Illinois’ budget battle: Tax hikes vs. reform

 

[June 16, 2015]  By Nathaniel Hamilton | Watchdog Opinion
 
 It’s overtime at the Illinois Statehouse. A battle over the state budget has forced a stalemate and extended legislative session at the Capitol. The opposing fronts of the debate are the Republican governor, who is pushing for spending reforms, and Democratic legislators, who have an end game of raising taxes.

Democratic lawmakers in Illinois have used nearly every form of political theater to push for a tax hike to fix the state’s budget crisis. But no amount of political showmanship can change the stark fact that balancing the state’s budget by reforming spending – and without tax hikes – is the only sustainable and responsible option for Illinois’ economy.

Democrats have controlled Illinois’ executive branch and legislature for more than a decade, using higher taxes as a first resort to pay for Illinois’ mounting pension debt and bill backlog. The state’s new Republican governor, however, has brought a very different political mindset to the budget discussion.

Gov. Bruce Rauner has demanded a balanced budget that does not raise taxes, along with solutions such as workers’ compensation reform, a property-tax freeze, term limits and redrawing legislative districts. Democrats have resisted the governor’s proposed reforms and instead have pushed for higher taxes and a budget that would spend nearly $4 billion more than the state’s expected revenue.

While budget negotiations have taken place behind closed doors, the public discourse among lawmakers has been biting. Just hours after the General Assembly adjourned without a balanced budget, Rauner gave a stern rebuke of Democrats in the Illinois General Assembly: “these [political] insiders will not give up their power easily. But we will not back down.”

In a radio interview that same day, Democratic House Speaker Mike Madigan compared Rauner to the disgraced former Gov. Rod Blagojevich, saying: “there have been certain actions taken by Rauner which clearly look like the things that were done by Rod Blagojevich […] I just don’t think Illinois needs Rod Blagojevich back on the scene.”

Relying on tax hikes to troubleshoot budget problems is nothing new in Illinois. In 2011, Democrats passed a 67 percent income-tax rate increase during a lame-duck legislative session to try and fix the state’s mounting pension debt and pay down some of the state’s unpaid bills.

The result? Illinois’ budget problems – and economy – grew worse. Since the tax hike, the state’s pension debt and backlog of unpaid bills have grown. The slow-growing state economy was made slower, which forced jobs and people out of the state.

Illinois has long been an example of how government policy can hurt a state’s economy and jobs growth – the state’s manufacturing sector being a prime example. Since the summer of 2012, Illinois has lost more than 10,000 manufacturing jobs due to businesses being forced to close up shop or move to neighboring states with more habitable economies.

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One of the most recent examples of these moves is the steel manufacturer T&B Tube. T&B moved their operations this year from the Chicago suburbs to Indiana. The company’s president, Jack Jones, listed Illinois’ shortcomings when he described to the Indiana Economic Development Corporation his decision to jump the border, “we chose Indiana because of its lower taxes, business friendly environment, […] and great infrastructure to move our products.”

For the first time in more than a decade, Illinoisans have elected a governor who has pledged to reform state spending and balance the budget without relying on tax increases. However, Democrats still hold supermajorities in the General Assembly.

July 1 marks the new fiscal year and also a government shutdown if no state budget has been passed by then.

It remains unclear what type of budget Illinois will have in the next year. With a new political dynamic in Springfield, raising taxes to try and fix the state’s fiscal problems will no longer be the default solution. Hopefully, for Illinoisans’ sake, raising taxes will continue to remain the governor’s last resort.