Comptroller: Taxes Would Have to Double to Cover State Debt

Amid the talk of bankruptcy and a state takeover of Chicago Public Schools, Illinois' comptroller is warning that state income taxes would have to double if they are to be used to get out of the mess created by the seven-month budget impasse.

But we've heard the warnings for months. Will the state actually run out of money?

To hear the comptroller tell it, the mountain of debt is going to keep on growing, but the cliff may never come. That just means the backlog of bills will continue to pile up, and the state will simply take longer to pay off vendors that it owes. 

Comptroller Leslie Munger says that backlog is likely to be $6.2 billion worse this year than last year. That could put the state $10 billion behind on its payments by the end of the year, in addition to a nearly $6 billion operating deficit. That growth in debt is due to $1.2 billion in increased court-ordered spending this year, despite only 90 percent of the budget being paid for. It is also due to $5 billion less in revenue from lower income taxes this year.

The comptroller says the costs to taxpayers to fix this mounting debt would be astronomical.

“If we solve this problem on revenue alone, we’ll be looking at raising our tax rate in Illinois from 3.75 percent to somewhere between 7 and 8 percent. We’d have to double our tax rate,” Munger said. “I don’t know any legislator who would vote for that, or any businesses that would stay in Illinois for that. As a result, we have to look at some reforms that will help our businesses be more competitive so they can absorb some increase in taxes and still create jobs.”

According to Munger, the state will never actually stop being able to pay all of its bills. At least not in the near future.

Social service providers and higher education institutes fall into the 10 percent of the budget that was not ordered by the courts to be paid, and they haven’t received any money. But for everything else, the comptroller says it’s like having $100 a day in your checking account to pay $7,000 of bills – some things get paid, other things get put off.

“We will never really run out of money. Every day we get more revenue in as a result of fees and taxes. Now we’re moving into the period where income taxes are coming in, so our revenue comes every single day,” she said. “We pay as much as we can in that given day, then we have to wait for the next day. So, when we make decisions on how to pay our bills, we ask, ‘Should we pay foster care or the developmentally disabled today?’ Because we can’t pay both.” 

If there is no budget by the end of the year, vendors could start to wait on average six months for payment. But this situation is not unprecedented – the bill backlog and delay in payments had peaked to similar numbers under the Quinn administration.

To illustrate the her point, Munger calculated the costs of purchasing both of this year’s Super Bowl teams, plus the Willis Tower, plus all of the Academy Award nominated movies, plus Chicago’s highest paid athletes, plus two round trip tickets to the moon and it still wouldn’t add up to $6 billion.


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