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 Illinoisans couldn’t seem to catch a break in 2018.
The year began as last year ended – with troubling news for taxpayers. Just one
month after the U.S. Census Bureau demoted the state from fifth- to
sixth-largest state in the nation, a report in January from the Illinois Policy
Institute found property taxes had been growing at a rate six times faster than
household incomes for nearly a decade. Illinoisans moving to other states have
driven Illinois’ population loss for years, according to Census data. Why were
they fleeing?
Illinoisans cited high taxes as the No. 1 reason they wanted to leave the state,
according to polling from the Paul Simon Public Policy Institute. Unfortunately,
state leaders have failed to listen or provide taxpayers with relief. Worse,
many state lawmakers this year pledged their support for a progressive state
income tax, which would pave the way for tax hikes on the middle class.
In 2018, state officeholders delivered Illinoisans the same policy failures
they’ve been re-gifting for years. Instead, here’s a taxpayer-friendly wish list
of reforms for lawmakers to keep handy in 2019.
No. 1: Pension reform
Illinoisans shoulder among the highest property tax burdens in the nation. The
main cause? Unsustainable growth in pension costs for government workers.
Pension reform should be the highest priority for state lawmakers in January
when they return to Springfield.
The Illinois Supreme Court’s strict interpretation of the state constitution’s
pension clause has driven the court to strike down even the most modest pension
reforms. Consequently, it is a moral imperative for state lawmakers to muster
the political will to amend the Illinois Constitution, as states such as Arizona
have done and as Chicago’s mayor has recommended.
A sensible constitutional amendment would protect benefits that have already
been earned by government workers, while allowing for adjustments to the future
growth in benefits that have not yet been earned. Moreover, the state should
enroll all future government workers into personal, 401(k)-style retirement
accounts that offer more security and predictability for workers’ retirement
funds.
No. 2: Honor the state’s balanced budget requirement
Illinois’ holds the distinction of worst credit rating in the nation. It’s
hardly a mystery why: The Prairie State has not passed a truly balanced budget
since 2001, despite the state constitution’s requirement to do so. The state’s
fiscal condition only worsened between 2015 and 2017, when for two years the
state failed to pass a budget at all.
When the General Assembly passed its budget for fiscal year 2019, lawmakers
declared a bipartisan victory. But that spending plan remains out of balance by
more than $1 billion, and it does nothing to address the state’s severe,
structural debts.
Springfield’s budgeting process is broken. Illinois lawmakers could change that
by renewing their commitment to the constitution’s balanced budget requirement.
Re-establishing a sound and transparent budgeting process would be a significant
step toward restoring taxpayers’ confidence in their state.
No. 3: A constitutional spending cap amendment
State lawmakers gave Illinoisans cause for optimism when the Illinois Policy
Institute’s proposed constitutional spending cap found support on both sides of
the aisle. On April 26, state Sens. Tom Cullerton, D-Villa Park, and Michael
Connelly, R-Naperville, held a press conference endorsing a spending cap
amendment to the Illinois Constitution.
State spending grew 25 percent faster than Illinoisans’ personal incomes between
2005 and 2015. And when spending grows faster than taxpayers’ ability to pay,
that means tax hikes and debt are next.
Asmart constitutional spending cap would limit the growth in state spending by
tying it to the rate of growth in the economy, allowing the state to
rehabilitate its finances without the need for future tax hikes. Moreover, it
would provide long-term certainty about the state’s economic climate, making the
state a more desirable destination for families and businesses.
No. 4: School district consolidation
Another reason for Illinoisans’ daunting property tax bills is the record number
of local government bodies they’re supporting. Illinois, for example, is home to
nearly 860 school districts, fifth-highest in the nation. Meanwhile, those
districts serve the fifth-lowest number of students per district at 2,400, which
suggests Illinois taxpayers are paying for an overabundance of school districts.
That comes at no small cost. School districts in Illinois consume nearly
two-thirds of all property taxes collected by local governments. Unfortunately,
Illinois ranks 8th in the nation in administrative spending as a percentage of
education spending – meaning a substantial chunk of those property tax dollars
never reach the classroom. Instead, a large portion goes to pay for
administration and support functions.
By consolidating school districts, overhead would drop and allow local leaders
to take immediate steps toward property tax relief.
No. 5: Local government consolidation
In addition to too many school districts, Illinois is overrun with local
government. At nearly 7,000 of them, Illinois is draped in more layers of
government than any other state in the nation. These layers include townships,
park districts, mosquito abatement districts and more.
Many of these government units overlap, in many cases performing the same
services. In addition to excess taxpayer costs, too much government provides
refuge for waste and abuse: The McHenry County state’s attorney opened criminal
investigations into three separate townships in the county this year. Following
one of the investigations, the state’s attorney described the “flawed” township
form of government in a report as hotbeds of “incompetence, guile and
impropriety.”
Either Gov. Bruce Rauner or Gov.-elect J.B. Pritzker should allow McHenry County
taxpayers to rid their communities of such abuse by signing into law House Bill
4637. That bill would empower county residents to more easily dissolve their
townships at the ballot box. Additionally, state lawmakers should extend those
consolidation powers to all Illinois taxpayers.
 No. 6: Reject a progressive income tax
Springfield gave taxpayers yet another cause for concern in Maywhen Illinois
House members passed a resolution affirming their support for a progressive
state income tax. While the resolution was nonbinding, it offered a discouraging
picture of Springfield’s policy priorities.
