The Civic Federation, a venerable pillar of Illinois’s business establishment, has for many decades championed the need for fiscal responsibility, including restraints on state spending and revenues to assure a stable business climate. On February 12, 2015, the Institute for Illinois’ Fiscal Sustainability at the Civic Federation released its State of Illinois FY16 Budget Roadmap. The Budget Roadmap consists of a 5-year plan that would achieve a balanced budget each year and eliminate Illinois’s $6.4 billion backlog of unpaid bills.
The Civic Federation’s Budget Roadmap would accomplish these goals and bring our state fiscal stability and a strong environment for business investment by limiting annual state spending increases to the 2% current rate of inflation and increasing annual state revenues by various means.
The Budget Roadmap makes these key findings:
- Balancing the state budget with spending cuts alone would require discretionary spending to be cut by 25% and “could involve the elimination of large portions of government services widely regarded as essential.”
- General Funds expenditures not related to pensions increased by only $133 million from FY 2008 to FY 2014, an increase of less than one half of 1%, while the Consumer Price Index increased by 10% during that same period.
The Roadmap makes the following major recommendations for the next five years:
- Limit future state spending to 2% annual increases, the projected rate of inflation.
- Retroactively increase the personal income tax rate from 3.75% to 4.25% with it eventually becoming permanently set at 4%.
- Broaden the sales tax to include services.
- Tax the retirement earnings of individuals with non-Social Security earnings over $50,000 (Illinois is one of only three states that does not tax retirement earnings).
- Temporarily increase the sales tax on food and non-prescription medicine to 6.25% (SNAP [Food Stamps] recipients do not pay sales tax on food purchased with SNAP benefits).
- Ameliorate some of the impact of these tax revenue measures by increasing the state earned income tax credit for low-wage workers by 50%.
- Explore ways to decrease the cost of providing health insurance to state employees and retirees (options limited by court decisions).
While further analysis is needed to determine the exact effect of this plan on low-income people, we are encouraged that the Civic Federation has recognized the need to avoid harming vulnerable people.
Several important conclusions flow from the Budget Roadmap’s findings and recommendations:
- Governor Rauner’s claim that the current level of state spending is not “sustainable” is false.
- Governor Rauner’s assertion that the way to achieve prosperity is to lower taxes and provide more capital to wealthy “job creators” is without merit.
- Our current fiscal situation does not justify cutting state spending for important priorities that matter for quality of life and business climate, or programs that serve our most vulnerable fellow residents, including the developmentally disabled, the mentally ill, people with disabilities, the elderly, the homeless, and needy children. Such cuts are unnecessary and cruel.
The Civic Federation’s Budget Roadmap will be a key measuring stick for the proposed FY 2016 budget that Governor Rauner will announce on February 18.