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Tax hike not enough to pull Illinois out of debt
By Benjamin Yount
Illinois Statehouse News
SPRINGFIELD, Ill. — Adam Andrzejewski says he’s not surprised by a new report showing that Illinois remains in a fiscal black hole despite a 67-percent personal income tax increase approved by the Legislature earlier this year.
“The state of Illinois needs to do three things,” Andrzejewski said. “That is cut spending, cut spending and cut spending.”
Andrzejewski, a former GOP candidate for governor, now leads his own group, For the Good of Illinois, a 501(c)4 nonprofit that calls for “limited, accountable and transparent government” and conducts research on the state’s government. For the Good of Illinois also has a political action committee, For the Good of Illinois PAC. For the Good of Illinois says on its website that it uses an “aggressive approach to grassroots advocacy, social media, (and) applies constant to policymakers to act.”
Andrzejewski said lawmakers need to start cutting state spending by focusing on payroll, pensions and perks.
“The entire 67-percent (personal) income tax hike went to fund the pensions and payroll here in Illinois,” said Andrzejewski. “There are 3,062 public employees that out-earned Governor Quinn. They’re at all levels of Illinois government. Collectively, those 3,000 employees soak up $1 billion in total compensation.”
Andrzejewski’s numbers include local, county and state workers. The compensation figures are based on salary, benefits and pension benefits.
Andrzejewski said most people who look at the state’s finances see Illinois has a spending problem, not a revenue problem.
Laurence Msall, president of the Chicago-based Civic Federation, which bills itself as a nonpartisan research group that focuses on improvements in government efficiency and tax policy, agreed with Andrzejewski.
“It’s a bad financial situation in Illinois. And the tax increase was not enough to solve the problem,” Msall said. “There needs to be significant reductions in the (state’s) operating costs. That can only be achieved by the state getting its arms around the pension liability problem.”
Msall said the report his group released Monday, Sept. 26, is not designed to tell Gov. Pat Quinn (D) and lawmakers how to do solve the state’s financial problems, though he was quick to say Illinois will be crushed by its pension debt unless lawmakers change the costs of benefits for current employees.
“Seventeen percent of (Illinois’ $33.2 billion) budget is going for pensions and pension-related payments,” Msall said.
While lawmakers in 2010 changed the cost of pension benefits for new state employees, Msall said changes for retirees are likely off limits. There was a proposal in May to change pension costs for state employees on the payroll, but that plan stalled in the General Assembly.
Both House Speaker Mike Madiagn, D-Chicago, and House Minority Leader Tom Cross, R-Oswego, pushed legislation to have state workers on the payroll either pay more to keep their defined-benefit pension benefits they have now, or switch to a less expensive defined-contribution package, similar to a 401(k).
State Sen. Dave Syverson, R-Rockford, said he agrees there is a need for pension reform, but worries that reforms could lead to more budget trickery.
“The problem with pension reform, the real savings would not be for a number of years,” said Syverson. “The fear is that Democrat leaders would take those savings and try and take those savings out of this year’s payments. That is what got us into this situation.”
State Sen. Mike Jacobs, D-East Moline, said it is going to take years to get Illinois out of the hole.
“We were able to make our pension payment for the first time in many years. So, you have to take the good with the bad,” Jacobs said. “I think that we’re starting to turn the tide, but I think it will take us three years to get out of a jam that many Republicans and Democrats alike created.”
Kelly Kraft, a spokesman for Quinn’s budget office, said the tax increases that passed in January were not designed to solve all of the state’s budget woes.
“Approximately $3 billion was generated from the income tax increase for FY11,” Kraft said, “an increase that has helped the state begin to address the decades of fiscal mismanagement that have taken place. But, due to large underfunding of the pension and group insurance systems, more reforms are needed to return our state to sound financial footing.”
Msall said the governor should get some credit for what he has done, but added there are no more easy choices.
“There is no magic, or politically attractive scenario,” Msall said. “The state is going to have to reduce its expenditures, not just its appropriations.”
Illinois’ $33.2-billion budget is built largely on smaller appropriations. Lawmakers balanced the budget by stretching out payments to Medicaid providers from, in many cases, 30 days to 160 days. The General Assembly also decided to push more than $1 billion in past-due bills from 2011 into 2012.
Andrzejewski said that shows the heart of the problem.
“I’ve been saying it for three years, Illinois needs to stop spending,” he said.