The Continuing Problems with our State Budget

1
The Continuing Problemswith our State Budget

• An Overview of
• Illinois Fiscal Status.

2
What is the Status of our Budget?The Governor
says our budget is balanced experts say
otherwise.

• Comptroller Hynes cites a 2.3 billion deficit.
• Says serious crisis looms for state finances.
• Rockford Register-Star analysis shows
  Illinois has the worst deficit in the
  nation
• Civic Committee of the Commercial Club of Chicago
  report says,
  Illinois is headed toward
  financial implosion.
• University of Illinois Government Institute
  report says Illinois state budget is
  seriously out of balance.

3
Governor Blagojevich inherited a budget problem
when he took office in the midst of a recession.

• He had an opportunity to solve the problem.
  Instead he
• Expanded social programs like Medicaid.
• Re-opened state facilities that had been
  shuttered.
• Increased spending every year.
• And those spending increases were funded with
  one-time revenues and tax increases.
• Raiding dollars from special funds.
• Borrowing from the pension systems.
• Using bond proceeds to pay for government
  operations.
• Selling the states student loan portfolio.
• Raising over 300 fees and imposing new taxes on
  businesses.
• These actions created more severe budget
  imbalances.

4
After a spending reduction in the year before he
took office, Governor Blagojevich has increased
spending every year.
5
Bond debt and unfunded pension liabilities
combine to an all-time record high in outstanding
obligations for the State of Illinois of over 60
Billion.
This represents the states credit card balance
and it is rising rapidly.
These are debts that must eventually be paid.
6
Illinois backlog of unpaid billsis
embarrassingly high.

• The state does not have enough cash to pay its
  bills.
• Service providers wait months before being paid.
• This amounts to borrowing from our providers.
• Illinois is a deadbeat bill payer.

7
Governor BlagojevichsFiscal Year 2008 Budget
Proposal

• Big Taxes
• Big Spending
• Big Government

8
The proposed budget represents as much new
spending in one year as what historically occurs
over four years.
9
Shattering Records

• The Governors Budget Contains
• The largest tax increase in the history of the
  state.
• Six times larger than the previous record.
• The largest spending increase in the history of
  the state.
• Twice as large as the previous record.
• The largest amount of borrowing in the history of
  the state.
• 60 higher than any other borrowing program in
  state history.
• In fact, the Bond Buyer says the Governors
  proposed 16 billion pension borrowing plan would
  be the largest ever in the history of our
  country.

10
New Gross Receipts Tax(Its Huge)

• Raises 6 Billion equates to 500 for every
  man, woman child in Illinois.
• Tax pyramiding occurs
• Goods services taxed at every level of the
  production cycle.

• Stealth Sales Tax
• Woven into the fabric of the economy.
• Not a business tax, its a consumer tax.
• Everybody pays.
• Can Illinois afford this new tax?

11
The Gross receipts tax will permeate every stage
of the production cycle, causing prices to rise
as the costs are passed on to the
consumer.EXAMPLE How would it affect the cost
of a new home?
The architect who designs the home will now be
subject to the gross receipts tax..
The electricians will have a new tax burden to
pass on.
The construction company will now pay taxes on
their total income, not just earnings.
The carpet layer will build new taxes into his
prices.
The plumbers services would be subject to the
Governors gross receipts tax.
The real estate company that sells you the home
will now have to pay taxes on their services.
12
The Governors gross receipts tax would be
thelargest tax increase in Illinois history.
(Its not even close.)
Governors Proposed Tax
13
Governors Health Care Plan

• Plans to cover 500,000 of 1.4 million uninsured.
• 2.1 billion cost, rising to 4 billion within 4
  years.
• Medicaid Expansions.
• Require insurance companies to offer standardized
  health insurance packages, regardless of
  pre-existing medical condition.
• State subsidizes these plans.
• Funded, in part, with new 3 payroll tax on
  employers who dont provide health insurance
  option for employees.
• Payroll tax raises 1.1 billion.

14
Education gets a huge increase.

• 1.5 billion, or 20 funding increase in
  Governors budget.
• Where does it go?
• Majority of new money has no link to performance.
• No property tax relief.
• 1.5 billion school construction program.

15
The Governors budgetincludes other items

• Selling the Lottery
• Sell the Lottery, which currently generates 650
  million per year, for an up-front payment of 10
  billion.
• Sell 16 billion in pension bonds.
• RTA funding shortfalls not addressed in
  Governors budget.
• No new Transportation A bonds for roads.
• Road program at 1.8 billion this year, 100
  million less than last year

16
Taxes Fees Revenue producers or job
killers?Have policies implemented by this
Administrationhampered Illinois ability to
create jobs?

• Raising truck registration fees by 36.
• Eliminating 100 million worth of sales tax
  exemptions for Illinois businesses.
• Eliminating 60 million worth of income tax
  exemptions for Illinois businesses including
  those designed to foster research development
  and employee training.
• Instituting large fee increases that require
  businesses to pay 300 million more per year to
  the State of Illinois.
• Raising the cost of doing business by increasing
  the minimum wage by 45 from 5.15 to 7.50.

17
Illinois ranks 43rd in the nation in job growth
over the last four years. Each of our
neighboring states has performed significantly
better.
18
Had Illinois added jobs at the rate of other
states, wed have hundreds of thousands of more
jobs today and hundreds of millions in
additional tax revenues.
19
Forbes Magazine published a rankingof the best
states in which to do business.

• It was a thorough analysis that took into
  account, business costs, regulatory environment,
  the economy, etc.
• Illinois ranks 44th on that list.
• States ranked in the top ten averaged over 8 job
  growth in the last 4 years.
• States ranked in the bottom ten (like Illinois)
  averaged 2.4 job growth over the same time
  period.
• The new tax proposal will not help.

20
Our tax burden in Illinois is already high. What
will the largest tax increase in history do to
our ranking?
Source Tax Foundation
21
The Governors budgetinspires some questions.

• How much health insurance subsidization can
  Illinois afford?
• Will more money, alone, improve our schools?
• Given our economic climate, is now the time for a
  huge tax increase? Is there ever a time?
• Can government take care of everyone?