Election-year budget benefits no one
We expect elected officials to address societal needs with well-designed, effective policy initiatives. Of course, the overtly political milieu in which public policy is created usually frustrates this expectation.
Which is in large part our fault. After all, as voters we reward politicians who avoid problem solving and pander to our own, preconceived notions, especially when it comes to tax policy. Want proof? Consider what we've been telling Springfield about the state's considerable General Fund deficit, which stands at around $6.4 billion. That's roughly 26 percent of all spending scheduled for current services in FY2015, which begins July 1.
In virtually every poll taken on the subject, a solid majority of likely voters -- well north of 50 percent -- support reducing the deficit through spending cuts, rather than raising adequate tax revenue. Meanwhile, in the very same polls an even greater majority -- well north of 60 percent -- do not want those spending cuts to impact education, health care, human services, or public safety. And therein lies the problem. Those four, core service areas account for more than $9 out of every $10 of General Fund spending on services.
We're telling politicians, who count on our votes to gain office, that we want children educated, the sick, elderly and other vulnerable populations cared for and public safety ensured, but we aren't interested in how to pay for it all. This has led to predictable consequences, none of them good.
Instead of encouraging elected officials to craft sensible, fair and sustainable tax policy designed for a modern economy, we've encouraged them to spout tired canards like "Illinois should do more with less." Good pandering that, because it allows voters to continue believing the fiction that they can have quality public services -- without ever paying for them. While this all inures to the benefit of politicians, the resultant public policy that ensues -- like the FY2015 General Fund budget -- inures to the benefit of no one.
See, elected officials had trouble cobbling the FY2015 budget together, because they had to deal with a year-to-year revenue loss of $2.17 billion, caused by the scheduled phase down of the temporary income tax increases that passed in 2011. Under current law, on January 1, 2015, the state personal income tax rate will decline from 5 to 3.75 percent, while its corporate rate will drop from 7 to 5.25 percent.
It simply wasn't possible to deal with the revenue loss caused by that phase-down with across-the-board cuts, given that: Illinois is already one of the lowest spending states in the nation; spending on the cores services of education, health care, human services, and public safety services has already been cut by $4.7 billion in nominal dollars since FY2009; and historically, spending on services has not been the primary driver of the state's deficits in the first place -- poorly designed tax policy has.
Considering all that, the responsible thing would have been to extend the temporary tax increases. The forward-thinking thing would have been to use this as an opportunity to implement comprehensive reform that would simultaneously modernize state tax policy, tax people more fairly, and ensure adequate, sustainable revenue to pay for core services over time. But this is an election year, so the FY2015 budget that passed is neither responsible nor thoughtful.
Indeed, it plugs the $2 billion revenue shortfall with a series of smoke-and-mirror moves that include borrowing to cover current service delivery, increasing revenue projections, artificially understating debt service costs and simply leaving significant General Fund liabilities the state has incurred out of the budget altogether.
It also kicks the real problem down the road into FY2016, when there will be $5 billion less in revenue available to fund core services than there was in FY2014.
Is this irresponsible? Sure. Dishonest? You bet. But it's also precisely the kind of budget nightmare Illinois voters have encouraged politicians to deliver for decades.
Ralph Martire is executive director of the Center for Tax and Budget Accountability, a bipartisan fiscal policy think tank.