Illinois’ false budget fix

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Illinois' false budget fix

[cap­tion id=“attachment_98864” align=“alignright” width=“300”] Graphic cour­tesy of the Illi­nois Pol­icy Institute[/caption]

By John Ruberry

On Thurs­day the Democratic-​dominated Illi­nois House, with aid of ten Repub­li­cans, over­rode Gov­er­nor Bruce Rauner’s veto of a 32 per­cent income tax hike. The cor­po­rate rate jumped by 35 percent.

Apol­o­gists for the income tax increase love to point out that many states have higher income tax rates, but last week’s over­ride places Illi­nois within the top 20 of the 50 states. And these tax lovers always leave out some painful facts. For instance, while sales tax rates vary from juris­dic­tion to juris­dic­tion, Illi­nois’ sales tax rates are very high across the board. Chicagoans, at 10.25 per­cent, pay America’s high­est sales taxes. And depend­ing on who you talk to, Illi­noisans suf­fer under America’s largest prop­erty tax bur­den–or they are near the top. Chicagoans deal also suf­fer with nui­sance taxes such as a seven-​cents-​per-​bag tax at gro­cery stores, and had a judge not tem­porar­ily struck down a Cook County – where Chicago is – a penny-​per-​ounce sug­ary drink tax would be in place right now. Food stamp recip­i­ents don’t have to pay those last two. And those nui­sance taxes add up, of course.

As a life­time res­i­dent of Illi­nois, I can assure you that the ser­vices we receive from the state are ter­ri­ble. Last year the Chicago Tri­bune phrased it more elo­quently, “As a result, Illi­nois gov­ern­ment is a mas­sive retire­ment sys­tem that, dur­ing work hours, also offers some services.”

Illi­nois’ per­sonal income tax rate is now at 4.95 per­cent and the cor­po­rate rate is now 7 per­cent, but because of a local only-​in-​Illinois 2.5 per­cent state per­sonal prop­erty replace­ment tax, the cor­po­rate rate is really 9.5 per­cent, which makes the over­all rate the fourth-​highest in the nation.

And before these tax hikes Illi­nois was one of the few states los­ing population.

So ends the Prairie State’s national record two-​year span of oper­at­ing with­out a budget.

[cap­tion id=“attachment_59155” align=“alignleft” width=“234”] “Shake Up Spring­field, Bring Back Illinois“[/caption]

Gov­er­nor Rauner, a Repub­li­can, was elected by vot­ers to, as his cam­paign slo­gan vowed, “Shake Up Spring­field.” While never averse to a tax increase, Rauner, who never held pub­lic office before, said he’d approve one as long as it included such items as term lim­its, redis­trict­ing reform, work­ers’ com­pen­sa­tion law changes, and prop­erty tax freezes. House Speaker Michael Madi­gan (D-​Chicago), who has held his job for 32 of the last 34 years, of course views term lim­its as anath­ema to him, and this mas­ter ger­ry­man­derer cre­ated leg­isla­tive maps that gave the Democ­rats super­ma­jori­ties in both cham­bers of the Gen­eral Assem­bly in the first two years of Rauner’s term. The Dems still have a veto-​proof major­ity in the Senate.

One of the rea­sons the Repub­li­can Gen­eral Assem­bly mem­bers who sided with Madi­gan gave for their votes was that Moody’s and S&P warned that if Illi­nois didn’t have a bud­get in place for fis­cal year 2018 its bonds would be rated as junk. Guess what? Moody’s says it might down­grade Illi­nois’ bonds any­way. The new taxes don’t address how Illi­nois will tackle its $100 bil­lion in unfunded pen­sion lia­bil­i­ties. Pen­sion pay­ments already con­sume a whop­ping one-​quarter of the Illi­nois bud­get. And even assum­ing enough funds are there for Illi­nois schools to open in the fall, more leg­is­la­tion is needed for allo­cat­ing that cash. The state has over $15 bil­lion in unpaid bills-​which is over 40 per­cent of the ’18 bud­get. That back­log will take years to pay off. Adding to the deba­cle is a late June rul­ing by a fed­eral judge for Illi­nois to pay $586 mil­lion per month to bring down its past-​due Med­ic­aid bills. Which means that other ven­dors will have to wait even longer to get paid. How many of them will go out of busi­ness wait­ing for their bills to be settled?

Didn’t I men­tion that Illi­nois is los­ing population?

[cap­tion id=“attachment_98863” align=“alignright” width=“300”] Blog­ger at the border[/caption]

At best, the Illi­nois bud­get deal is a band-​aid for much more seri­ous problems.

