January 12, 2012

A year ago, Democrat lawmakers pushed through a 67 percent tax hike that takes a week's pay out of the pockets of Illinoisans every year.  They said the tax hike would pull Illinois back from financial collapse. And yet, a year later is Illinois better off with the tax increase?  What do taxpayers have to show for this massive tax increase—other than less money in their pockets?

Democrat leaders pushed the tax hike as a way to pay off old bills and resolve the state’s financial problems, insisting they would eventually roll back the increase. Despite these assurances, they have continued to spend as though the increase will be permanent.

As a result, just last week, Gov. Quinn released budget projections showing that instead of generating a surplus, the Fiscal Year 2012 budget still spends more than state takes in.  In fact, according to the Governor, Illinois will still see a $500 million shortfall at the end of this fiscal year—not including $2 billion in deferred obligations.

Looking forward, Quinn’s projections indicate that in the year the tax hike is supposed to expire, the state is on target to spend $800 million more than available revenues. Senate Republicans point out that by continuing to overspend, the state’s Democrat leaders are building expenses into the state budget that will make it more difficult to phase out the tax hike.

Aspirations to reduce the state’s overwhelming debt have gone unrealized. Currently, the state still cannot pay its bills in a timely manner, continuing to balance the budget on the back of the state’s employers and Medicaid providers. At this time, the Governor’s Administration estimates a $7 billion bill backlog, while the Comptroller believes the backlog could be as high as $8 billion; it currently takes the state 75 days to issue repayments to the state’s Medicaid providers.

Influenced by the systemic budget problems highlighted in the Governor’s recent report, recently one major credit rating agency lowered the state’s credit rating to the worst in the nation, while two others issued stern warnings that future downgrades could occur.  Details on the state's credit report, including information from all three major credit rating agencies, can be found at www.senategop.state.il.us

And despite insistence from state Democrats that increasing taxes would not affect jobs, in the last year—citing Illinois’ high corporate tax burden and anti-business policies—a number of high-profile employers threatened to leave Illinois. In response, tax incentives have been passed to retain the employers—and jobs.  Yet, even with these efforts, the state unemployment rate has reached double-digits; as of November it was 16 percent above the national average.

Last January, Senate Republicans voted against the tax hike, stressing that an influx of new revenue would not be enough to address the state’s significant financial problems. The sheer amount of the Illinois’ massive debt, coupled with state Democrats oft-proven inability to rein in spending, make cuts and institute reforms, made it unlikely the new tax dollars alone would be sufficient to fill in the state’s budget hole.

However, it’s not too late to change course. Illinois is a great state with an abundance of assets and resources. But without a plan to reduce spending and improve our economy, it is clear that by the time the tax increase is scheduled to expire, Illinois will still be drowning in red ink—even with the Democrats’ massive tax increase.

As an alternative, Senate Republicans point to their “Reality Check” budget plan that they offered last March. The proposal contains a menu of more than $6.5 billion in spending cuts and revenue generators that would enable the state to bring the budget into line with available revenues. You can view the plan at http://www.illinoisrealitycheck.com/.