Tuesday, March 24, 2009

Will the "cutting committee" cut much?

By Jamey Dunn and Hilary Russell
The state’s budget deficit could be worse than Gov. Pat Quinn’s projection of $11.6 billion next fiscal year. But some education-funding reform advocates see a silver lining in that the dire budget constraints could open the door for a longstanding effort to restructure the way Illinois pays for public education.

They’re again supporting a so-called tax swap, which would increase the state income tax and expand the state sales tax to apply to services. The new revenues would help offer property tax relief. Sen. James Meeks, a Chicago Democrat who has been pushing the idea for seven years, says relying less on property taxes to fund public education would help address funding disparities between property rich and property poor school districts.

We’ll find out tomorrow morning whether such tax reforms will be included in a series of recommendations that a special bipartisan committee will pass along to legislative leaders as they try to figure out how to balance next year’s state budget. The special committee is led by a rare co-chairmanship of one Democrat and one Republican. Sen. Donne Trotter is the Democratic chairman. He said the committee is considering recommending such revenue changes as a tax swap, as well as other changes to the public employee pension system, that both parties can support.

“There’s probably going to be a larger stack of things that we could agree upon than things that we can’t,” Trotter said. However, he added that there’s a good chance that the committee could produce a majority and minority opinion reports.

Trotter said Meeks’ tax reforms have support from committee members of both political parties.

Legislators’ reluctance to raise state income taxes has been one of the main roadblocks to various tax swap proposals advanced in the past seven years, but Meeks said the likelihood of an income tax hike this year creates a “now or never” opportunity for reform. The latest proposal, SB 750, would raise the state income tax from 3 percent to 5 percent for individuals and from 4 percent to 8 percent for corporations.

While the tax reforms traditionally have been proposed as a way to reform education funding, Meeks said he’s open to using new tax revenues to plug the state’s budget deficit for up to two years. But then it would have to switch to fund education. If lawmakers only consider the deficit, he said, “we’ll end up raising taxes, but we won’t end up fixing anything.”

Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, supports Meeks’ plan for education funding and said there’s an added reason (scroll down) to reform the state’s tax structure. “The bottom line is Illinois cannot get to a balanced budget situation without adjusting both of its major taxes,” he said. He added that expanding the state sales tax could allow for a lower rate.

The Taxpayers’ Federation of Illinois opposes the bill because, according to organization president Tom Johnson, property tax is a reliable revenue source for local governments even in hard times. He added that the state may not be able to keep up with the property tax relief, which he said could “vanish in a relatively short period of time.”

Tomorrow morning’s Budget Deficit Reduction Committee will wrap up four weeks of testimony, which started out by focusing more on what agencies and advocates couldn’t live without than what they were willing to cut. The last two meetings have changed the focus to more concrete examples of ways the state could generate money while it also saved money.

Sen. Matt Murphy, the Republican co-chair from Palatine, said: “I love the idea of restraining future growth for spending because there’s never gonna be enough tax revenue if we don’t get a handle on the spending. I look forward to coming out with a collection of deficit reduction measures that we think can help fill this hole and do it in a way that’s productive for the long-term benefits for the state.”

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