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Illinois’ constitutionally protected flat income
tax is one of the state’s few competitive advantages – and one of
the only protections for residents and businesses braving its
punishing tax climate.
Lawmakers are attracted to the progressive tax
because it plays well politically, and can often be sold as a “tax
on the rich.” But progressive tax proposals too often serve as a
Trojan horse for tax hikes on the middle class. State Rep. Robert
Martwick, D-Chicago, introduced a progressive tax bill this year
that would raise taxes on Illinoisans earning as little as $17,300 a
year. Across the nation, higher tax rates have crept into lower
income levels under progressive income tax structures.
While Pritzker made a progressive tax a pillar of his gubernatorial
campaign, he has more recently distanced himself from such a
proposal. The incoming governor would be wise to keep a progressive
tax off the table.
No. 7: Prison sentencing reform
Illinois has taken bold steps in the right direction on criminal
justice in recent years. A series of bills signed into law by Gov.
Bruce Rauner in 2017 made it easier for ex-offenders to successfully
re-enter their communities and prevented Illinoisans from being
targeted under the controversial practice of civil asset forfeiture.
But there’s more to be done: A July report released by the Illinois
Sentencing Policy Advisory Council projects that the state’s
recidivism rate – the rate at which ex-offenders reoffend and return
to prison – will come at a cost of more than $13 billion during the
next five years.
Enabling ex-offenders to re-enter the workforce after having paid
their debts to society is fundamental to reducing Illinois’
recidivism rate. Reducing burdensome barriers to employment, such as
occupational licensing without due process, and limiting risks posed
to prospective employers, such as negligent-hiring liability, would
help put ex-offenders to work and limit the chances they would again
turn to crime.
No. 8: Simplify property assessment process
In addition to high property tax bills, Illinoisans suffer from a
property assessment system that is needlessly complicated. The
system can hide errors and inaccuracies on residents’ property tax
bills, subjecting them to unfair taxes. An Illinois Policy Institute
report this year found while the degree of property tax
inefficiencies varies across counties, the needlessly complex
appraisal system is universal.
Taxpayers deserve a property tax system they can understand.
Simplifying the state’s assessment process would foster fairness and
accuracy in property appraisals – and empower Illinoisans to fix
property tax mistakes.
No. 9: Mapmaking reform
Elections require voters to choose their representatives. But
Illinois representatives too often choose their voters. Through
redistricting – the re-drawing of maps showing the districts
lawmakers represent – politicians can routinely manipulate electoral
odds in their favor. This is because state law virtually guarantees
partisan mapmaking. The result? Illinois House Speaker Madigan has
drawn Illinois’ legislative map three out of the past four decades,
following the U.S. Census.
Unsurprisingly, incumbents such as Madigan have greeted reform with
fierce opposition. The system’s effects are painfully clear: More
than 60 percent of Illinois’ state legislative races in 2016 went
uncontested. Illinoisans deserve an independent, non-political
redistricting commission.
No. 10: Roll back 2017 income tax hike
Prior to the state’s last income tax hike, Illinoisans were already
among the highest taxed in the nation. But when Illinois lawmakers
overturned Rauner’s veto of the proposed budget in 2017, lawmakers
heaped a 32 percent income tax hike onto that burden. Increasing the
personal rate to 4.95 percent from 3.75 percent, and the corporate
rate to 7 percent from 5.25 percent, the measure won the distinction
of the largest permanent tax hike in state history.
The Illinois Policy Institute estimates Springfield’s previous
income tax hike in 2011 cost the state nearly $56 billion in
economic output and more than 9,000 jobs. And that rate already had
been driving Illinoisans across state lines.
Springfield’s taxation habits are a dead end. Without spending
reforms, and with higher taxes on a shrinking tax base, the ugly
conclusion is a slower economy with fewer jobs and more families
leaving Illinois. Rolling back the income tax hike is an urgent
necessity.
No. 11: Protect school choice
With the passage of Senate Bill 1947 in 2017, scholastic
opportunities for underprivileged students were no longer determined
by their ZIP codes. The education funding bill included the Invest
in Kids Act, a tax credit program to give low-income households
scholarships to private schools.
Scholarships are limited to students whose family incomes are within
300 percent of the federal poverty line, or less than $75,300 for a
family of four in 2018. But the program prioritizes the neediest
students, offering the largest scholarships to those within 185
percent of the poverty line, or less than $46,435 for that family of
four, as well as those who live in low-performing school districts.
If Gov.-elect Pritzker sticks to his stated plans, those students
may soon have this opportunity ripped away from them. “We should as
soon as possible do away with it,” Pritzker said in April.
For the majority of Illinois families, schools are determined not by
the needs of students, but by the location of their homes.
Well-heeled families such as the Pritzkers have little to lose under
the status quo, but the incoming governor should consider what he
will take from needy students before he attacks the Invest in Kids
Act.
No. 12: New House rules
Under the House rules in Illinois, the House speaker assigns
committee chair positions and the stipends that come with them, can
substitute committee members, dictates when a bill will be called
for a vote, and decides what bills make it to a vote in the first
place.
Taken together, the powers enjoyed by the House speaker in Illinois’
legislative process are unparalleled in the nation.
Further, the possibility of losing a leadership appointment and
stipend creates a strong incentive for state lawmakers to side with
political leadership, rather than the constituents they’re elected
to represent.
The Illinois House should take a note from other states and change
its legislative rules to diminish the control of the House speaker
over the legislative process, and over the fate of Illinoisans.
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