54 Comments - Skeptic - Friday, Feb 8, 13 @ 9:38 am: Typos: “cost for rest the rest of the fiscal year, which ends June 20″ (Duplicate text and FY ends June 30) - Leave a Light on George - Friday, Feb 8, 13 @ 9:45 am: =For the first seven months of the fiscal year (through the end of January), Illinois tax revenues grew by about a billion dollars. = How much of the growth is a result of our “temporary” income tax increase? - Small Town Liberal - Friday, Feb 8, 13 @ 9:48 am: - but we could use a truly massive public works project that updates our antiquated water and sewer systems - The governor specifically referred to the $1B clean water initiative in his speech, which is doing exactly what you’re talking about. I’m not saying we should quit there, nor does the governor think we should, but it’s not as if he hasn’t been doing everything possible to invest in infrastructure. - Rich Miller - Friday, Feb 8, 13 @ 9:49 am: ===How much of the growth is a result of our “temporary” income tax increase?=== The tax hike was fully in place by the start of this fiscal year. C’mon, use your brain. - Small Town Liberal - Friday, Feb 8, 13 @ 9:51 am: - How much of the growth is a result of our “temporary” income tax increase? - You’re missing the point. The income tax increase took effect in 2011. So, if the economy didn’t grow, we would have seen the exact same revenue two years in a row. Since the revenue increased, that means the economy has grown. - siriusly - Friday, Feb 8, 13 @ 9:53 am: It’s the economy, stupid ? - PublicServant - Friday, Feb 8, 13 @ 9:54 am: The tax increase was in place last year too George. Federal revenues, and therefore Illinois revenues, are improving due to an improving national economy. If the pension ramp is modified according to Ralph Martire’s CTBA analysis the ridiculous pension payment increases that we are experiencing year over year will become very much sustainable. As for the Feds getting their act together and fixing the crumbling national infrastructure, that would be good for the Illinois and the National Economy. I also agree with Rich on the additional changes needed to Worker’s Comp laws. - Joe M - Friday, Feb 8, 13 @ 9:56 am: Its doubtful that Illinois can “cut” its way out if its mess, — or solve its problems with only revenue increases. In reading about California, they seemed to have balanced their budget in a short period of time by a combination of spending cuts, new revenue, and an improving economy. Leadership requires convincing people to do what they didn’t want to do, by showing the people that the end result is for the good of everybody. I don’t know that much about California Gov. Brown, but it seems he did get people to accept the spending cuts he recommended - and to vote for some higher taxes to increase revenue. - Leave a Light on George - Friday, Feb 8, 13 @ 9:56 am: =You’re missing the point.= Seems I’ve been doing that quite often lately! - geronimo - Friday, Feb 8, 13 @ 10:03 am: It is annoying when the pension REPAYMENT is mentioned as eating up the budget. This is what happens when money is borrowed (from the pension fund to pay for other costs that should be funded with taxes) and interest payments are ignored for decades on end. Try running your household that way. Pension repayment is the cost of doing business in arears. If there is no appetite to cut any programs that were paid for with diverted pension funds, then we need to generate more tax revenue for those programs, however that has to happen. But the demonizing of pensions has to stop. It’s illogical if you know the facts. Of course it’s alot of money. Alot of money bought stuff along the way that it shouldn’t have bought. - Lobo Y Olla - Friday, Feb 8, 13 @ 10:09 am: Someone smarter than I suggested in these pages a 1$ fee on each option contract. That person also guessed that the firms wouldn’t feel the hit but institutional investors who execute large volume trades. Maybe smart person will see this and elaborate…… - Downstater - Friday, Feb 8, 13 @ 10:09 am: =Another funding source has to be found. Maybe the federal government can finally get off its duff and start updating our nation’s infrastructure and schools. The federal stimulus bill four years ago barely touched infrastructure.