Gov. J.B. Pritzker delivered his inaugural budget address Feb. 20.
His response to Illinois’ budget problems? Tax hikes, borrowing and a can-kick – the same recipe for failure that has led the state to this point. Bipartisan solutions on the table in Springfield were ignored.
First, take the tax hikes and new revenue, which will disproportionately come from lower-income Illinoisans.
Pritzker’s plan includes legalizing sports betting, a statewide plastic bag tax, a cigarette tax hike, a vaping tax, cutting tax credits that fund school choice scholarships for low-income children, expanding the tax on video gaming, and taxing recreational marijuana, to name a few. It also hikes taxes on medical care organizations and cuts the credit retailers get from the state for collecting sales taxes.
Next, the borrowing. Pritzker wants a $2 billion pension obligation bond, or POB. Former Govs. Rod Blagojevich and Pat Quinn issued $17.2 billion in POBs to pay into state pension funds in 2003, 2010 and 2011. They are expected to cost $30.8 billion to repay. In other words, the last time lawmakers used POBs it increased the cost of pensions to taxpayers by about $13.6 billion. This kind of risk is why the Government Finance Officers Association recommends against the use of POBs.
And finally, the can-kick. Pritzker is extending the deadline for when Illinois needs to true up its pension funds by seven years. Voila. Putting more of the burden of yesterday’s government on the backs of young and unborn Illinoisans.
A major pain point for many Illinois families, their property tax bill, was left unaddressed. Pritzker’s budget does nothing for people worried about those bills cutting deeper and deeper into their home equity.
The buzzword around Pritzker’s budget address was “honesty.” But at the core of this budget proposal is a false, dishonest choice: deep cuts to core services or a constitutional amendment eliminating Illinois’ flat tax protection to allow for a progressive income tax hike.
Left unsaid is that even Pritzker’s “all cuts” option holds harmless all state worker compensation, health insurance benefits that are unheard of in the private sector, and pension benefits. It’s as if a family making a $10,000 a month mortgage payment on a $50,000 income tried to balance their household budget by not buying food or medicine. There’s an elephant in the room.
Take pensions, for instance. The most recent data from the National Association of State Retirement Administrators shows Illinois’ state and local governments spend the most in the nation on pension benefits as a percentage of all state and local revenue. Pension-related spending consumes more than 25 percent of Illinois’ state budget, crowding out spending on social services, public safety and education.
Pritzker’s solution to the pension problem is not to bargain with government workers on behalf of taxpayers to balance their interests. It is to borrow more money, hike taxes, and dump all of it into a bottomless pit. This kind of cowardice will ultimately harm public workers counting on a pension payment that won’t materialize.
But what about a progressive income tax? Is that the solution?
“[Illinois] can accomplish [a progressive income tax] with a more competitive rate structure than Wisconsin or Iowa,” Pritzker said in his budget address. This may be the closest Pritzker has come to revealing any proposed income tax rates. But it is entirely unclear what he means.
In fact, a recent Tax Foundation study on Wisconsin’s tax code recommended exchanging its progressive income tax for a flat income tax as one way to make the state more competitive. Both North Carolina and Kentucky have swapped their states’ progressive income tax for a flat income tax in recent years.
Raising the amount of revenue to fund the spending Pritzker wants can’t just come from a progressive tax on the backs of millionaires. It will have to come from middle-class tax hikes. The math doesn’t work otherwise.
The most disappointing element of the Pritzker budget is that there are bipartisan measures in the General Assembly today that could balance the state budget without tax hikes.
A state government spending cap that limits growth in spending to taxpayer incomes, a school district efficiency measure that would reduce expensive district-level bureaucracy, and a constitutional amendment allowing for changes to future, unearned pension benefits have all been filed.
Getting behind bipartisan budget reform is the kind of bravery Illinoisans deserve from the executive branch.
Instead, they’re getting more of the same.
Austin Berg is a writer for the Illinois Policy Institute. He wrote this column for the Illinois News Network. Austin can be reached at [email protected]