‘Grand bargain’ redux: Brady plan the next in a long list of failed ‘compromises’ for Illinoisans

Ted Dabrowski

Former Vice President of Policy

Ted Dabrowski

John Klingner

Policy Analyst

John Klingner
May 12, 2017

‘Grand bargain’ redux: Brady plan the next in a long list of failed ‘compromises’ for Illinoisans

Only in Illinois could a budget deal that hits struggling Illinoisans with billions in new taxes be called a “grand bargain.”

State Sen. Bill Brady, R-Bloomington, has proposed what he hopes may be the big “compromise” to end Illinois’ budget impasse.

But Illinoisans should realize what’s really going on.

Brady is offering some new promises to cut spending, but only so he can mask his request for billions in taxes and fees. How much is an open question.

Brady claims he wants $5 billion in new revenues, but he’s also said his proposal acts as a supplement to the Senate’s proposed “grand bargain,” which calls for $7 billion in new taxes and fees.

For months politicians have been pushing a narrative that a multibillion-dollar tax hike alone is enough to fix Illinois’ budget gap. But after failing to get a tax-hike-only plan passed, they’ve moved to the “compromise” position. By offering some spending cuts, they’re hoping their deal will appeal to the political class in Springfield.

For politicians, it’s the perfect compromise. Lawmakers get what they need for their campaign stump speeches, the status quo is preserved, and special interest groups are appeased. But struggling taxpayers are left behind, and will get hit yet again as they try to get by in a dysfunctional Illinois.

Illinoisans don’t need, nor can they afford, that kind of compromise. Every one of Illinois politicians’ past compromises – from former Gov. Jim Edgar’s pension ramp to former Gov. Rod Blagojevich’s pension bonds to former Gov. Pat Quinn’s temporary tax hike – has something in common: They all avoided fixing Illinois’ structural spending problems by sending the bill to taxpayers instead.

It’s why Illinois has a perpetual financial crisis and its credit rating stands at the precipice of junk.

Thirty years of “compromise” have brought the state to the brink of collapse.

The latest “grand bargain” only offers more of the same. 

Illinoisans need a budget that enacts commonsense spending and economic reforms without harmful and counterproductive tax hikes.

Fortunately for Illinoisans, state Sens. Kyle McCarter, R-Lebanon, and Dan McConchie, R-Hawthorn Woods, have introduced such a plan. The senators’ proposal does what other politicians say is impossible: It balances the budget without resorting to tax hikes.

And state Sen. Dale Righter, R-Mattoon, has introduced a bill that would begin an end to the pension crisis. His plan moves all new state workers into a 401(k)-style plan. It’s based on the successful State Universities Retirement System’s own 401(k)-style plan, which has been around almost 20 years and has over 20,000 participants.

Brady’s plan is built on tax hikes – but more revenue is never enough

In March, Brady said his proposal acts as a supplement to the original grand bargain’s revenue proposals.

That plan calls for nearly $7 billion in tax hikes and fees, much of which is contained in Senate Bill 9, the core tax hike bill. This is the proposal that would slap a new tax on things like Netflix, lawn services, laundry services and more. The details of the grand bargain revenues are:

  • $5.4 billion of income tax hikes (SB 9).
  • Approximately $300 million through an expansion of the state’s sales tax to certain services (SB 9).
  • Casino expansion fees, which could bring up to $1 billion in revenues (Senate Bill 7). (Brady has said he’s open to including casino expansion fees in his proposal.)

Brady also may rely on $200 million in revenues from the sale of the Thompson Center.

Filling Springfield coffers with billions in cash means lawmakers will be able to postpone the reforms Illinois needs.

For evidence, look no farther than the 2011-2014 temporary income tax hike. New tax dollars totaling $32 billion merely relieved Illinois lawmakers from the pressure to enact needed reforms.

Politicians simply spent the funds, leaving Illinois on a budgetary cliff when the tax hike expired.

Brady’s proposed cuts don’t add up to $5 billion in savings

Brady claims his own proposal “includes more than $5 billion in general revenue fund spending cuts, adjustments and cost savings, including 5 percent across-the-board cuts for most of state government outside elementary and secondary education.”

But not all of that can be found in the seven bills he’s filed, because his plan also relies on other proposals in the grand bargain, including pension reform.

An Illinois Policy Institute review of the senator’s bills and other parts of the grand bargain communicated in Brady’s spending proposal found only $3.8 billion in savings, at best. And even then, some of those savings are unlikely or unreliable over the long term.

  • The grand bargain reportedly has $1.3 billion in pension savings, relying largely on the consideration plan proposed by Senate President John Cullerton, D-Chicago, and a new hybrid retirement plan for new employees. Not only has no fiscal analysis of this hybrid pension plan been made public, but it is also likely that any plan based on the Cullerton consideration model will be found unconstitutional. A crucial defect in the plan is that it perpetuates pensions, despite the damage pensions have done to the wallets of taxpayers, the retirement security of state workers, and the programs that assist Illinois’ most vulnerable. Keeping pensions alive will prevent Illinois from ever having fully stabilized finances, because pension costs are inherently unpredictable and unmanageable.
  • There is also reportedly $800 million in across-the-board department cost reductions and $500 million in procurement reform. Much of that is simply spending cuts, which aren’t equal to reform. The grand bargain cuts the level of spending, but it doesn’t slow spending growth – which is what really matters.
  • The plan also reportedly includes $435 million in reduced health insurance costs, approximately $250 million in interest cost savings from refinancing expensive unpaid bills with lower-cost bonds, $260 million in cuts to higher education, and a $255 million reduction in grants to local governments.

An additional issue is the grand bargain’s lack of a comprehensive property tax reform plan. The proposed property tax freeze does little to reduce taxpayers’ burden because it is not accompanied by permanent reforms, nor does it mandate relief at the local level. It doesn’t address what’s been driving up property taxes in the first place. Without reforms, a property tax freeze alone will simply cause other local taxes and fees to spawn, maintaining the heavy burden on local taxpayers.

Any property tax freeze must be accompanied by reforms that cut the tangled web of state-local funding, Illinois’ excessive number of local governments, and burdensome state mandates. Necessary reforms include: collective bargaining reforms, ending prevailing wage mandates, and ending various state subsidies that prop up local spending. 

Illinois needs a plan with real reforms, no tax hikes

Illinoisans are fed up with “tax-hike, no-reform” budget proposals. A recent poll conducted by Fabrizio, Lee & Associates and commissioned by the Illinois Policy Institute found nearly 80 percent of Illinoisans agree that “Illinois state lawmakers should pass major structural reforms before passing any tax increase.”

More tax hikes will only drive more residents to flee the state and punish those who can’t leave. And hikes will only perpetuate the state’s structural problems and deflate the pressure to enact real change.

Illinois can no longer put off real spending reforms. Politicians have to pass a balanced budget that actually solves the state’s structural problems without tax hikes.

The Illinois Policy Institute has provided a reform road map that balances the budget without tax hikes. The plan provides tax relief to struggling homeowners through a comprehensive property tax reform package and makes changes to curb bloated administrative expenses in higher education and the state’s excessive number of local government entities.

Most importantly, it implements a 401(k)-style retirement plan for government workers going forward, a solution that’s been under lawmakers’ noses for nearly 20 years.

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