Wednesday, April 27, 2011

Budget expert: Tax increase shouldn't phase out

By Jamey Dunn

Illinois' recent income tax increase cannot be temporary, as is currently written in the law, if the state wants to avoid deep cuts to social services, according to one budget expert.

“I think it’s disingenuous for [lawmakers] to have claimed that this is a four-year tax increase that is set to expire. They did the right thing by raising revenue. They did the wrong thing by making it temporary,” said Ralph Martire, director of the Center for Tax and Budget Accountability, a think tank focused on budget policy. “I think one of the most disingenuous pieces of public policy that has been perpetuated on voters and taxpayers for decades now is that they can have public services and never have to pay for them. At some point, you need adequate sustainable revenue raised in a responsible way.”

Martire joined several human services advocates today during a news conference to encourage lawmakers to make budget decisions that will not deeply cut their sector of state government. Their focus was on the differences between what each chamber estimates the state will have to spend for the next fiscal year. “The governor has proposed a budget for the coming fiscal year 2012 — $35.2 billion in spending — that’s short on revenue. But the big question is how short on revenue, because we have two different revenue estimates being utilized by the House and the Senate,” Martire said.

The House produced an estimate that is about $1 billion less than the Senate's prediction, which is based on numbers from the legislature’s bipartisan Commission on Government Forecasting and Accountability. Martire said COGFA has a solid history of accurate revenue projections, while he characterized the House’s estimate as part of a political deal between Democrats and Republicans aimed at cutting the budget. “This is Illinois. Any concern about being fiscally responsible is a good thing in this state. … The problem is, don’t let a political compromise stand in the way of reality. Especially when reality would mean significant cuts to your General [Revenue] Fund.”

Martire added, “$9 out of $10 in the General [Revenue] Fund go to just four things: education, health care, human services and public safety.”

House members and Senate Republicans, who also back the estimate, say that the state should be “conservative” when planning its spending in order to phase out the income tax increase as planned and get the state back in the black. House Speaker Michael Madigan said in March that if the legislative chambers cannot agree on some parts of the budget, House members and Senate Republicans might partner in a conference committee, which works to hash out the differences in bills passed by each chamber, to approve leaner spending that aligns with the House estimates.

Meanwhile, Senate President John Cullerton has called for about $1 billion in cuts from Gov. Pat Quinn’s proposed budget, a plan that human service providers said after the governor’s budget speech would decimate treatment for many Illinoisans with mental health or substance abuse issues. Senate Republicans say the state has to cut $5 billion from Quinn’s proposal to avoid a $22 billion deficit in five years.

While lawmakers cannot agree about how much the state needs to cut for next fiscal year, Comptroller Judy Baar Topinka said Illinois will likely end the current fiscal year this June with about $8 billion in “unaddressed obligations.”

"After years of hand-wringing about the state's finances and deficit spending, here we are looking to end yet another fiscal year in the red," Topinka said in a written statement. "The prescription for our financial recovery is simple: Stop spending more than we bring in. But sadly, that still has not occurred."

Topinka said the state will owe about $4.5 billion in late payments to schools, vendors and social service providers. An additional $1 billion in bills is expected to come in during the lapse period that the state uses to catch up on costs from the previous fiscal year, and the state will owe $1.2 billion for state employee health insurance and $850 million owed to corporations for their tax refunds. Both Madigan and House Minority Leader Tom Cross have said that any money that comes in beyond the House’s conservative revenue estimate would be spent paying off the state’s overdue obligations.

Martire pointed to other budget fixes, such as borrowing to pay off the bill backlog, that many lawmakers seem to have dismissed. “There are rational options available on the table to close this budget gap,” he said. Madigan said there is little enthusiasm in the House for Quinn’s $8.75 billion. However, Sen. John Sullivan, a Rushville Democrat, is toying with ways to bring down that number by targeting payments to certain areas or bringing the bill cycle down a one- or two-month time frame instead of paying everything off at once.

Martire also advocates that the state begin taxing some services because Illinois has shifted in recent years to a more service-based economy. A recent COGFA report estimates that such a tax could bring in $8.5 billion in revenue if business-to-business services were included and $4 billion if they were not.

As for the cuts that could result from lawmakers using a lower revenue estimate, human services providers said they would be devastating. They point to other cuts to social services in recent years and say the area has taken disproportionate pain when compared with other parts of state government. They say cuts to social services are more expensive in the long run because those looking for a safety net must turn to emergency rooms or possibly end up in costly prisons or institutions.

“There might not be someone to answer that 2 a.m. emergency call to the hospital for a rape victim. There might not be a 24-hour hotline. And this would impact rape victims across the state,” said Sean Black, a spokesperson for the Illinois Coalition Against Sexual Violence, which operates 33 rape crisis centers throughout the state. “When they call for help, there might not be the help. Or [they] might be on a waiting list that they would have to wait three, four, five, six weeks or months to get [help]. And the longer people wait for help, the more devastating the trauma is. And the more devastating not just for them but for those around them — their families, their communities, their workplaces their colleagues. The ripple effect is much more than just a single agency in a town. The ripple effect is the entire community.”

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