PI Original Adam Doster Friday May 28th, 2010, 9:56am

The Democrats Stumble At The Budget Finish Line

Lawmakers are leaving Springfield, once again, without developing a comprehensive solution to the state's fiscal problems.

The spring session has officially come to an end in Springfield.  Both chambers passed some minor revenue generators, as well as a framework for the state budget that gives Gov. Quinn wide leeway to cut spending.  However, one large item remains unresolved.

The sticking point is a measure (SB 3514) that would allow the state to borrow $4 billion to cover the upcoming contribution to the pension system.  After narrowly passing the House earlier this week, the bill met resistance among the Democratic caucus in the Senate. "I don't think we can afford to punt it down the road and keeping avoiding the problem even longer," said Sen. Heather Steans (D-Chicago), one of a handful of Democratic holdouts.  So, instead of calling the bill in committee yesterday morning, Senate President John Cullerton (D-Chicago) held it with the intention of whipping up more support. But the body ultimately adjourned without even bringing the legislation to the floor. That means lawmakers will probably be called back to the capitol building for a special session sometime this summer.

More depressing than that is the miserable spending bill both chambers did manage to pass this week. In a white paper (PDF) released Wednesday night, the Center For Tax and Budget Accountability breaks down in clear terms what next year's fiscal plan (HB 859) looks like. Combining the backlog of unpaid bills ($6 billion), repayment of past debts ($4.6 billion), and general revenue funds, Illinois would need $36.9 billion to pay off its annual bills and the entire existing deficit. Even when one factors in $3.1 billion worth of one-time payments -- the securitization of the tobacco lawsuit and the tax amnesty proposal, for example -- revenue next year will only reach approximately $29 billion. That's $7 billion short of the state's estimated expenditures. And this analysis doesn't even include any debt the state will incur if and when it borrows to make the FY 2011 pension contribution.

Speaking to reporters yesterday, House Speaker Michael Madigan (D-Chicago) himself admitted that the budget is unbalanced, which technically violates the state's constitution. It's also miserable politics for the Democrats, who have built considerable majorities in both chambers, yet appear unable to fix a damaged ship that's sinking deeper by the day.

This brings us back, as budget negotiations often do, to "the sell." For the last year, Democrats in Springfield have chronically undersold the benefits of comprehensive tax reform, which would close a significant portion of the deficit while also providing tax fairness, property tax relief, and a pathway to education funding reform. Instead, they've sat on their heels and watched two devastating narratives develop: that the state "overspends" and that Gov. Pat Quinn's scaled-back, one-percentage-point income tax increase was enormous and economically dangerous.

Neither are true. As we documented last week, schools and human services are starved in Illinois and the pension fund is only 48 percent funded. Waste exists, undoubtedly, but this is not a bloated government by any stretch of the imagination. Meanwhile, Voices for Illinois Children's Larry Joseph produced an interesting graph (PDF) charting the state's quarterly unemployment rate between 1981 and 1985. As he shows, there is no noticeable uptick in joblessness after January 1983, when the General Assembly raised the personal and corporate income tax temporarily in the midst of decade-high unemployment levels. "The recovery in Illinois was shaped primarily by macroeconomic conditions, not by changes in state tax policy," he adds. Take a look at it below:

That comparison is apples-to-oranges in some ways, but it offers an interesting lens through which to view the continuing fight. A modest tax increase will not play well with many voters, for sure. But neither will pension problems, a growing provider backlog, and the image of inepitude that will cloud the party this November.


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