by Charles N. Wheeler III
“Wait ’til next year,’’ for more than a century the lament of long-suffering fans of the Chicago Cubs, aptly describes the approach Illinois leaders are taking to the state’s budget woes heading into the fall legislative session this month.
Consider the setting:
• The bills keep piling up, to the tune of $2.8 billion and counting at the end of the last budget year, according to the state comptroller’s office.
• Thousands of state workers face layoffs, adding to a jobless total already at its highest level in 26 years.
• Human service programs have been slashed to the bone and beyond, with potentially devastating impacts on senior citizens, the mentally ill, at-risk teens, people with disabilities and a host of other vulnerable Illinoisans who depend on a social safety net.
• Even the state’s chief justice has sounded the budgetary alarm, warning that deep cuts in state funding for community-based probation services threaten public safety.
Against that backdrop, Gov. Pat Quinn and legislative leaders met to discuss the agenda for the session and decided to do … virtually nothing to ease the budget crisis. True, the governor and his fellow Chicago Democrats — Senate President John Cullerton and House Speaker Michael Madigan — said they’d push for a $1-a-pack increase in cigarette taxes to pay for spring semester tuition aid so that tens of thousands of college students could continue their studies. But House Minority Leader Tom Cross is not on board, and without GOP support, a Senate-approved cigarette tax increase can’t garner the 71 House votes needed to pass this fall.
Indeed, the GOP seems to have made a political calculation: Being against any tax increase will enhance the party’s chances next November among voters disgusted with Democratic incompetence in general and outright corruption (see Rod Blagojevich) in particular.
So Republican leaders and the party’s gubernatorial hopefuls argue that higher taxes are not needed, but rather, deeper cuts targeting generic waste and mismanagement, with few specifics offered.
Quinn remains steadfast in seeking an income tax increase but is resigned to waiting to push for higher rates until next year, when only 30 Senate votes and 60 House votes would be needed. Democrats clearly have the numbers — 37 in the Senate and 70 in the House. Less certain is whether they’ll have the political will, especially in the House, to do so.
Meanwhile, state Comptroller Dan Hynes, who is challenging Quinn for his party’s gubernatorial nomination, last month unveiled a sweeping plan to get the state back on a sound financial footing.
Garnering the most attention was Hynes’ call for a progressive income tax, with rates on individual taxpayers ranging from the current 3 percent on the first $200,000 of earnings up to a top bracket of 7.5 percent on income in excess of $1 million. The new rates would bring in about $5.5 billion, Hynes estimated. But the state Constitution says income tax rates must be flat, so for Hynes’ plan to work, voters next November would have to approve an amendment allowing graduated rates — no sure thing. Even if all the stars aligned, new revenue likely would not be available before fiscal year 2012, offering no help for the current budget shortfall nor next year’s red ink tsunami pegged at $9 billion by some accounts.
To help with the immediate problem, the comptroller proposed cutting current spending by about $1.6 billion and coming up with $850 million a year in new revenue by eliminating a number of business tax breaks and expanding the state sales tax to include more than a dozen “luxury” services such as tanning parlors, car rentals, pet grooming and health clubs.
The Hynes plan also includes licensing as many as three new casinos and increasing cigarette taxes to help pay health care costs.
Though Republicans derided Hynes’ plan as nothing more than a massive income tax increase, in fact the comptroller deserves credit for developing a comprehensive blueprint for state finances, far more detailed than anything GOP critics have offered.
For all its merit on paper, though, Hynes’ effort has a practical problem in addition to its timing delay: Lawmakers have rejected many of his money-saving, revenue-enhancing ideas in the past, from paring corporate incentives to authorizing new casinos. Hynes knows the history but says times are different and believes he can persuade the legislature to support his cause.
If lawmakers want to deal with the state’s inadequate revenue structure, though, a quicker alternative is waiting in the wings, embodied in House Bill 174. The proposal would increase the individual income tax rate to 5 percent from 3 percent and the corporate rate to 5 percent from 4.8 percent. The rates would be flat, and thus not require a constitutional amendment, but the measure would include several features to lessen the burden on low- and moderate-income families, including increasing the personal exemption to $3,000 from $2,000, doubling to 10 percent the income tax credit homeowners can claim for residential property taxes and tripling the state’s earned income tax credit to 15 percent of the federal credit.
In addition, the plan would expand the sales tax base to include 39 different consumer services, many of which are already taxed in neighboring states. The changes would produce an estimated $6 billion in new revenue, with the money coming in a year sooner than under Hynes’ plan.
Perhaps most important, HB 174 already cleared the Senate 31-27 in May, with only Democratic support. The measure was not called for a vote in the House, though, and given GOP intransigence, a House vote this fall would be futile. After January 1, however, Madigan and his troops — and any Republican realistic about state finances — could act decisively to modernize the state’s tax structure, if they have the political courage to do so. Let’s hope they do.
Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois at Springfield.
Illinois Issues, October 2009