Inauguration day: 5 pro-taxpayer reforms Pritzker should push in 2019
The Land of Lincoln has a new governor, but the state’s deep-seated problems remain. Here are five reforms that newly inaugurated Gov. J.B. Pritzker could pursue to begin setting the state on the right fiscal path.
With the inauguration of Gov. J.B. Pritzker on Jan. 14, outgoing Gov. Bruce Rauner will leave the keys to the governor’s mansion with another first-time officeholder.
But that isn’t all the state’s 43rd governor will inherit.
While the name on the office letterhead will be new, the scope of fiscal hurdles facing the state remains unchanged. Illinois’ growing unfunded pension liability inched upward to nearly $134 billion from $130 billion, the Commission on Government Forecasting and Accountability reported in November. And the state comptroller’s records show a backlog of unpaid bills standing at $7.5 billion. Despite two historic income tax hikes – one in 2011 and another in 2017 – the state’s fiscal condition has only worsened.
Illinois’ biggest budget problem is its people problem. In December, U.S. Census Bureau population data revealed that residents fleeing the state had caused Illinois to shrink for its fifth straight year. Illinois’ lackluster economy – due in large part to a punishing tax burden – is the primary driver of residents leaving for greener pastures. Paul Simon Public Policy Institute polling has shown repeatedly that high taxes are the No. 1 reason Illinoisans wish to leave the state.
Illinois’ newly inaugurated governor enters office faced with a choice: Take the necessary, albeit difficult, steps toward restoring the state’s finances, and creating path toward relief for taxpayers – or hike taxes and kick the can further down the road, saddling future Illinoisans with massive debts. Here are five reforms Pritzker could pursue to put the state on a path to recovery:
No. 1: Pension reform
Illinoisans shoulder among the highest property tax burdens in the nation. The main cause? Unsustainable growth in pension costs for government workers. Pension reform must be the highest priority for the Pritzker administration upon taking office.
The Illinois Supreme Court’s strict interpretation of the Illinois Constitution’s pension clause has driven the court to strike down even the most modest pension reforms – even as high pension costs crowd out core government services across the state.
A sensible constitutional amendment would protect benefits that have already been earned by government workers, while allowing for adjustments to the future growth in benefits that have not yet been earned – such as 3 percent compounding benefit increases throughout retirement.
No. 2: School district consolidation
Another reason for Illinoisans’ daunting property tax bills is the extraordinary number of local government bodies they’re supporting. For example, Illinois is home to nearly 860 school districts, the fifth-highest total in the nation. Meanwhile, those districts serve the fifth-lowest number of students per district, which suggests Illinois taxpayers are paying for an overabundance of administrators who have little to do with the classroom.
That comes at no small cost. Illinois ranks 8th in the nation in administrative spending as a percentage of education spending – meaning a substantial chunk of money meant to improve student outcomes never reaches the classroom, and goes to district-level boardrooms instead.
Consolidation of school districts, which involves trimming bloat at the administrative district level, should not be confused with the consolidation of individual schools – which is not often a desirable policy.
By consolidating school districts, overhead would drop, more resources would be freed up for the classroom and local leaders would be empowered to take immediate steps toward property tax relief.
No. 3: Local government consolidation
Beyond just school districts, Illinois is overrun with units of local government. At nearly 7,000 of them, Illinois is draped in more layers of government than any other state in the nation. These layers include townships, park districts, mosquito abatement districts and more.
Many of these government units overlap, and often wastefully perform identical services. In addition to excess taxpayer costs, too much government provides refuge for waste and abuse: The McHenry County state’s attorney opened criminal investigations into three separate townships in the county this year. Following one of the investigations, the state’s attorney described the “flawed” township form of government in a report as hotbeds of “incompetence, guile and impropriety.”
In an October interview with the Northwest Herald, then-candidate Pritzker referred to Illinois’ volume of government as “highly inefficient,” suggesting he’d support local consolidation efforts.
Last year, a bill seeking to make it easier for McHenry County taxpayers to dissolve their townships at the ballot box enjoyed overwhelming bipartisan support, passing unanimously in both chambers of the General Assembly. Unfortunately, due to what was reportedly a clerical error and Rauner’s amendatory veto, that bill is effectively dead.
Pritzker should work with lawmakers this year to revive the bipartisan push for local control over government consolidation – and expand those powers to taxpayers in all Illinois counties.
No. 4: Constitutional spending cap
State lawmakers gave Illinoisans cause for optimism in 2018 when the Illinois Policy Institute’s proposed constitutional spending cap found support on both sides of the aisle. On April 26, state Sens. Tom Cullerton, D-Villa Park, and Michael Connelly, R-Naperville, held a press conference endorsing a spending cap amendment to the Illinois Constitution.
A smart constitutional spending cap would limit the growth in state spending by tying it to the rate of growth in the state’s economy, allowing the state to rehabilitate its finances without the need for future tax hikes. Moreover, it would provide long-term certainty about the state’s tax climate, making Illinois a more desirable destination for families and businesses.
No. 5: True balanced budget amendment
Illinois holds the distinction of worst credit rating in the nation. It’s hardly a mystery why: The Prairie State has not passed a truly balanced budget since 2001, despite the state constitution’s requirement to do so. The state’s fiscal condition only worsened between 2015 and 2017, when for two years the state failed to pass a budget at all.
When the General Assembly passed its budget for fiscal year 2019, lawmakers declared a bipartisan victory. But that spending plan remains out of balance by more than $1 billion, and it does nothing to address the state’s severe, structural debts.
Springfield’s budgeting process is broken. One key reason for this is that the state’s balanced budget requirement is “prospective,” meaning revenues and expenditures need only match during the planning stage. If unforeseen midyear costs push the state overbudget, deficits simply carry over to the next fiscal year.
Pritzker should work with state lawmakers to change that by strengthening the state constitution’s balanced budget provision to require “end-of-year” balance, as opposed to prospective balance. End-of-year budgeting practices, which prevent deficits from carrying over, are used by nearly 40 U.S. states and would go far in keeping Springfield from spending more than it takes in.
Establishing a sound budgeting process would be a significant step toward restoring taxpayers’ confidence in their state.