Friday, February 09, 2007


Pressure is mounting for Illinois to milk the cow this year. Lawmakers need a long-term plan to pay for education, transportation, health care and public employee pensions, but there’s disagreement about which cash cow to milk.

HB/SB 750 tax reform
Sen. James Meeks reintroduced a so-called tax swap plan to raise income taxes, lower property taxes and expand the sales tax as a way to fairly fund education and significantly pay down the state’s pension obligations.

Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, says the bottom 60 percent of income earners would not pay more in income taxes than they are now. And the money they saved in property taxes would be intended to offset the cost of sales taxes on consumer services, such as auto repair labor and haircuts.

Martire adds that the property tax relief would total $2.7 billion statewide. “No school district loses a penny,” he says.

He says the drafters of the legislation tried to “depoliticize” the distribution of the money. Of the state’s $5 billion net revenue, $720 million would go to downstate schools, $420 million to Chicago schools, $400 million to suburban Chicago schools, and $300 million for higher education.

Depoliticize is a bold word, considering this year's budget debate is expected to be a doozy. Gov. Rod Blagojevich has repeatedly said he would veto an increase in state taxes. Senate President Emil Jones Jr. also said on Inauguration Day that he definitely opposes expansion of the sales tax to consumer services. But he did leave the door open to other revenue ideas. “We do not have a spending problem. We have a revenue problem,” Jones said.

Good or bad, he'll have plenty of “creative” revenue ideas to consider.

Privatizing the lottery and the tollway
The governor is still considering selling the Illinois Lottery to fund a $6 billion plan to pump more money into education, school buildings, teacher quality and books. But the plan doesn't address pensions.

Sen. Jeff Schoenberg, an Evanston Democrat, is still considering privatizing the Illinois Tollway (scroll down to the August 29, 2006, blog) as a way to raise lots of money to pay the state’s unfunded pension liabilities and transportation costs. However, he said on Inauguration Day that he is convinced the state should not sell the tollway, but maintain majority ownership. He said the next step is to work with the Illinois attorney general’s office to get insight on the legal dimensions of such a lease.

Sen. Bill Brady’s solution to the pension liability problem is giving current state employees an option to participate in a self-managing plan (like a 401-k) that mirrors the private sector retirement options. New state employees would have to participate in the self-managed plan. The board of trustees of each of the five retirement systems would select up to seven companies where state employees could choose to invest their money as they wished. Brady, a Bloomington Republican, says it would save taxpayer money, reduce political influence on state investment decisions and prevent the state from raiding the five pension systems to pay for general state costs.

More to come
There’s also more creative — read politically risky — revenue ideas to come, potentially targeting businesses as one way to pay for the governor’s promised plan of universal health care. He gives his combined State of the State address and his budget address March 7.

Deanese Williams-Harris contributed to this post.

No comments: