SPRINGFIELD, Ill. - Illinois' future economic stability hinges on a decision expected out of Springfield this month.
Lawmakers will decide on a state budget for Fiscal Year 2015 by the end of May. If they don't make a now-temporary income tax permanent, David Lloyd, director of the Fiscal Policy Center at Voices for Illinois Children, warned that it will lead to a budget shortfall of $2 billion, and what he describes as "massive revenue collapse."
"It's really deeply irresponsible for lawmakers to allow current rates to expire," he said, "and they really have to confront the reality that we really can't afford even the most basic investments in our future if the current rates expire."
Lloyd said less tax revenue would mean cuts of close to 25 percent to services such as education, child care and public safety that already are underfunded. Special education would lose about $200 million, and preschool programs another $18 million. The temporary 67 percent increase in the state income tax was passed in 2011 and is scheduled to end in January.
If current tax levels are not maintained, the tax rate will drop from 5 percent to 3.75 percent. Lloyd said that change signals drastic effects for the budget in Fiscal Year 2016.
"In July of 2015, the rates would have been expired for the entire year," he said, "meaning the revenue collapse would be much, much worse, and you'd have a budget shortfall likely of $5 billion, which would mean even deeper cuts."
Gov. Pat Quinn, House Speaker Michael Madigan and other top leaders have called for extending the current tax rates. Lloyd acknowledged that it will take some political courage to approve that kind of budget, but said the bigger concern is that the state needs stable and sustainable revenue.
"I don't think this is a vote that legislators are excited to take," he said, "but on both sides of the aisle, there's a recognition of the deep harm that this would cause if a huge budget gap of about $2 billion is allowed to occur."
Also of concern is the state's backlog of unpaid bills, and Lloyd warned there could be more credit downgrades if the current tax rate expires. Illinois already has the lowest credit rating of any state in the nation, which he said harms the economy and the state's reputation.
Mary Kuhlman - Public News Service, IL