential for more spending is even greater. Under HJRCA 61, it is unlikely that funds would be available to fill a budget stabilization fund or provide taxpayer relief. This is especially true if the state adds to its debt service costs by passing billions in new borrowing.

Keeping major liabilities (like the pension payment) within the spending limit, while preventing the baseline spending year from being artificially inflated, would help ensure ?excess? revenues above the limit are available to help pay down debt, fill a budget stabilization fund, and then be returned to taxpayers. These are prerequisites for an effective spending growth control measure.

Download the full report here.

Fact Finder: Why HJRCA 61 Isn?t Right for Illinois