President of the Civic Federation
The state tax increase alone will not solve the state’s financial problems. After years of budgets held together by chewing gum and knotted string, state officials have finally taken action to address Illinois’ budget crisis. The income tax hike is painful to people and businesses and was emphatically not the first step toward fiscal rectitude the Civic Federation counseled state officials to take.
The federation recommended that the state first cut expenditures and implement more pension reforms. But, given that the tax increase is now the law of the land, there are steps state officials must take to ensure that the new revenues are part of a comprehensive plan to fix the state’s finances.
First, the Civic Federation is concerned that the spending cap for FY 2012, included as part of the tax-increase package, is an increase of approximately 10 percent over FY 2011 spending. The General Assembly and governor must not to use the “cap” as an excuse to spend beyond reasonable revenue expectations. Next year’s state budget must be reduced so that Illinois will be able to fund its pension contribution out of the operating budget, instead of borrowing, and begin to reduce its multibillion-dollar backlog of unpaid bills.
Second, the state has demonstrated that its pension systems are unaffordable by its continued inability to fund them out of the operating budget, resorting instead to borrowing and pension holidays. The state must work to lower its actual pension costs to a manageable level by reducing non-vested benefits for employees already hired.
The difficult job of balancing the state’s budget is only half done, and the Civic Federation will not give up our calls for a fiscally responsible FY 2012 budget and beyond.
Laurence Msall, an Oak Park resident, is president of the Civic Federation, a non-partisan government research organization, working to maximize the quality and cost-effectiveness of government services in the Chicago region and state of Illinois.