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Topinka: State could owe $8 billion at end of fiscal year

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Illinois

* When Gov. Pat Quinn said he wanted to borrow $8.7 billion to pay off past-due bills, lots of people were skeptical that he needed so much money. Well, he may not have been that far off…

Illinois is on track to end fiscal 2011 with $8 billion in unpaid bills and other obligations, the state comptroller said on Wednesday. […]

The $8 billion owed to school districts, hospitals, social service agencies, as well as $1.2 billion due for state employee health insurance and $850 million in corporate tax refunds, would match the amount of unpaid obligations the state had at the end of fiscal 2010, according to the comptroller. […]

Topinka, however, said her projection could change depending on actions taken by state lawmakers.

* Despite the ongoing problem, state Sen. Bill Brady wants to eliminate the estate tax…

We all recognize Illinois’ dire fiscal condition and the need to finally come to grips with our out-of-balance budget, but siphoning more money from families and businesses is not the solution. A tax on dying in Illinois will be especially onerous for small-business owners and family farmers, who could be faced with the prospect of selling their businesses and farms to pay the tax collector.

Only 17 states impose their own estate taxes. Illinois imposes an estate tax on estates valued at more than $2 million. The applicable rate depends on the size of the estate and increases with the size of the estate, starting at 8 percent and going as high as 16 percent, on top of the federal 35 percent estate tax rate.

* Sen. Brady also has a pension solution that appears to rely on a lot of magic. First, he would put all current employees in 401(k)-type programs, and then…

These changes still leave the system’s legacy cost, estimated by Messrs. Rauh and Novy-Marx at $140 billion. Ideally, the majority of that will be funded through future investment growth and a modest change to cost-of-living adjustments. Challenges include a state budget that cannot afford unreformed costs and citizens who are not undertaxed. The incentive of a solvent pension plan should motivate government officials and union representatives to reach an acceptable compromise.

* Meanwhile, the Commission on Government Forecasting and Accountability estimates that a service tax could yield $4-8 billion a year, depending on what was taxed, but don’t hold your breath…

A new report says Illinois is ignoring as much as $8 billion in potential tax revenue, but there is little support from either political party in Springfield for a grab at the money.

The Legislature’s Commission on Government Forecasting and Accountability took a look at how Illinois taxes services, everything from providing electricity and natural gas to cutting hair and lawns. The report states that Illinois does not tax many services — only 17 — and that other states tax many more, the average is 56. COGFA’s analysis estimates that the state could generate between $4 billion and $8 billion if lawmakers were to expand the service tax base.

* Related…

* State sales tax loophole alarming for Cook County - Some say legislation could lead to businesses fleeing, millions in lost revenue

* Illinois RTA Decries Shell Game

* Press release: Governor Quinn Announces Full-Fill Aerosol Plant Expansion - $2.5 Million State Investment Package Will Help Danville Company Add Approximately 150 Jobs

* Quinn has worker’s comp reform proposal, but no details

* House approaches looming deadline to pass budget

* Editorial: No money? Big problem

* VIDEO: Mike Tryon on Service Taxes

* VIDEO: Elaine Nekritz on service taxes

* VIDEO: Rep. Roger Eddy on budget

* VIDEO: Rep. Sara Feigenholtz on budget

posted by Rich Miller
Wednesday, Apr 27, 11 @ 11:44 am

Comments

====brady - siphoning more money from tax payers is not the option===

I thought Brady wanted the State to operate like a private company does. Every time I go to the store some private buisness is raising its prices and siphoning away more of my money to cover their operating expenses.

SO governemnt should not be un like a private business, instead it should produce goods and services for less then they cost? Where do i sing up to get Brady to build me a house on land I pay less then what it cost him and for less money then he spends building it, after all he shouldnt siphon my money away with his private tax er sales price, on his work.

Comment by Ghost Wednesday, Apr 27, 11 @ 11:59 am
So what’s the over/under number on the budget deficit this year?

Comment by Cincinnatus Wednesday, Apr 27, 11 @ 12:27 pm
In addition to eliminating the Estate Tax, I’ve heard that Senator Brady also wants to replace township government with duchies.

While estate sales count for 57% of farm sales in Illinois, I don’t think there’s much evidence that farmers are being “forced” to sell. In most cases, heirs don’t want to be farmers, and if the estate tax gives them an excuse to get out of the family business, hurrah for them.

On the upside, 56% of buyers are other local farmers who want to expand their business, so the farm transfers seem to be good economics to me.

Comment by Yellow Dog Democrat Wednesday, Apr 27, 11 @ 12:52 pm
YDD,

Here is an excellent report by the USDA that can provide some context:

http://www.ers.usda.gov/publications/aib751/aib751-02/aib751-02.pdf

The report indicates that the impact of estate taxes can be very large on families. I tried to dig a bit to flesh out your anecdotal claims about farmers and their heirs and their being forced, but I came up short.

Comment by Cincinnatus Wednesday, Apr 27, 11 @ 1:37 pm
I don’t think the estate tax is a tax on dying, it’s a tax on inheriting. I do think it should mirror the current federal estate tax with the $5 million per person and $10 million per couple exemption to help protect small businesses.

Comment by Ahoy Wednesday, Apr 27, 11 @ 1:38 pm
–These changes still leave the system’s legacy cost, estimated by Messrs. Rauh and Novy-Marx at $140 billion. Ideally, the majority of that will be funded through future investment growth and a modest change to cost-of-living adjustments. –

Huh? If you can make the $140 billion nut through investment growth and modest COLA, there’s no problem to fix.

What in the world is he talking about?

Comment by wordslinger Wednesday, Apr 27, 11 @ 2:15 pm
wordslinger,

As a Republican, and someone who likes Brady personally, I wish he’d take the MacArthur route…

Comment by Cincinnatus Wednesday, Apr 27, 11 @ 2:32 pm
Eight Billion in the whole. A reasonable borrowing plan to pay this off and then absolute spending cuts to ensure no further overspending seems to be the only way out.

Comment by downstate hack Wednesday, Apr 27, 11 @ 2:33 pm
@Cincinnatus -

4 percent of farms pay inheritance taxes…only for farms worth $2 million or more…and they have 14 years to do it when inherited by a family member?

I’ll tell you what, if Brady was looking for some folks that are really suffering, he should have looked a little harder.

Let’s be honest: Republicans like talking about the “Death Tax” because it plays well among their base.

This ain’t about saving the family farm, or small business owners, and it certainly isn’t about fixing the state budget.

Comment by Yellow Dog Democrat Wednesday, Apr 27, 11 @ 3:49 pm
Sorry
Someone who wins the genetic lottery should pay the same 35% I would pay on the state lottery. I get real tired of hearing how the family farm needs to be saved but the family factory job is best done overseas. If corporate farms can do it better is that not the end all and be all.

Comment by Bemused Wednesday, Apr 27, 11 @ 10:00 pm
The Novy report does not say that the Illinois pension undefunding is $140B. Does anyone bother to actually read it?

What it does say is the underfunding calculation would be $140B IF the pension systems used the discount rate that Novy thinks they should-about 3%. He makes an actuarial argument. However, no public pension system in the country that I am aware of uses anything close to 3%. So only if all the actuaries for all the public pension systems in America are wrong is Novy right. I have read him subsequently quoted as saying that that discount rate should not be confused with assumptions on returns, which I believe is what the Illinois systems use as their basis for estimating their liability at around $80B.

Comment by steve schnorf Wednesday, Apr 27, 11 @ 10:29 pm