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Excerpts from recent editorials in newspapers in Illinois

July 16, 2017

Belleville News-Democrat

Look at your paycheck, and say hello to your new Illinois tax increase

Take a close look at your next paycheck.

If you work in Illinois, the state has officially notified your employer that the boss needs to start deducting more from your paycheck and sending the money to Springfield.

In case you missed it, Illinois' individual income tax rate is now 4.95 percent, up from 3.75 percent. For a household with an annual income of $100,000, that means an increase in income tax of $1,200, from $3,750 per year to $4,950 - only another $23 a week to be a working resident of Illinois.

It took our lawmakers two years to come up with this tax and budget package, but they're wasting no time getting into our wallets.

If you weren't paying attention to how Illinois got into its mess, maybe the change in your paycheck will make you take notice. And we need to pay attention, because even though this tax will give the state another $5 billion annually, big problems remain.

For one thing, there's still that $130 billion debt to state employees' pension funds. For another, there's that $15 billion bill backlog.

And House Speaker Michael Madigan pushed through this Democrat tax-and-spend plan without having to accept any of the pro-business reforms that Gov. Bruce Rauner hoped would stop job-creators and residents from fleeing to more business-friendly states. What will happen when there are no paychecks left to tax?

Madigan's scheme has no change to Illinois' costly workers' compensation laws, no freezing of property taxes, nothing to rein in the out-of-control government spending.

Even with this new tax windfall, our state's credit rating remains dangerously close to junk status. Moody's Investors Service, citing the pension debt and bill backlog and other structural problems, said Friday that Illinois has "lingering credit challenges," like collecting $5 billion to pay off $145 billion in debt.

In other words, Illinois' politicians might be lingering around your paycheck and your wallet for a long time.

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July 17, 2017

(Peoria) Journal Star

Editorial: Hell to pay if no state schools budget

Illinois schoolchildren, their parents and teachers should not become victims in the crossfire between our Republican governor and Democratic leaders in the Legislature.

It may be another one of those "only in Illinois" situations in which partisan politics would trump even schoolkids, but despite a new budget and a tax increase, funding for K-12 education remains unsettled with but weeks to go before the scheduled start of another school year.

The Legislature passed Senate Bill 1, a "landmark" school funding reform measure that would direct more money to poorer districts to address the worst education funding disparities in the nation, with largely Democratic votes. Republicans preferred a competing bill that would have sent less money to Chicago's public schools.

There was a catch, of course, as Democrats saw to it that no school would get state funding, budget notwithstanding, without the governor's signature on SB1. The governor has threatened an amendatory veto, calling the bill "a bailout for the CPS (Chicago Public Schools) pension system." Specifically, Bruce Rauner has indicated he would excise the Chicago pension assistance (though some have questioned whether he has the constitutional authority to do so, based on state Supreme Court rulings). As a result, the Senate under President John Cullerton has used a procedural loophole to hold on to the bill rather than send it to Rauner's desk, hoping to elevate the pressure on him to sign it with another school year looming.

As we have written before, both reform bills are measurably better than the status quo, which has one district spending $32,000 per student on the high end and another $4,300 per student on the low side. Both would begin to narrow that gap, though they'll never close it.

Parochially speaking, Peoria-area schools fare much better under Rauner's plan than they do under the Cullerton/Madigan version. While no district loses money under the "hold harmless" provision in both, Peoria Public Schools would be a big winner with $4.1 million in additional funding should the governor get his way, compared to $1.9 million more should Democrat leaders prevail. That's a 120 percent difference. Pekin's grade schools would do almost twice as well with the governor.

Politically speaking, if the Senate doesn't release this bill - and Cullerton should - may local parents and schoolchildren be under no illusion: That's on Democrats. If it's determined the governor can't legally follow through on his promise to change part of the bill and he vetoes it in its entirety - and he shouldn't - Rauner owns it. If our area legislators do get a shot at an altered bill, we'd expect them to represent local interests without hesitation, if they're Democrat even at the risk of giving the GOP governor a rare political victory. The total hit on taxpayers doesn't change regardless; it's all about how this pot of money, about $5 billion in general state aid, is to be distributed.

From this vantage, whether or not you view this as a Chicago "bailout" bill - CPS does not participate in the same pension system as every other school district - its pension problems can be dealt with in a separate piece of legislation.

It's always about who blinks first, right? Again, we get the feeling that it's not about the issue at hand, that it's a pretext to some other, usually more sinister motivation.

And again, it's just like Illinois to go down to the wire. It need not be. In any case, if schools don't start on time or cannot finish the year, let us predict there will be hell to pay, and that voters may not distinguish as to which party is more at fault.

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July 17, 2017

The (Champaign) News-Gazette

Smart borrowing?

How smart is it to borrow from Peter to pay Paul?

Not smart at all, although those with vivid imaginations can conjure up a scenario where it might make sense.

Here's the key ingredient - the borrower has to be in terrible financial shape. Or, to put it another way - the borrower has to be the state of Illinois, which is in terrible financial shape.

The state, in fact, has a plan to borrow money to pay off a portion of its debts, and here's why.

Illinois has about $15 billion in unpaid bills. In fact, Illinois has been keeping its government running for years now by not paying its bills in a timely fashion, stiffing creditors on one side of the financial ledger while spending tax dollars on the other side.

Ordinary people can't get away with that kind of thing. But the state of Illinois does what it wants, but not without a significant cost.

Under current law, bills that are at least 60 days old generate a 12 percent annual interest charge.

So unpaid bills plus interest increase the size of the bill. That's why businesses that buy state debt from creditors eventually make good money on the deal.

In passing their recent budget and tax plan over Gov. Bruce Rauner's veto, Democrats authorized $6 billion in borrowing to make a sizable payment dent on the $15 billion backlog. Backers of the plan say the savings will come from borrowing at 6 percent a year to pay off bills growing at a rate of 12 percent a year.

Call it arbitrage, call it common sense, call it smoke and mirrors, there's no doubt that 6 percent is less than 12 percent. Hence, the savings is real if things work out as expected.

It's unclear what Gov. Rauner intends to do about the borrowing authorization. It makes sense on paper, but his office hasn't commented directly on the issue.

But there are some caveats here that ought to be taken into consideration.

Although the borrowing plan is billed as a money saver, it's still expensive. One analyst estimated a $6 billion loan will cost taxpayers $2.5 billion even if paid off quickly, and there's no reason to think the state is going to pay off this debt in an expeditious matter.

Even with the recent $5 billion tax increase, there is a real dispute about whether the 2017-18 state budget actually is balanced, as its backers claim, or $2 billion in the hole, as critics suggest. Different accountants can read the numbers in different ways.

Of even greater concern is the Legislature's propensity to continue to spend money that it does not have.

If Illinois is going to pull itself out of its really deep hole, legislators are going to have to embrace the kind of fiscal restraint they have flatly rejected in the past.

The state desperately needs more revenue and not just that generated by increases in the personal and corporate income tax. It needs the natural revenue that is generated by a growing economy that produces more good-paying jobs at higher incomes for people who then pay higher taxes to local and state government.

Instead, Illinois is enduring a slow-growth economy that is at risk of falling back into a recession. If that happens, experts say government revenues will fall significantly.

That's why the state is skating on thin fiscal ice. Sure, the borrowing ploy looks like a winner. But that's only because Illinois has been down so long that virtually anything looks like up to our legislators.

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