Is It Really Possible to Balance the State Budget Without a Tax Hike?

The conservative Illinois Policy Institute unveiled a plan Tuesday that promises to fill Illinois’ $7.1 billion budget hole, without any increase in taxes.

It comes as leading senators continue to promote a bipartisan compromise they say would likewise close the deficit, in part by an income tax hike and new service taxes.

Critics were quick to pan the IPI’s suggestions.

“Like their political patron Bruce Rauner, the right-wing IPI will say anything to push its extreme agenda,” said Anders Lindall, spokesman for the American Council of State, Federal and Municipal Employees Council 31.

Rauner once contributed to the Institute, and has relied on Tillman as a campaign confidant.

The IPI says it can close the $7.1 billion deficit with five, big targets for savings:

  • $3.5 billion through shifting costs to local governments and taking away their share of the state income tax. This plank of the platform also calls for a five-year freeze on local property taxes.
  • $1.6 billion in savings by changing the state's underfunded pension systems.
  • Just over a billion dollars in savings by reducing the payroll for state employees, and by having the state's largest union, AFSCME, abide by a new contract that cuts wages, requires workers to pay more for health care, and other changes.
  • Another $415 million would come from cutting off poor, childless adults who got on Medicaid thanks to Obamacare. So, roughly 600,000 people would lose health care benefits. Also, checking the Medicaid rolls.
  • And finally, cutting a half billion dollars from Illinois' public universities.

Each of those tenants is more complicated than an initial pass indicate.

Universities have already faced reductions (and went long stretches without any funding) during the 19-month impasse, and higher education stopped receiving any money when Illinois' short-term budget expired at the start of this month. The IPI has called for reductions in administrative costs; current school leaders say they’ve already begun to cut back. State funding cuts led some universities to layoff faculty.

When it comes to Medicaid, health care advocates argue that it will cost the state in the long-run if people go without insurance, because they'll end up in the emergency room instead.

As for expecting AFSCME to adopt those contract terms, it's doubtful. On Monday, union members began voting to authorize what could be state government's first-ever strike because they oppose the contract Rauner is implementing.

The IPI pension proposal calls for moving workers into a 401(k) style plan. Tillman says it’s designed to meet constitutional muster. But because a 2015 Illinois Supreme Court's decision severely restricts, even forbids, cutting guaranteed benefits, it's risky to count on any pension savings, let alone the chunk the IPI presumes.

While lawmakers from both sides of the aisle say they’re committed to reducing the local property tax burden, a freeze could trigger hardships for schools, which rely primarily on property taxes for their own budgets.

A freeze, coupled with stripping municipalities of the 9-cents per dollar they’ve received since Illinois first implemented an income tax, would further strip localities of another key funding source. The IPI says it’s taking away a “subsidy,” but head of the Illinois Municipal League Brad Cole says that’s a misnomer.

“For many small communities, it’s the only source of income they have, so it provides for the health, safety and welfare of their residents,” Cole said. “It’s not as simple as saying ‘let’s cut the LGDF (Local Government Distributive Fund).’ I mean, that would abandon the entire state, whether it’s Cairo or Chicago.”

Additionally, the IPI wants to make it harder for units of local government to look to raise taxes in the future, by requiring referenda pass with a two-thirds majority before any hikes.

“Taking people’s money for their labor is one of the most sacred acts government does. It’s taking money from an individual working for their family and putting it in for the common good of government and unfortunately … the ability of citizens to hold politicians accountable is delayed and diffused,” Tillman said.

That would be a "heavy burden" and is "overly restrictive,” Cole said.

“What if a water treatment facility doesn’t get expanded, then the community can’t grow, or keep up to date with EPA (Environmental Protection Agency) regulation,” he said, as a hypothetical.

Some of the ideas proposed by the IPI have been attempted before in Springfield and not passed; others are at the heart of the partisan debate that has led to the impasse (other elements of Rauner’s so-called “turnaround agenda” such as term limits and a change in how legislative districts are drawn are not part of the IPI’s budget solutions package).

Insiders who did not want to be named called the idea "laughable" and not based in reality; even Rauner has said he's open to a tax hike if he gets his way on some long-term changes. Most government watchdogs say it’s impossible for Illinois to get out of the budget mess absent both revenue increases and spending cuts.

But Republicans who stood with the IPI at Tuesday’s press conference – including Rep. Jeanne Ives, R-Wheaton, and Rep. Allen Skillicorn, R-Crystal Lake – panned the Senate’s bipartisan “grand bargain” and its 4.99-percent income tax increase.

Follow Amanda Vinicky on Twitter: @AmandaVinicky


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