= Yes, with a $16 trillion deficit and continued trillion dollar annual deficits forecast, the federal government is in a position to help us. Not! I am sure the other 49 states would like to get in that line. The pension mess is going to require difficult sacrifices on part of current and retired pensioners. - wordslinger - Friday, Feb 8, 13 @ 10:13 am: On the federal level, the opportunity for bold action on job-creating, long-term infrastructure was frittered away by concentrating on Obamacare. That should have been a second-term initiative. Now, we’re fighting a rear-guard action to hold off the forces of austerity like those that are crippling Europe. On the state level, I’m not sure what can be done quickly except bonding out some of the backlog with the portion of the income tax that was dedicated for that. With Dem super-majorities, maybe that can happen. Long-term, maybe we could leapfrog medicinal marijuana and just go for the Washington or Colorado model. Like gay marriage, marijuana legalization is coming in a hurry, and it’s time to get on that train. There will be a lot of money to be made. - Demoralized - Friday, Feb 8, 13 @ 10:17 am: ==The pension mess is going to require difficult sacrifices on part of current and retired pensioners.== It depends on what “difficult” means. If it means that I have to pay a little more for my pension, then fine (and little doesn’t mean doubling my contribution). If it means I have to retire a little bit later that’s fine too (and by little bit I don’t mean holding my pension until I’m 67). If it means that I have to pay more for my pension and will end up getting less benefit in the end then we have a problem. - Small Town Liberal - Friday, Feb 8, 13 @ 10:18 am: - Yes, with a $16 trillion deficit and continued trillion dollar annual deficits forecast - What is it with big numbers that just scares the heck out of some people? Our debt to GDP ratio is still lower than it has been in years past, most notably far lower than it was in the 1940s. You know, when we went over to Europe and changed the lifestyle of a guy named Hitler? No one was whining back then about the big scary national debt. - USMCJanitor - Friday, Feb 8, 13 @ 10:24 am: Illinois has to grow its economy to get out of this hole. we see we cant cut enough and even a new 1 or 2 billion dollar project (spent out of Illinois taxes/borrowed funds) doesn’t equal the growth we need. Illinois should look to the other states that are growing and see what we can emulate. Can we look to do some energy work in southern Illinois? Can we make it easier for business to move and get started here? I mean lets face it, billions of dollars in the rear with bills and tax hikes that need to stay to just keep treading water for a while will lead lots of folks to say “TAX THE RICH!!!, TAX THE BUSINESS OWNERS!!!!” but really… if you need more growth shouldn’t we be looking to get people and companies in that can supply that? Its hard in Illinois. Too many times people will ignore or forget their Econ classes, and that taxes do shape behavior. We could slap a 10% income tax on anyone over 250K in this state, still not be able to make pension obligations as they sit right now and lose how many of those people to migration? We need to grow Illinois’ economy, and I haven’t heard anything other than gov spending (which first has to come from taxes) and the begging for the fed to give us money… Its time to look at our own house and see what we can do here. - Darienite - Friday, Feb 8, 13 @ 10:33 am: In Ohio, Gov. Kasich is proposing to assess a sales tax on professional services (e.g., architectural, engineering, legal, accounting) in exchange for a reduction in the state sales tax (from 5.5 to 5)and a 20% reduction in the state income tax over 3 years. When these services are performed to a public agency, the sales tax would obviously be waived. But consider if development would be hindered if the owner has to pay a sales tax on hiring outside parties for design, legal services, etc. - Grandson of Man - Friday, Feb 8, 13 @ 10:39 am: I also read the article and support the Keynesian approach to growing the state’s economy through infrastructure investment. The political environment in Washington has changed since President Obama was reelected (more compromise), but I’m not sure it has changed enough to pass another stimulus (stay tuned, though). Some like Paul Krugman said that the first stimulus was too small. I think that because of the constitutional snag with pension reform, it might be a good idea for Illinois politicians to consider AFSCME’s proposal and combine that with other ideas like debt re-amortization. It might not be fully sufficient, but wouldn’t it be better than nothing or better than pension reform that would be legally challenged by AFSCME? Also, say Illinois enacts pension reform with AFSCME’s