 This trinity of seemingly separate issues -- skyrocketing health
care costs, ballooning pension payments and the state's tax
structure -- actually are interwoven, said Tom Johnson, former
director of the Illinois Department of Revenue and current president
of the Taxpayers Federation of Illinois, a nonpartisan fiscal and
tax policy advocacy organization."The first place you have to
look at is our pensions," Johnson said. "It's what's crowding out
all other areas of government, human services and education."
Until then, new money from the year-old income tax increase "will
be used primarily for payment of debt, not sustaining government
services."
Pension payouts or reform
Illinois has an unfunded pension liability -- how much the state
owes in payouts compared with the fiscal resources on hand -- of $85
million. The state is expected to put $5.3 billion into the state's
pension system for the coming fiscal year, about $1.1 billion more
than the most recent payment.
"We're in a crisis. ... I really don't think we have a choice
(about pension reform) anymore," state Rep. Tom Cross, R-Oswego,
said in a news conference this month.
Cross and House Speaker Michael Madigan, D-Chicago, outlined a
plan last spring that creates different levels of pension benefits
for state employees. Employees would keep their current pensions but
would have to pay more. Or workers could participate in a
401(k)-style pension that wouldn't offer the same level of benefits
but would be less expensive.
Cross said he would push this plan again this spring.
Quiet on the issue until recently, Quinn said earlier this month
that pension reform would be a major priority of his administration
this spring.
"I do think it is important that we take this year, 2012, and do
some hard things when it comes to the finances of Illinois, and that
begins with pension reform," Quinn said. "For 30 years -- three
decades -- governors and legislators didn't do enough. They let it
go; it's time now to tighten up and get it done."
Quinn put together a commission to study pension reform, but he
hasn't laid out specific changes, saying robust dialogue about the
issue is needed before a plan can be formulated.
Strain of Medicaid
Medicaid spending is growing quickly, as well. The state will
shell out $7 billion, or about 12 percent, of its $33.2 billion
budget for the state-run health care program as part of the federal
Patient Protection and Affordable Care Act.
That cost is expected to climb by about $700 million in the next
budget.
Last spring Quinn proposed cutting the amount Medicaid providers
are paid, but the Legislature didn't pass any supporting
legislation.
Lawmakers opted instead to require residency and income
verification, both of which go against the rules in the health care
overhaul passed by Congress and signed by the president, the federal
government said.
[to top of second column] |
State Rep. Patti Bellock, R-Hinsdale, co-chairwoman of the
Illinois House Medicaid Reform Committee, said the state is seeking
waivers from the federal government to implement its changes. With
or without the waivers, more talk about how to slow Medicaid
spending is inevitable, Bellock said.
"There are going to be some uncomfortable conversations, (but) we
have to address the issues of Medicaid in Illinois," Bellock said.
Tax squeeze
There is another squeeze in the near future, beyond the current
issues facing Medicaid and pension funding.
The 67 percent personal income tax increase passed a year ago is
set to go from the current rate of 5 percent to 3.75 percent at the
end of 2014, then back to the pre-increase rate of 3.25 percent by
2025. This will create a huge revenue hole in the budget, and the
hole will need to be filled with either more taxes, major changes to
the state's Medicaid and pension systems, or some combination of
both.
Statehouse observers and lawmakers have predicted that some form
of tax reform is expected to come to fruition before the extra money
from the income tax increase, estimated to be $7 billion annually,
goes away.
State Sen. Toi Hutchinson, D-Olympia Fields, sponsored
legislation late last fall that gives tax breaks to businesses and
low-income families. It was approved by the General Assembly and
signed into law by Quinn. She said reforms to Medicaid and pensions
must be accompanied by changes to Illinois' tax structure.
"Buckle your seat belts and keep your arms and legs inside the
vehicle, because it's going to be a bumpy ride," said Hutchinson,
who worked on tax-reform legislation in the past.
Hutchinson wouldn't speculate on the result of a broad tax
debate, saying only that it must be something realistic that creates
an environment friendly to businesses and individuals and provides
the money to keep the state government's core services running.
"We are in the middle of a frame where you have extremes who say
big government doesn't have a role in anything ... and then you have
folks on the other extreme who believe government can save
everything, which we know isn't true," Hutchinson said.
Johnson said any changes to the tax structure need to be preceded
by changes in spending.
"The tax increase did not resolve the issues, because we didn't
really tackle, in any significant way, the spending side of the
budget," Johnson said.
[Illinois
Statehouse News; By ANDREW THOMASON] |
