Analysis of Proposed Illinois FY2013 General Fund
Budgets
Center for Tax and Budget Accountability
April, 2012
http://www.ctbaonline.org/New_Folder/Budget,%20Tax%20and%20Revenue/CTBA%20%20FY2013%20Proposed%20Budget%20Analysis_FINAL.pdf

[moderator: the full report, with accompanying 
charts and graphs, may be found at the link above]

1. INTRODUCTION Many of the fiscal problems that
have plagued Illinois over the last decade remain
apparent in the FY2013 General Fund Budget
proposals that the Governor and Illinois House of
Representatives have put on the table.  These
problems include a significant accumulated deficit
that, at a minimum, will be just over $7.7
billion, a failure to invest adequately in basic
core services like educating our children or
caring for vulnerable members of society, and an
ongoing structural imbalance between General Fund
revenue growth on the one hand and service cost
growth on the other, that will only get worse when
the temporary tax increases which recently passed
begin to phase out in FY2015.  Given these ongoing
structural fiscal problems, the Governor has
requested each agency receiving General Fund
appropriations in FY2013 to identify spending
cuts varying from five to nine percent from FY2012
levels.  The primary ramification of this request
by the Governor is clear: the actual line item
appropriations set forth in the Governor's
proposed FY2013 General Fund Budget are at best
maximum potential allocations.  Actual spending
will almost invariably be somewhat less, as
agencies identify the cuts requested by the
Governor.

How can this be, when just over one year ago, in
January 2011, Illinois passed significant, albeit
temporary, tax increases to help the state cope
with its fiscal problems?  Well, because at that
time the accumulated General Fund deficit stood at
just under $16 billion. Meanwhile, the temporary
tax increase (P.A. 96-1496) generated
approximately $7.2 billion in new revenue,
primarily by increasing the state's personal
income tax rate from three to five percent, and
corporate income tax rate from 4.8 to seven
percent.

Making  the January 2011  tax increases
temporary-they begin to phase-out in FY2015- would
have been an appropriate way to address the
state's fiscal woes, if in fact those woes were
mostly caused by the Great Recession, which began
in December of 2007 and continued through June of
2009.  Unfortunately, Illinois' fiscal woes are
primarily the result of long-term, structural
flaws in the state's tax system which the Great
Recession certainly exacerbated, but did not
cause.  So, while the temporary tax increases of
2011 helped mitigate Illinois' fiscal woes for a
few years, the state's structural fiscal problems
remain unresolved.

8. CONCLUSION Since the Center for Tax and Budget
Accountability was formed in 2000, our
organization has been analyzing the state of
Illinois' fiscal system with a focus on the
General Fund.  The reason for this focus is
simple:  the General Fund is what pays for the
core services  of Education, Healthcare, Human
Services and Public Safety  demanded by voters and
taxpayers.  Over this time period, the fiscal
condition of the Illinois General Fund has
continued to deteriorate from year to year, with
deficits growing annually.

Contrary to popular belief, the reason for the
state's deteriorating fiscal condition has  had
nothing to do with runaway spending.  Indeed, the
state has been cutting real spending  on all four
categories of  core  public services for over a
decade and ranks well below the national average
in critical Education and Human Service spending
both in per-capita and capacity terms. The fact is
that Illinois has been slowly starving its public
sector for years, lowering the quality of life for
current residents and diminishing the state's
long-term economic competitiveness.

The truth is Illinois' fiscal problems have been
primarily caused by its tax policy, which is so
flawed it cannot support the provision of the same
level of services from one fiscal year into the
next.  At this juncture, further cuts in spending
on core services will invariably fall hardest on
school children and the poorest, most vulnerable
Illinoisans, severely compromise the states' long
term economic development, and ultimately NOT
SOLVE THE PROBLEM. There is no magic way out.
Illinois must enact comprehensive, meaningful and
permanent tax reform that modernizes tax policy,
makes it comport with the principles of a sound
tax system and raises adequate revenue to fund
core services into the future.

The good news is that by expanding the state's
sales tax base to include services, amending the
constitution to permit graduated income tax rates
and taxing some retirement income, Illinois can
raise the additional revenue needed to sustain
public service investments, while at the same time
reducing or not changing the tax burden for the
bottom 94 percent of families in Illinois with
modest increases in tax burden for the top 6
percent of filers (with incomes of over $150,000).

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