Town Hall Looks At State's Budget Hole

More than 100 people heard a sobering presentation on Illinois' state budget woes Aug. 19 at St. Augustine College in Uptown.

The meeting was sponsored by Ill. state Sen. Heather Steans (D-Chicago) and Ill. state Rep. Greg Harris (D-Chicago), but most of it was devoted to presentations by Ralph Martire, executive director of the Center for Tax and Budget Accountability, and Lawrence Msall, president of the Civic Federation, on how to resolve Illinois' staggering state budget deficit.

Out of a total budget of about $39 billion this fiscal year, the state is carrying a deficit of more than $12 billion.

"You can't tax your way out of it, you can't cut your way out of it, you can't borrow your way out of it, you can't grow your way out of it," Harris said.

The Illinois Legislature this year turned to borrowing and cuts, though they refused to make the cuts, passing that responsibility on to Gov. Pat Quinn (D), who had urged a hike in the state income tax, which at a flat 3 percent is lower than most states. Legislators, however, have been loath to increase it to produce a balanced budget, preferring borrowing and putting off paying the state's bills, which has meant avoiding funding state employee pensions and deferring payments to service providers such as schools, non-profit groups and medical providers.

Martire and Msall proposed differing solutions, though both agreed on broad points.

"The solution has to be comprehensive," Martire said. "But the biggest tool in the kit is the one that's never put on the table - we need tax reform. If we're going to solve it, we need tax reform. If we don't do that, it's pretty much game over."

Martire explained that the popular perception that Illinois has high taxes and a bloated budget and state workforce is wrong. State spending on human services, for example, has not kept pace with inflation from 2002 to 2010, he said, and the state ranks 43rd among the 50 states in general fund spending as a percentage of gross domestic product. As a percentage of personal income, Martire said, Illinois ranks 44th in the total burden of state and local taxes on its residents.

"Overall we are a very low tax and spending state," Martire said.

Martire said tax reform that replaces Illinois' flat income tax of 3 percent with a progressive tax rate, depending on income, could solve the budget deficit in a relatively short time.

"Over the next three to five years we could eliminate the deficit," Martire said.

That would require an amendment to the Illinois Constitution. Steans, though, who was one of just two Democrats in the Senate to take a stand this year against more borrowing to patch together a budget, noted that she tried to pass such an amendment.

"I tried to get that on the ballot," she said. "We got 19 of 60 votes in the Senate."

Msall said the Civic Federation could support tax reform but only if it's coupled with state pension reform.

"The state has to make a commitment to both fund its pensions and reform its pension benefits," Msall said.

Msall said the Federation also proposes $2.5 billion in cuts in spending.

"The state carries almost $6 billion in unpaid bills from the previous year," Msall said, saying Illinois must get its budget problems under control to maintain an economic climate conducive to attracting new businesses and keeping existing ones in the state.

"No business wants to invest in Illinois if it cannot accurately predict its longterm economic stability," he said.

The meeting didn't get into the political obstacles to budget and tax reform, which are considerable. One attendee, for example, despite the detailed presentation by Martire, said he simply doesn't accept that Illinois' taxes are lower than most other states.

"Illinois to me isn't the 44th tax state," he said.

That's in line with a Rasmussen Reports poll released Aug. 17 showing that 52 percent of Illinois residents think the state's budget can be balanced without increasing income taxes.

Martire noted that if Illinois fired every single state worker immediately, the budget deficit would only shrink by $4 billion this fiscal year, just one-third of the total deficit.

Cindi Canary, director of the Illinois Campaign for Political Reform, said the day after the town hall that she's not surprised when voters don't believe the numbers presented to them by people such as Martire and Msall.

"One of the biggest obstacles to resolving our budget misery is that public confidence in state government is absolutely shattered," Canary said. "Should we raise taxes? Well, maybe, but the public has no confidence in how that will be spent."

Much of that, she said, is attributable to the way the Illinois Legislature conducts business, with power concentrated in the hands of legislative leaders and an obtuse budgeting process that relies on closed-door meetings and a last-minute rush to pass a budget that leaves no room for public debate.

"In a lot of ways, with the system not being transparent, it just reinforces the public cynicism," Canary said.

The almost absolute power of the House speaker, Senate president and House and Senate minority leaders to control their members' votes is enforced by their unlimited ability to spend money on other legislators' general election campaigns.

"A year ago, Illinois did pass campaign finance reform, but that had to pass through the speaker and the Senate president," Canary said. "So they didn't limit their own spending in general elections."

That leaves legislators concerned about getting reelected reluctant to disagree with their leaders' directives. Canary said voters need to get more involved in pushing legislators to govern independently.

"It's not rocket science," she said. "When a legislator gets 15-20 calls or letters or whatever on an issue, they freak out," Canary said. "If all of us would take, say, five to 10 minutes a week and say, 'I'm going to be an activist citizen and contact my legislators,' there would be change."

If that doesn't happen, she said, Illinois runs the risk of falling under the influence of political extremists.

"I've generally thought that in comparison to other states, Illinois has had a much more moderate bent, not too far right and not too far left," Canary said. "But the way we've been doing things, we're driving people to the edges."