PI Original Adam Doster Thursday April 22nd, 2010, 12:24pm

After The Rally: Another Look At Our Beleaguered Budget

The Responsible Budget Coalition is trying to remind lawmakers that it's long past time to acknowledge and resolve the ongoing budget crisis in Illinois. A new report reinforces just how deep our fiscal hole has become.

Teachers, social service providers, public employees, and concerned Illinois citizens staged the largest Springfield protest in years yesterday. Their goal was simple: remind lawmakers that it's long past time to acknowledge and resolve the ongoing budget crisis in Illinois. This week, an updated report (PDF) from Voices for Illinois Children (VFIC) reinforces just how deep our fiscal hole has become.

GOP gubernatorial candidate Bill Brady might think Democrats are exaggerating it, but Illinois' fiscal deficit in 2011, according to estimates from VFIC, will be at least $13 billion. That includes nearly $6 billion in late bill payments, $4.5 billion in pension payments, a baseline deficit of $1.2 billion, and a drop in stimulus funding of $1.2 billion.

The national recession has certainly contributed to Illinois' financial problems. General funds revenue -- receipts for corporate income taxes, personal income taxes, and excise taxes -- dropped by $2 billion in FY 2009 and another $1.8 billion in FY 2010.  Meanwhile, the Commission on Government Forecasting and Accountability projects only a modest revenue increase ($411 million) in FY 2011.

But we must remember that the state's financial problems predate the national financial crisis.

While local conservatives hyperventilate about out-of-control state spending, the growth rate of general revenue spending has actually slowed considerably in the last decade, dropping from 6.1 percent annually between FY 1989 and 1999 to 3.9 percent in the 2000's (which is less than the state's income growth rate and just one percent higher than inflation). That trend is reflected in our decreasing contributions to both K-12 and higher education institutions. At the same time, increasing economic insecurity has led to a spike in demand for state services. Our (efficient) Medicaid system swelled from 1.2 million in 2000 to 2.2 million in 2009, only a portion of which can be attributed to eligibility expansions.

But over this same period, lawmakers have refused to reform the state's unfair and outdated tax policies, instead relying on pension gimmicks and borrowing to satisfy the state constitution's balanced budget requirements. Now, the chickens are coming home to roost.

This is an important point to keep in mind as news filters out about possible deficit solutions. Even if it were ultimately adopted, the VFIC report notes that Gov. Pat Quinn's budget proposal (which calls for a one-point income tax hike) would still leave $4.5 billion in unpaid bills on the books. It would also fail to address the fact that Illinois simply does not generate enough revenue to cover core services adequately. That means that in FY 2012, the deficit will continue to grow.

HB 174, which the Responsible Budget Coalition supports, is the only proposal currently on the table in Springfield that begins to grapple with the structural deficit.  (Strangely, the Peoria Journal Star characterized the bill as "convoluted" today, but never explained what they meant.)

Supporters of HB 174 aren't arguing that the funds generated by the bill's two-point income tax increase will close the FY 2011 deficit on its own. Cuts and borrowing will be required. But the bill would create approximately $5 billion in new (and recurring) annual revenue. On top of that, local governments, homeowners, and low-income taxpayers would receive tax relief. And in a few years, when the local economy fully rebounds and the backlog of bills (and borrowing costs) are paid off, the state could finally devote more resources to schools.

Responses to yesterday's rally from House members, however, make it seem like lawmakers are willing to play the same old games. Several Springfield-area moderate Republicans suggested they might consider a temporary and minimal income tax increase, but only after deep cuts. Some House Democrats appeared even less open-minded. In an interview with the Journal Star, freshman Rep. Jehan Gordon (D-Peoria) said a tax increase "is not going to happen" and blamed Gov. Quinn for not lobbying legislators like herself hard enough.  A year ago, Gordon was quoted in the same paper expressing concerns about potential cuts to child care and stating that tax increase proposals "should be on the table."

Meanwhile, Rep. Jack Franks (D-Marengo) penned a Tribune op-ed today that could have been written by Illinois GOP Chair Pat Brady. While some of his suggestions seem reasonable enough, he glosses over the fact that eliminating the deficit with cuts alone would require a 45 percent reduction to the General Revenue Fund.

Raising taxes is never popular, especially when families are struggling. But the changes proposed by RBC aren't that drastic and take into consideration a family's ability to pay. There's nothing "convoluted" about that.

Full Disclosure: SEIU Healthcare IL/IN is a member of the Responsible Budget Coalition. Their associates at the SEIU Illinois State Council sponsor this website.


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