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5 THINGS
ILLINOISANS NEED TO KNOW ABOUT HOUSE DEMOCRATS’ BUDGET
Illinois Policy Institute/Ted
Dabrowski
Much like other plans in the General
Assembly before it, the House Democrats’ budget plan does nothing to
structurally reform state government and bring down costs, but instead
increases the burden on Illinois taxpayers.
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 On June 28, Democrats in the
Illinois House of Representatives officially presented a 2018 budget plan for
the first time.
Like most of the plans lawmakers in Springfield have introduced, the House
Democrats’ plan balances the budget by hitting struggling Illinoisans with a $5
billion tax hike because it fails to enact any of the structural spending
reforms Illinois needs.
An analysis of the House Democrats’ funding proposal found the following:
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The proposed budget spends $36.5
billion in fiscal year 2018. This is over $5 billion more than the state is
expected to collect in revenues.
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The plan hikes taxes by over $5
billion. Although this latest plan doesn’t yet have its own revenue
component, the House Democrats expect to “live within the confines” of the
$5 billion-plus in revenues Senate Bill 9 created. That bill:
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Hikes personal and corporate
income taxes by $5 billion. The personal income tax rate increases to
4.95 percent from the current 3.75 percent rate. The corporate income
tax rate rises to 7 percent from the current 5.25 percent rate.
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Expands the sales tax to
laundry and dry-cleaning services, as well as storage and other services
to bring in an estimated $300 million.
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Raises an estimated $54
million in new cable and satellite TV taxes
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Closes corporate income tax
loopholes worth an estimated $125 million.
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It pays for an ineffective
education funding program. The House Democrats’ plan increases spending on
K-12 education by $743 million compared to last year. $350 million of those
new dollars will go to fund the first year of a proposed “evidence-based”
funding program.At the same time, the proposal cuts over $118 million in
funding from other parts of education, including funding for free
breakfast/lunch programs, Illinois State Board of Education operations and
regular transportation program reimbursements to districts.The
“evidence-based” model will send Illinois down the path of yet another tax
hike. The full program calls for the state to spend an additional $3.5
billion to $6 billion a year on education.Not only is that money the state
does not have, but it will be spent on a program that doesn’t work.
Evidence-based funding has failed to improve student achievement wherever
it’s been tried, whether in Wyoming, Arkansas, North Dakota or Ohio.
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It funds higher education
without demanding accountability. The House Democrats’ plan funds higher
education operations at a rate of 95 percent of the state’s FY 2015 budget.
Other critical programs such as MAP grants for low income students are 100
percent funded.However, that 2018 funding comes with no reforms to ensure
those state dollars are spent effectively. Much of the financial crisis in
higher education is self-inflicted. Universities have raised student
tuitions and squandered state funding on larger administrations and more
expensive administrators, according to a 2015 report by the Senate
Democratic Caucus.The House budget restores funding to higher education
without requiring a single reform of universities and their administrative
costs.
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- It cuts spending without reforming costs. The
House Democrats’ plan contains a little less than $2.4 billion
in spending reductions. A vast majority of those reductions are
due to straight cuts to department operations, fund transfers
and other gimmicks – not the structural reforms needed to
actually reduce the growth in state spending.
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Pension funding
changes. The House Democrats’ plan includes over $800
million in pension cost cuts by smoothing changes in
actuarial assumptions over time and shifting the cost of
high-salary employees’ pensions to local governments, among
other items. These small reforms will help in the short term
but do nothing to actually solve the state’s pension crisis.
Only moving away from pensions and giving new workers
401(k)-style plans can do that.
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Transfers
transportation and local subsidy costs. The plan shifts $135
million of transportation project costs and $282.5 million
in general and transportation subsidies to local governments
out the state’s general fund. That simply shifts those costs
to other funds in Illinois’ overall budget without reforming
them.
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Makes general
cuts to state operations but includes little restructuring.
The House Democrats’ budget is a mixed bag for government
departments and programs. Many departments’ have their
funding reduced by 5 or 9 percent off their FY 2015 funding
levels. Other programs and departments, such as the state
EPA and Medicaid are fully funded at their proposed 2018
levels.
In total, the plan cuts
department and programs by about $1 billion. But those cuts will do
little to actually reform the cost of government. Real, structural
reforms are needed to programs like Medicaid to ensure government
costs grow slower. The Democrats’ plan has none.
Illinois is broke. Illinoisans are tapped out. The economy is
broken. Yet the Illinois House Democrats’ only solution to the
current crisis is a multibillion-dollar tax hike on Illinoisans.
Like all the previous budget plans before it, the House Democrats’
plan imposes $5 billion worth of higher taxes on struggling
Illinoisans because it doesn’t contain any of the structural reforms
Illinois needs to make government more affordable.
Instead of more taxes and more spending, state lawmakers need to
pass a balanced budget that actually solves the state’s structural
problems without resorting to tax hikes.
The Illinois Policy Institute has provided a reform plan – Budget
Solutions 2018 – that does just that.
The plan provides tax relief through a comprehensive property tax
reform package and makes state government affordable through a move
to 401(k)-style plans, and through reductions in bloated
administrative expenses throughout state government.
Those are the structural reforms Illinoisans need, not cuts and tax
hikes.
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