support, and the union doesn’t sue to stop it on constitutional grounds, what about if individual workers don’t like the reform and want to sue? - geronimo - Friday, Feb 8, 13 @ 10:40 am: Crain’s Chicago Business published an article by Ralph Martire (who seems to have real solutions but apparently our legislators don’t want to listen to him OR deal with real solutions) on January 16, 2013. He talks about the 3 causes of the problem, the vast majority of the problem being debt and repayment schudule of that debt. “Simply re-amortizing $85 billion of the unfunded liability into flat, annual debt payments of around $6.9 billion each through 2057 does the trick.” This would cost taxpayers $35 billion LESS than current law. So, there is one solution that can help. Is that bold? - Judgment Day - Friday, Feb 8, 13 @ 10:41 am: “…massive public works project that updates our antiquated water and sewer systems, fixes our roads and bridges, modernizes public transit and tears down old schools and builds new ones” Yeah. But the devil is in the details, as usual. And when you have to deal with the details, it’s often the government bureaucracies that are getting in the way of modernization efforts. Try dealing with federal EPA types these days on a complete update of your wastewater treatment facility, and all the sudden you find you have to implement a complete inspection and record keeping program on backflow prevention (RPZ devices) on virtually all commercial and industrial facilities, along with apartment buildings above 6 units, and anybody with external watering sources (like underground sprinkler systems, swimming pools, the like). Any yearly inspections (expensive) and massive record keeping. And that’s just one little tiny (actually, miniscule) area - but things like that get in the way of doing serious infrastructure work. And you only have so many resources. Btw, thought the seasons of Spring/Summer (and part of Fall) in IL had already been replaced with ‘Road Construction’ season as it was. “…tears down old schools and builds new ones…” Btw, you are aware that many of these older schools (pre 1970) contain asbestos. That’s a whole ‘nother ball game, there. In those cases, before you can tear them down, you have to remove/remediate all the asbestos before you can demo the building. As it is, the rules of asbestos for K-12 schools are extreme as it is, and now the State (IDPH) wants to apply those same rules to all public buildings and commercial/industrial facilities here in IL. See http://www.idph.state.il.us/rulesregs/2012_Rules/77_IAC_855_12-7.pdf for the gory details. Looks like this proposed change in regs is going to dramatically increase costs, as it will revise the rules to require that commercial and public building asbestos abatement requirements are consistent with school asbestos abatement requirements. And that’s a big time cost increase. My point is that if you really want to create a major infrastructure update, the government bureaucracies can’t keep making things more difficult to accomplish. And in effect, that’s what is happening. We’re spending more, and getting less structural work done in return. Are being very successful at generating massive amounts of paper, though. - Nickypiii - Friday, Feb 8, 13 @ 10:46 am: CBOE profit up 25% per Crains. They needed a tax break? Illinois has a revenue problem. A relatively low personal income tax and no sales taxes on services means we’ll never catch up on our state debt. Pension reform gets all the press, however most prposals are Constituitionally illegal. Start increasing revenue by rasing the income tax (again) increase exemptions enough to keep the impact on low income workers stationary and increase the sales tax base by taxing services while lowering the overall rate to again give low income residents a tax break. These measures will help make Illinois a less regressive tax State and increase coffers. - dupage dan - Friday, Feb 8, 13 @ 10:46 am: The problems are well described. The solutions have been suggested and debated ad nauseum. The only thing left to do is legislate. With a dem super majority in the GA what the #ell are they waiting for? - Endangered Moderate Species - Friday, Feb 8, 13 @ 10:52 am: Judgment Day- Well said! - PublicServant - Friday, Feb 8, 13 @ 11:04 am: Typical Supply side economics arguments fail to move me. Keynes has it right. Businesses don’t need to be encouraged to move where there is unfulfilled demand to buy their products and services, or if you can sell them for less. If you “encourage” businesses