TO: Members of the Illinois General Assembly

FROM: Greg Baise, President & CEO

Illinois Manufacturers’ Association

RE: Capital Infrastructure Program

DATE: June 16, 2008

Members of the Board of Directors of the Illinois Manufacturers’ Association (IMA) met last week, and among other things, discussed the proposed $34 billion Illinois Works Program designed to build and repair Illinois’ aging infrastructure. Manufacturing companies have a vested interest in ensuring that Illinois maintains its roads, bridges and other critical infrastructure needs because they are used to move products and supplies while providing a means for employees to get to work. While the IMA supports an infrastructure program to meet the state’s basic needs, the IMA Board voted to oppose the massive Illinois Works Program for the following reasons:

1. Revenue Sources are Unstable

The $34 billion Illinois Works Program relies on three major revenue sources including an expansion of gambling, partial lease of the State Lottery, and increased taxes on motor fuel. Unfortunately, the state revenue sources that would fund this massive new program are suspect and could create additional hardships on Illinois taxpayers.

Illinois gaming revenue is down 17 percent since the start of the year due largely to the statewide smoking ban and economic downturn in the economy. Despite the slumping revenue, and possible new competition from neighboring states, Illinois Works relies on a huge expansion of gaming in the form of new casinos and additional gaming spots at current casinos and horse tracks to fund the infrastructure program.

Under Illinois Works, the State Lottery would be leased to a private vendor for fifty years for a one-time payment of $10 billion. In the past two decades, the Lottery has been a stable source of revenue, providing nearly $600 million year-in and year-out for the Common School Fund. According to proponents’ stated plans, Illinois would be leasing a $30 billion state asset for a one-time payment of $10 billion. It does not make financial sense to sell or lease a state asset for 30 cents on the dollar, especially in light of the time-tested reliability of the revenue it has made available for our children’s education.

Finally, Illinois Works creates a funding gap in the state budget by diverting the sales tax on motor fuel from the General Revenue Fund. While the state has experienced an increase in sales tax revenue because of rising gas prices, there has been a corresponding decrease in sales tax revenue coming from the sale of all other goods. Illinois sales tax revenues are performing poorly, growing less than 1 percent over last year. This means that there is no additional tax revenue to patch the hole in the General Revenue Fund.

2. Illinois Works Lacks Transparency

At a time when the state is facing a fiscal crisis, owing billions of dollars to health care providers and facing the worst funded pension system in the United States, it defies common sense to pass a massive new public works program that contains billions of dollars in unallocated, lump-sum spending or does not contain a mechanism to evaluate the merits of a project. Does anyone in this state truly believe having huge sums of cash deposited into nebulous accounts with no true guidelines about how it is to be spent is good public policy?

Illinois’ next public works program should be fully transparent to ensure businesses and taxpayers that projects have merit and are not based on politics.

3. Illinois Works is Excessive

In 1999, the Illinois FIRST program totaled $12 billion to fund countless projects across the state, some of which are on-going today. The Illinois Works Program is nearly 3 times larger that the state’s last infrastructure program and seemingly contains a laundry list of projects. Because of the ongoing financial problems that plague Illinois, the state’s new infrastructure program should be smaller and smarter – accessing the federal matching dollars and addressing only the most pressing needs. Illinois cannot afford a massive new program using unstable revenue.

Moving forward, the Illinois Manufacturers’ Association is prepared to work with you to help address our state’s infrastructure needs in a smart and meaningful way.