Think tank introduces plan to stave off tax hikes by limiting growth in government spending to economic growth
The Institute’s responsible spending cap would limit the growth of state spending to the average growth of Illinois’ gross domestic product per capita, or in short, the growth rate of the state’s economy, over the past 10 years. For example, if enacted in 2019, the cap would limit state spending growth for fiscal year 2020 to 2.4 percent.
Constitutional amendments that would implement the Institute’s spending cap are being filed in both the Illinois House and Senate with bipartisan support.
Why Illinois needs a spending cap
In per capita terms, Illinois’ state spending grew by an average of 3.9 percent per year over the past decade, which was 25 percent faster than personal income growth, according to data from the Bureau of Economic Analysis and the U.S. Census Bureau. In some areas, such as Rock Island County, per capita state spending growth outpaced per capita personal income growth by as much as 70 percent.
Quote from Chief Economist Orphe Divounguy
“The spending cap is all about smart growth,” said Orphe Divounguy, chief economist at the Illinois Policy Institute. “By tying growth in government spending to growth in Illinois’ economy, Illinoisans can rest assured they’re getting a state government they can afford. If the Illinois General Assembly could provide a basic level of certainty about the long-term growth of state government, and thus ward off future tax hikes, Illinois could once again become an attractive destination for families and businesses.
“It’s time to change the culture in Springfield. Lawmakers must start budgeting just like families across Illinois: By living within their means.”
A spending cap is the first step in solving Illinois’ fiscal crisis. More spending reforms are needed to address the state’s budget deficits. The Illinois Policy Institute’s spending cap proposal is part of Budget Solutions 2019, a plan to balance the state’s budget without tax hikes or borrowing that also puts the state on a path to repealing the 2017 income tax hike.
For more information on the Institute’s spending cap plan, visit http://illin.is/spendingcap.