to move where there is depressed demand that is already being fulfilled by existing businesses, what amount of “encouragement” could be provided that would make a business owner say “Hey! I’m going to move there to sell my widgits.” Increase demand and businesses will come without any need for “encouragement”. - east central - Friday, Feb 8, 13 @ 11:04 am: “It could be years before the courts figure things out.” So, negotiate constitutional changes to the pension system. Unions have expressed a willingness to increase pension contributions in exchange for assurances on the part of the State. This along with retirees picking up a portion of health benefits, if not rejected by the courts, is probably as much as will come from the employee and retiree side. If the courts reject the health benefit change, include it in the negotiations. It is counterproductive to assume some unconstitutional reform is going to avoid permanent extension of the income tax increase. - T.O. - Friday, Feb 8, 13 @ 11:15 am: The state can negotiate all the pension changes they want with unions, it only takes one person filing suit to hold up everything. - illinifan - Friday, Feb 8, 13 @ 11:29 am: okay if it is a revenue and spending problem, then wouldn’t the pension issue get some resolution if employees pay 2% more into the system (revenue and suggested by the union and not diminishing benefits) and then doing the Martire part and restructuring the ramp thus reducing the state payment for all it borrowed freeing money to meet state obligations. Then the state has to get serious about what programs really need to be cut and how to generate new business and taxes. I would think that alone would increase the pension system bottom line. The health insurance piece is not money coming from the pension system but GRF so it does not affect the pension deficit just the state’s bottom line. That won’t be solved until the court hears the challenge. - Cook County Commoner - Friday, Feb 8, 13 @ 11:30 am: Wordslinger has the only rational suggestion to new revenue: marijuana legalization. I’d go a step farther and fast track it. This is an agricultural state. I’ll bet Illinois farmers know a thing or two on how to grow quality cannabis hybrids commercially at our latitude. I suspect their conservative leanings would soften in a cascade of Franklins. Let’s face it. The taxpayers are stretched. The unions won’t give in. The state constitution bars meaningful reform. The bond rating houses are breathing down our necks. The politicians are paralyzed in fear of losing an election. And the economy isn’t going to heal anytime soon. Let’s grow, sell and tax Illinois Gold. - Fed up - Friday, Feb 8, 13 @ 11:34 am: Expanding the sales tax and coming to an agreement on a Chicago casino, plus two- three more casinos statewide, along with video poker at Ohare and midway. Would be a nice start in helping on the revenue side. Fixing the pension ramp seems to be common sense along with borrowing to pay off current debts and getting a better interest rate. Hopefully someone wakes up in Springfield. - east central - Friday, Feb 8, 13 @ 11:34 am: T.O., I assume that the unions cannot negotiate changes that apply to non-union members. But can they not negotiate changes that apply to their members? If this is true, it potentially could cover much of TRS and SERS. Or does it not work this way? - wizard - Friday, Feb 8, 13 @ 11:45 am: fyi: afscme told me that it did not represent me once i retired. - ZC - Friday, Feb 8, 13 @ 11:46 am: Broaden. The. Services. Tax. Base. We know parts of the solution (at least elected officials do). It’s a question of political willto do it. - cassandra - Friday, Feb 8, 13 @ 11:47 am: I hope the unions can’t negotiate unconstitutional changes on behalf of their members. Think of the broader implications. But seriously as noted above, the unions don’t represent all of those who would be affected by proposed pension changes to retirement benefits. Current retirees, for example, and not just those who were never in a unionized position. - T.O. - Friday, Feb 8, 13 @ 11:49 am: EC, I would assume AFSCME or other unions could negotiate contract changes outside of pension laws, but it would need to go to a vote. I think when AFSCME is talking about being in on pension reform what they mean is having a say in any new laws which might be crafted. AFSCME would agree not to file suit against a particular bill if it was something AFSCME could live with. But even if the union leadership agreed to that I’m not sure they could keep any individual members from filing suit on their own. - RNUG - Friday, Feb 8, 13 @ 11:56 am: Re: the ramp and Martire plan 1) As Steve Schnorf pointed out the other day, the actual “ramp” portion is over with. The growth now is from increased employee hiring (even though it is under Tier 2) and the lowering of assumptions on the rate of return. 