Rauner is a can­di­date for reelec­tion in 2018. That task was made more dif­fi­cult by the man­ner that the tax hike was passed. In the first go-​round 15 Repub­li­cans–the Madi­gan 15–voted for the tax hike. That allowed Boss Madi­gan, who has been chair­man of the state Demo­c­ra­tic Party since 1998, to allow, yes, allow 11 Democ­rats in vul­ner­a­ble dis­tricts to vote “No.” In the over­ride vote, four of the Madi­gan 15 voted “No.” Another one missed the roll call. Of course Madi­gan “found” the other five votes among his caucus.

Demo­c­ra­tic can­di­dates for gov­er­nor are of course call­ing the tax increase “bi-​partisan.”

But already one Madi­gan 15 mem­ber has announced he’s not run­ning for reelec­tion.

In my opin­ion bank­ruptcy, even though it will be called some­thing else, is still com­ing to Illi­nois, despite this bud­get “fix.”

John Ruberry reg­u­larly blogs at Marathon Pun­dit.

Graphic courtesy of the Illinois Policy Institute

By John Ruberry

On Thursday the Democratic-dominated Illinois House, with aid of ten Republicans, overrode Governor Bruce Rauner’s veto of a 32 percent income tax hike. The corporate rate jumped by 35 percent.

Apologists for the income tax increase love to point out that many states have higher income tax rates, but last week’s override places Illinois within the top 20 of the 50 states. And these tax lovers always leave out some painful facts. For instance, while sales tax rates vary from jurisdiction to jurisdiction, Illinois’ sales tax rates are very high across the board. Chicagoans, at 10.25 percent, pay America’s highest sales taxes. And depending on who you talk to, Illinoisans suffer under America’s largest property tax burden–or they are near the top. Chicagoans deal also suffer with nuisance taxes such as a seven-cents-per-bag tax at grocery stores, and had a judge not temporarily struck down a Cook County–where Chicago is–a penny-per-ounce sugary drink tax would be in place right now. Food stamp recipients don’t have to pay those last two. And those nuisance taxes add up, of course.

As a lifetime resident of Illinois, I can assure you that the services we receive from the state are terrible. Last year the Chicago Tribune phrased it more eloquently, “As a result, Illinois government is a massive retirement system that, during work hours, also offers some services.”

Illinois’ personal income tax rate is now at 4.95 percent and the corporate rate is now 7 percent, but because of a local only-in-Illinois 2.5 percent state personal property replacement tax, the corporate rate is really 9.5 percent, which makes the overall rate the fourth-highest in the nation.

And before these tax hikes Illinois was one of the few states losing population.

So ends the Prairie State’s national record two-year span of operating without a budget.

“Shake Up Springfield, Bring Back Illinois”

Governor Rauner, a Republican, was elected by voters to, as his campaign slogan vowed, “Shake Up Springfield.” While never averse to a tax increase, Rauner, who never held public office before, said he’d approve one as long as it included such items as term limits, redistricting reform, workers’ compensation law changes, and property tax freezes. House Speaker Michael Madigan (D-Chicago), who has held his job for 32 of the last 34 years, of course views term limits as anathema to him, and this master gerrymanderer created legislative maps that gave the Democrats supermajorities in both chambers of the General Assembly in the first two years of Rauner’s term. The Dems still have a veto-proof majority in the Senate.

One of the reasons the Republican General Assembly members who sided with Madigan gave for their votes was that Moody’s and S&P warned that if Illinois didn’t have a budget in place for fiscal year 2018 its bonds would be rated as junk. Guess what? Moody’s says it might downgrade Illinois’ bonds anyway. The new taxes don’t address how Illinois will tackle its $100 billion in unfunded pension liabilities. Pension payments already consume a whopping one-quarter of the Illinois budget. And even assuming enough funds are there for Illinois schools to open in the fall, more legislation is needed for allocating that cash. The state has over $15 billion in unpaid bills-which is over 40 percent of the ’18 budget. That backlog will take years to pay off. Adding to the debacle is a late June ruling by a federal judge for Illinois to pay $586 million per month to bring down its past-due Medicaid bills. Which means that other vendors will have to wait even longer to get paid. How many of them will go out of business waiting for their bills to be settled?

Didn’t I mention that Illinois is losing population?

Blogger at the border

At best, the Illinois budget deal is a band-aid for much more serious problems.

Rauner is a candidate for reelection in 2018. That task was made more difficult by the manner that the tax hike was passed. In the first go-round 15 Republicans–the Madigan 15–voted for the tax hike. That allowed Boss Madigan, who has been chairman of the state Democratic Party since 1998, to allow, yes, allow 11 Democrats in vulnerable districts to vote “No.” In the override vote, four of the Madigan 15 voted “No.” Another one missed the roll call. Of course Madigan “found” the other five votes among his caucus.

Democratic candidates for governor are of course calling the tax increase “bi-partisan.”

But already one Madigan 15 member has announced he’s not running for reelection.

In my opinion bankruptcy, even though it will be called something else, is still coming to Illinois, despite this budget “fix.”

John Ruberry regularly blogs at Marathon Pundit.