State's needed tax increase held up by politics

How can it ever be the wrong time to do the right thing?

I ask because the state's current budget stalemate essentially begs the question. See, both the Democrats, who hold a veto-proof supermajority in the General Assembly, and Republican Gov. Bruce Rauner have acknowledged that state government needs to raise more tax revenue if it's to function properly.

And by function properly, I mean educate public school children, provide low and lower-middle income families access to health care, ensure the state's most vulnerable populations receive the supports they need to have any semblance of an ordinary life, and provide for the safety of the general public. You know, all that stuff state government does that we take for granted.

Given that the Democrats controlling the General Assembly and Gov. Rauner have quite different ideological world views, it may come as a surprise that they agree on anything - especially that more tax revenue is needed.

But any surprise about that concurrence quickly evaporates when one considers the data. For instance, the state ended its last complete fiscal year - FY2015 - with an accumulated deficit of some $5.9 billion in its General Fund. Which isn't chump change. Indeed, it means almost 25 percent of all FY2015 spending on education, health care, human services and public safety - which is where $9 out of every $10 on services got spent - was deficit spending.

Making matters worse, on Jan. 1 this year, temporary increases previously made to Illinois' personal and corporate income tax rates began to phase down, causing a loss of annual, recurring revenue just north of $4 billion.

Meanwhile, just as revenue was going down, hard costs for items like debt service owed to the pensions and insurance on public sector workers were going up - currently scheduled to be $2 billion more in FY2016 than what was in last year's budget.

Which may explain why both the Democrats and the governor, propose cutting year-to-year spending on core services in FY2016 by $500 million and $1.8 billion, respectively.

Those proposed spending cuts, however, don't move the needle forward on reducing the deficit.

Indeed, under the governor's FY2016 proposal, the accumulated General Fund deficit will jump to $9.17 billion - or roughly 40 percent of all spending on current services, while under the Democrats' proposal, the accumulated deficit increases to $9.9 billion, or 41 percent of current service expenditures.

Deficit spending north of 40 percent isn't sustainable. So, without new revenue, Illinois simply won't have the fiscal capacity to continue providing core services.

Yet, despite this rather grim reality, and their veto-proof majority, the Democrats have chosen not to pass the tax increases Illinois needs, pegging their reluctance to move on first gaining the support of some Republican legislators.

Gov. Rauner, meanwhile, is insisting Republican legislators not agree to increase taxes until he gets his "turnaround agenda," much of which involves curtailing collective bargaining rights.

That's problematic on two fronts. First, the data indicate this proposed "turnaround agenda" will neither result in job growth nor stimulate economic expansion. Second, even if it passes, it'll have little to no impact on the state's accumulated deficit.

Which means the powers that be have decided not to do the right thing - i.e., raise new tax revenue - for political reasons.

Many theorize that this politically driven budget impasse will break when a crisis emerges. And by "crisis" they must mean something that harms folks who are predominantly upper-middle income or above.

Apparently, the significant cuts currently being imposed on services that support primarily low-income families and vulnerable populations, like disabled individuals or folks who need child care, doesn't qualify as a "crisis."

The bottom line: in Illinois, it can very much be the wrong time for electeds to do the right thing - if doing the right thing is politically difficult and failure to get it done harms only low-income and vulnerable populations.

Ralph Martire is executive director of the Center for Tax and Budget Accountability, a bipartisan fiscal policy think tank. rmartire@ctbaonline.org