2) With the Martire plan, the devil is in the details. It requires a flat $6.9B payment. The first year, at least, it will be higher than the current payment plan. As such, it frees up no money immediately or in the near future to spend on the State’s other needs. If it is passed and the pension problem declared ‘fixed’, then the State has to ADMIT to a spending / revenue problem outside of the pensions. 3) Actually starting to fix Illinois will require, at minimum, an extension of the “temporary” income tax. If you don’t want to muddle along for the next 5 - 10 years or so, it will also require additional revenue. The question is does the income tax go higher or does a sales tax on services get imposed? My guess is a tax on services; that potential pot is bigger. - Rod - Friday, Feb 8, 13 @ 11:57 am: How about something real simple to start with? Like preventing the earmarks we saw in HB190 as amended by the Speaker? Maybe, even going so far as to pass a real budget that did not require a supplamental appropriation in the form of HB190 to start with. - east central - Friday, Feb 8, 13 @ 12:05 pm: I agree that changes for retirees cannot be negotiated by a union. Thus changes for retirees are probably limited to health benefit changes, if upheld in court, and to changes that are voluntary on an individual basis. The question is whether a pension change would be constitutional if negotiated by a union for active employees and approved by its membership. - Nuance - Friday, Feb 8, 13 @ 12:23 pm: Let’s attack, capture North Dakota and take over fracking! They don’t have enough people to stop us. - cassandra - Friday, Feb 8, 13 @ 12:41 pm: I don’t believe that the union or any resident of this state can abrogate the constitution. There may be some issues of interpretation but really, I’m surprised that our elected officials continue to pursue this angle. - Small Town Liberal - Friday, Feb 8, 13 @ 12:47 pm: - There may be some issues of interpretation but really, I’m surprised that our elected officials continue to pursue this angle. - Interpreting contitutions has used up a lot of brainpower ever since Jackson was president. If it was always cut-and-dried, lawyers wouldn’t have to take 3 extra years of school. - Kasich Walker, Jr. - Friday, Feb 8, 13 @ 12:49 pm: I wish local and national reporting on IL budgetary problems focused more on the perspective presented by Geronimo above at 10:03 am. I’d rather see a state tax on passive income over $X amount than an expansion of sales taxes as proposed in Ohio. And when will we get out of the way of local entrepreneurs? Just locked up 5 more in Bloomington. http://www.pantagraph.com/news/local/crime-and-courts/police-bust-marijuana-operation-face-charges/article_4e1505c0-7168-11e2-9d7e-001a4bcf887a.html - PublicServant - Friday, Feb 8, 13 @ 12:49 pm: RNUG, I’m not sure exactly what you’re referring to when you say the “ramp portion is over”, but payments required by that law continue to increase at an ever steeper pace in the coming years, and that’s what makes Martire’s 6.9 flat so attractive. A bit more now, but then an ever lessening percentage of state revenues. - Downstater - Friday, Feb 8, 13 @ 12:58 pm: Make retirement income subject to state income taxes. That should raise a little money. =Our debt to GDP ratio is still lower than it has been in years past. Currently, US debt to GDP is about 96% versus 60% at the end of Clintons term. - retired and fed up - Friday, Feb 8, 13 @ 1:06 pm: A constitutional right is an individual one which can not be negotiated away by anyone, AFSCME or otherwise. - Small Town Liberal - Friday, Feb 8, 13 @ 1:12 pm: - Currently, US debt to GDP is about 96% versus 60% at the end of Clintons term. - I’m aware, it’s also at ~96% vs ~120% in the 1940s. Recessions aren’t the time to worry about debt, they’re the time to worry about jobs. When the economy recovers, you pay down the debt, exactly like Clinton. - Billy - Friday, Feb 8, 13 @ 1:20 pm: Tax retirement income and all who can will move out of state. Florida being a good destination and the state can try to find another solution to its revenue problem! - Grandson of Man - Friday, Feb 8, 13 @ 2:49 pm: “Recessions aren’t the time to worry