Taxpayers, reformers at a structural disadvantage in Illinois budgeting

Taxpayers, reformers at a structural disadvantage in Illinois budgeting

Yes, the state has a budget. But how that budget came to be reveals the reasons our state continues to spend with abandon, tax too much and fail in fostering an economy where its people can prosper.

Can you hear it?

That’s the collective sigh of relief, still echoing from the Capitol. There will be no impasse in Illinois this year. And most observers who had to bear witness to two long years of battle during the previous budget fight are now applauding “compromise” in Springfield – we have a budget.

But compromise is a funny word to describe the results of a game with a stacked deck.

The minority party, as well as any lawmaker who cares about solid budgeting basics and long-term stability, is dealt a nearly unwinnable hand when it comes to state spending.

Yes, the state has a budget. But how that budget came to be reveals the reasons our state continues to spend with abandon, tax too much and fail in fostering an economy where its people can prosper.

When families sit around the kitchen table to plan their monthly budget, they have to know some basic information: How much money can we afford to spend? What bills need to be paid? How much can we spend on things we want, like cable and dining out? How much debt can we pay off?

The process described above is how any budgeting process should work, in principle. Understand how much you have to spend, cover what you need, spend the leftovers on things you want – or save it.

So at the proverbial kitchen table down in Springfield, what could the state – meaning taxpayers – afford in its fiscal year 2019 budget?

The Illinois Policy Institute ran the numbers this spring: about $36.9 billion.

That number didn’t fall out of a hat. It’s based on tying the growth in Springfield’s spending to long-run state economic growth. Illinois’ fiscal year 2018 budget called for $36 billion in spending, according to the Commission on Government Forecasting and Accountability, or COGFA. For the most recent 10-year period, Illinois’ economy grew at an average of 2.4 percent each year.

Applying that 2.4 percent growth rate means the fiscal year 2019 budget would be able to increase by $865 million, for roughly $36.9 billion in total spending next year.

This was our proposal.

Gov. Bruce Rauner asked to spend about $37.6 billion in his proposed budget, which he released all the way back in February. For context, COGFA projects the state will bring in $37.8 billion in the upcoming fiscal year. While still above our proposed spending level, Rauner’s budget was a material improvement over what ended up landing on his desk.

So what did Illinois get?

The Democrat-controlled legislature rushed through a 1,245-page budget bill with less than two days left in session. It spends $38.5 billion. It is unbalanced by anywhere between $635 million and $1.5 billion, depending on assumptions. It spends every dime of the state’s record income tax increase and then some, without paying down any debt.

House Speaker Mike Madigan and Co. orchestrated an unwinnable game.

Imagine the choice fiscally responsible lawmakers had to make: Make any noise in the face of bipartisan agreement and you’ll be labeled an “obstructionist.” But sign what you see as the best deal on the table and your name is on a spending plan that would make any accountant blush.

In the face of extraordinarily powerful leadership in the Illinois House and Senate, institutional checks on bad budgeting are nearly non-existent, leaving many lawmakers little choice but to sign legislation they wouldn’t support otherwise.

Want a balanced budget? The Illinois Constitution has a balanced budget requirement – but no teeth. There has not been a truly balanced state budget in Illinois for more than 15 years.

Want everyone to agree on how much money the state is set to bring in before deciding how much to spend? Outrageous. Senate President John Cullerton said in May that adopting revenue estimate was unnecessary, despite a constitutional requirement to do so.

Want to know the true size of the state’s budget deficit? Through a process called cash-based accounting, that’s entirely hidden. Under this system, revenues are counted in the year they are received, but expenses are counted only in the year they are paid, not the year in which they are incurred. Imagine if a household magically “balanced” its budget by not paying the electric bill. That’s the type of behavior cash-based budgeting hides in state government.

Without sufficient institutional scrutiny, the spending plan arrived at Rauner’s desk.

He could hand his opponent, J.B. Pritzker, a cudgel with which to beat him by sending the budget back to the General Assembly, where Madigan would happily throw it in the garbage. Or he could sign what is still the closest the state has come to a balanced budget in years, though not close enough. Rauner chose to sign the budget.

The upcoming election will be intimately tied to two things that budget represents.

The first is the outsized and incomparable power of House Speaker Mike Madigan, who has more control over a statehouse than any politician in the nation. House members will decide whether to extend his record-breaking tenure as speaker in January 2019.

The second is a progressive income tax – the proffered “saving grace” for Illinois politicians who have, for years, pushed budgets that spend far beyond what taxpayers can afford. A cornerstone of the Pritzker campaign, Madigan made sure to have his members vote on a progressive tax resolution before the House voted on the budget.

He sold it as middle class tax relief, but financial reality and lawmakers’ spending habits mean a progressive income tax would bring about massive tax hikes on Illinois’ middle class. Its initials (PIT) give taxpayers a hint about where any new tax dollars from a progressive income tax would go.

This budget will continue to draw headlines as a noble compromise. Don’t be fooled.

It is yet another product of a process built on speed, politics and uncertainty, and thus in favor of those who have remained in power the longest.

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