Tax hikes fail to balance Illinois budget, but lawmakers raise own pay

Tax hikes fail to balance Illinois budget, but lawmakers raise own pay

Leaders claimed the budget was balanced and included no tax hikes, but neither is true. Illinois state lawmakers for the 21st time passed a deficit budget – one that includes $655 million in new taxes and a nearly $1,200 raise for themselves.

Illinois lawmakers on June 1 passed a $42.3 billion budget that leaders said was balanced and contained no tax hikes. They said those things, but that doesn’t make them true.

A closer examination shows at least a $482 million hole, which makes the 21st year in a row the state has failed to balance its budget. The budget also contains a $655 million tax hike. And it contains a nearly $1,200 raise for each lawmaker.

False claims are understandable, because most lawmakers had little clue what they were voting on. They passed nearly 4,000 pages of budget and spending legislation just hours after the bills were introduced.

Which is part of another false claim: that it is a new day in Springfield. Last-minute budgets containing big deficits are exactly the design perfected by former Illinois House Speaker Mike Madigan.

What is missing from the budget is significant fiscal reforms. Without them, lawmakers cannot stabilize the nation’s worst pension crisis, as high as $317 billion by one estimate, or reduce its $226 billion net debt burden.

Madigan in January was removed from the speaker’s post and then resigned from the Illinois House after he became synonymous with corruption and hurt Democrats at the polls. Still, his practice of holding spending bills until hours before the legislature was to adjourn survived his departure, with the 704-page appropriations bill, 879-page budget implementation bill and 2,378-page capital bill dropping with no time for real study or debate or more than vague awareness of what was inside them.

The budget included four of the nine tax increases requested by Gov. J.B. Pritzker, projected to bring in $655 million. That is 70% of the $932 million in new tax revenue Pritzker wanted to raise.

It also increases lawmaker base pay by nearly $1,200 to $70,645. Illinois lawmakers were already the fifth-highest paid in the nation, and the highest paid among part-time legislators – before the pay hike.

The fiscal forecasting arm of the General Assembly most recently estimated revenues for fiscal year 2022 would be $41.188 billion, while Pritzker’s office projected $41.055 billion. Combined with the $655 million in new revenue from tax increases, that would leave a deficit of between $482 million and $615 million.

In a press release, Pritzker falsely claimed the budget was balanced and said he was living up to his campaign promise to close the state’s structural deficit. “For the third straight year, I’ll sign into law another balanced budget for Illinois that demonstrates fiscal responsibility works with a progressive vision of governance,” Pritzker said. In fact, the two complete fiscal years for which Pritzker was governor each ended with a $5.7 billion deficit.

Pritzker is far from the first politician to make wrong claims about Illinois finances. Lawmakers and governors have claimed to balance the budget virtually every year since fiscal year 2001, the last time official state reporting shows the budget actually achieved balance at the end of the year. A broken budget process and toothless balanced budget requirement allow for lawmakers to use gimmicks and tricks to effectively circumvent the requirement in the state constitution that spending not exceed available revenues.

Illinois is one of 15 states lacking a requirement to balance the budget at the end of the year and prohibiting deficits from being carried year to year.

The $482 million to $615 million deficit cannot be blamed on COVID-19-related revenue shortfalls. Compared to projections in November 2020, estimated revenues from Pritzker’s office are now $3.94 billion higher for fiscal year 2021 and $2.55 billion higher for fiscal year 2022. Unprecedented levels of federal spending served to bolster worker and business incomes during the pandemic, preserving state tax collections.

At the same time, Congress provided $10.8 billion in state and local government fiscal support along with more than $14 billion under the American Rescue Plan recently signed by President Joe Biden.

But revenue growth cannot keep up with the state’s ever-increasing spending.

Pensions continue to be the largest and among the fastest growing items in the state budget, crowding out Illinois’ ability to invest in core government services such as public safety and anti-poverty programs. State spending on pensions has mushroomed over 533% while state spending on social services has dropped by nearly 15%.

Total general funds pension spending in the budget is equal to $10.5 billion or more than 25% of revenue. That includes more than $9.4 billion in direct general revenue contributions, $749.8 million of pension obligation bond debt service, and a $277.5 million subsidy to the Chicago Teachers’ Pension Fund. A report from the legislature’s fiscal arm estimates an additional $1.1 billion in “other state funds” will go to pensions, bringing the total taxpayer cost to $11.6 billion.

Additional spending increases include:

  • $350 million more for the state’s K-12 Evidence Based Funding formula, which Pritzker had left out of his proposed budget in February
  • $28 million more for Monetary Award Program grants, which help low-income students in Illinois attend college
  • $27 million more for the General Assembly, including more than $200,000 for lawmaker raises, more than doubling office allowances for all lawmakers and increasing by 50% spending on leadership and party staff
  • $2 million more for the governor’s office

Higher education funding is mostly held flat, apart from a new $8 million program at the University of Illinois to research carbon capture technology.

One silver lining of the budget is lawmakers rejected Pritzker’s request to gut a scholarship program that helps disadvantaged students enhance their education opportunities. Instead of reducing the program, the budget extends its sunset for one year and expands scholarship eligibility to include career and technical education.

Still, budgets like this one, which Pritzker is expected to sign, will merely continue Illinois’ fiscal decline. If the state continues to grow spending at its average rate during the past five years, the backlog of unpaid bills will reach $19 billionwithin three years. That will break the $16.7 billion record set during the two-year budget impasse, according to a March forecast from the General Assembly’s fiscal arm.

Ending Illinois’ downward spiral requires significant fiscal reforms, beginning with a constitutional amendment to end the pension crisis that is dragging the state down. It certainly doesn’t end by claiming there’s no deficit, denying there are tax hikes and getting a raise for avoiding tough choices.

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