about debt, they’re the time to worry about jobs. When the economy recovers, you pay down the debt, exactly like Clinton.” Some economist said the same thing in an article about Wisconsin’s bad economy, that Wisconsin is paying a price for its budget cuts. There is a paradox in places like Wisconsin, where there are jobs available, but people lack the qualifications for them. Cutting education seems counterintuitive. I support more investment in education. - RNUG - Friday, Feb 8, 13 @ 3:02 pm: Relatively speaking, taxing retirement income doesn’t really get you that much money. A while back I took some census info for age 65 & older incomes and, at the current 5% income tax rate, it will bring in about $1.5B to $2.1B or so, depending on assumptions about deductions. It would be even less is you excluded the first $20K or so to keep from taxing SS. I think the biggest untapped pile is a service tax; sales currently brings in almost $10B and most people estimate service income equal to retail sales. - Kasich Walker, Jr. - Friday, Feb 8, 13 @ 3:05 pm: Didn’t mean to confuse “retirement money” with passive income over $X. - Cherokee Threethreeg - Friday, Feb 8, 13 @ 3:23 pm: Public schools need to think “Home School”. The fact of the matter is America, state by state, has had the technology to “home-school” the country interactively for quite some time. It would avoid monumental costs in buildings, nauseatinglyrepetitive and unnecessary teachers, and offer the best of the best in resources and otherwise. Hire the best teachers to teach the best and most cutting edge materials in every subject and it’s recorded for additional review by students struggling what is more; even better. It should already be something they are working toward with respect to 9th-12th graders if nothing else. Busing, meals, and a whole variety of costs would be cut; some saved as to taxes and the rest to be sunk into science, design, and invention complexes or labs instead where students could advance science, industry, and otherwise. They should be embarrassed by the money wasted and the failings when compared to other countries internationally beyond that. It would elevate the entire k-12 game. Teachers would have entirely new opportunities also; the opportunity to gear towards research and the creation of better programs to advance students as just an initial matter. It would push the industry of academic creation, information, and distribution of resources to places never contemplated by many. Students would be crushing what they’re doing right now too. Labs and otherwise would have them curing cancer and other unbelievable things. Other countries gear their students in high school and junior high to excel at application. America is in a huge rut; one that isn’t very efficient or inexpensive either. The status quo is a huge drain on property taxes here as well. Illinois is so screwed up monetarily right now it’s unbelievable but yet we rank as bad as any state when it comes to science. What’s more, forward-thinking technological solutions would foster a whole new surge in technology manufacturing as well; people insisting their children get better educations and insisting the technology be created and manufactured in America to revive industry, standards of living, and tax bases as well. - Kasich Walker, Jr. - Friday, Feb 8, 13 @ 3:35 pm: Cherokee, a program that involves shutting down the buildings to have K-12 students stay home with some educational software and their laptops may need some fine tuning. - olddog - Friday, Feb 8, 13 @ 3:46 pm: @ Cherokee Threeg 3:23 p.m. I’ve got a better idea - why don’t we “provide for an efficient system of high quality public educational institutions and services” for a change? (Ill. Const. Art. I, Sect. 1) Then, and only then, we might do some of the wonderful things you’re suggesting. - Just The Way It Is One - Friday, Feb 8, 13 @ 4:04 pm: ===Then again, there are no magic wands here.=== I KNEW that was the one thing I, too, was hoping to hear him propose in that speech: The Magic Wand Bill. Oh well, what the heck–probably would’nt make it out of Committee anyways. ===But man, is there ever a lot of bad news.=== Well, here’s some GOOD news. TGIF! And if my memorey serves me correctly, White Sox Pitchers and Catchers “report” THIS SUNday! Even MORE good news for Illinoisans (or, Baseball fans in general, at least)….Have a great weekend! - Just The Way It Is One - Friday, Feb 8, 13 @ 4:05 pm: I hope my “memorY” is better than my spelling! Sorry, comments for this post are now closed.