Capitol Fax.com - Your Illinois News Radar

Policy Institute claims that Madigan’s tax idea is really just a “Chicago bailout”

Posted in:

Illinois

* It’s no surprise that the Illinois Policy Institute hates Speaker Madigan’s proposed 3 percent tax surcharge on incomes above a million dollars. But the group has connected the dots to the Chicago Public Schools’ pension problems. The proposal would distributes the billion dollars in projected revenues equally to school districts based on student headcount. Since CPS has the most students, it gets the most money, which the Policy Institute claims is basically just a “Chicago bailout”…

It just so happens that [Madigan’s] home school district is suffering from a collapsing pension fund and pension contributions that are set to triple in 2014.

Chicago Public Schools’ pension contribution spiked to $613 million in 2014, up from $208 million in 2013, and CPS doesn’t have the money to pay for it.

But rather than call for sensible pension reforms, Madigan would rather pour more state tax dollars into CPS’s pensions.

Nearly 20 percent of Madigan’s proposed tax, or $200 million per year, would go to CPS. With nearly 400,000 students, CPS makes up about one-fifth of the entire student population in Illinois.

Sure, all school districts in the state stand to receive more money from Madigan’s short-sighted plan (how much they’ll get depends on how many millionaires decide to leave); but it’s only CPS that’s dealing with such a large contribution spike.

Madigan’s plan makes his tax increase retroactive to January 2014. That means CPS would stand to gain a combined $400 million in new revenues for 2014 and 2015.

That money would help pay CPS’s increased pension contribution, but the district’s pension system is past the point of a quick fix. Which is what Madigan’s plan really is – a bailout with state tax dollars.

Madigan’s proposal can be read by clicking here.

Discuss.

posted by Rich Miller
Tuesday, Mar 25, 14 @ 9:42 am

Comments

IPi is really just a Tillman/Proft bailout.

Comment by William j Kelly Tuesday, Mar 25, 14 @ 9:47 am
20% = 1/5. Seems like a fair redistribution. I disagree with the whole premise of this tax and that it is a bailout, but have no issue with them getting 20% if that is the piece of the pie that they compose.

How about a 1.5% pension tax. If you receive a government pension, 1.5% of that will go towards the same things this tax would go towards. All this is in addition to the millionaire tax.

Comment by Wumpus Tuesday, Mar 25, 14 @ 9:52 am
Highly creative on IPI’s part.

Comment by Walker Tuesday, Mar 25, 14 @ 9:52 am
You really should issue tinfoil hats to help us decipher when you post their spew.

Comment by Reality Check Tuesday, Mar 25, 14 @ 9:53 am
–Sure, all school districts in the state stand to receive more money from Madigan’s short-sighted plan (how much they’ll get depends on how many millionaires decide to leave); but it’s only CPS that’s dealing with such a large contribution spike.–

That doesn’t make any sense. Every district would receive an equal “spike,” per capita.

Comment by wordslinger Tuesday, Mar 25, 14 @ 9:55 am
This is certainly a valid political/ perception concern if you represent any area outside of Cook & Collar counties.

Comment by JSlim Tuesday, Mar 25, 14 @ 9:56 am
“rather than call for sensible pension reforms…”

So what would be sensible pension reforms that would work and pass in the GA?

Comment by zatoichi Tuesday, Mar 25, 14 @ 9:57 am
IPI makes a key point. How many of these millionaires will leave the state? Also, how many of them will selectively shift income to avoid the higher taxes? And yes, the good folks downstate will again bailout Chicago.

Comment by Downstater Tuesday, Mar 25, 14 @ 9:57 am
Should Chicago get less than their proportionate share? Would that satisfy the IPI that it’s not City bailout? How much less should Chicago kids get than students everywhere else?

Comment by cicero Tuesday, Mar 25, 14 @ 9:57 am
As much as it hurts to admit, they’ll probably into something.

If it were more than that, Madigan would’ve found a way to equalize the formula, like the state aid formula. I’m not opposed to CPS getting more money, it’s the rich suburbs that would further benefit from this that makes me cringe.

Comment by TCB Tuesday, Mar 25, 14 @ 10:00 am
It is just plain common sense.

You don’t put money into a broken system, because it would be an immoral waste of money. When you waste money on stuff like this, it could have been going to address another problem that actually could benefit from the additional money.

Be smart here. When you demand that more water be added to a bucket full of holes, you not only waste the water - you fail the folks needing the water as well, and run out of water faster.

We cannot afford Madigan’s proposal as he presents it. While it may cause liberal Democrats to fall in blissful dreams filled with rainbows and unicorns, and satisfy any needs to penalize wealthy citizens - it is a fool’s dream that does not address reality.

It doesn’t matter where the money is taken, when government wastes money by funding a system that it knows is wasteful and broken - that is an immoral act and bad government.

Comment by VanillaMan Tuesday, Mar 25, 14 @ 10:02 am
===Sure, all school districts in the state stand to receive more money…===

People hate paying for pensions, so IPI, takes one fact, Madigan’s Millionaire Income Surcharge proposal, and associates it with another fact, the CPS Pension Payment increase due to skipping payments in previous years, and states that there is a causal relationship. This even though all school districts would be helped, but, hey, don’t let inconvenient facts get in the way of the IPI “analysis” of Madigan’s motivations.

Comment by PublicServant Tuesday, Mar 25, 14 @ 10:03 am
–And yes, the good folks downstate will again bailout Chicago.–

When were the other times? You are aware Downstate receives more back from state government than it pays in?

Comment by wordslinger Tuesday, Mar 25, 14 @ 10:04 am
===So what would be sensible pension reforms that would work and pass in the GA?

Not sure there was any mention of the “sensible pension reforms” passing.

The IPI’s idea of sensible pension reform is probably synonymous with pension elimination — unless you have a controlling interest in a campaign contributing operation receiving multiple state tax breaks and municipal subsidies.

Comment by Hans Sanity Tuesday, Mar 25, 14 @ 10:05 am
Last I checked Chicago was part of IL too.

Comment by Pensioner Tuesday, Mar 25, 14 @ 10:06 am
Not sure I understand why VanillaMan thinks it’s immoral to pay the pension costs for teachers when the benefits have already been accrued. If there is a legal and constitutional way to change the pension system, that’s great but does not solve the current shortage. 80% of this going to the outside of Chicago teacher pensions and 20% to Chicago. I continue to wait to hear a solution from the GOP on funding current pension shortages.

Comment by Bourbonrich Tuesday, Mar 25, 14 @ 10:08 am
=== And yes, the good folks downstate will again bailout Chicago. ===

Do you realize we have schools downstate?

Comment by olddog Tuesday, Mar 25, 14 @ 10:10 am
I would love to see the percentage of people making >1 million who live in Chicagoland vs downstate.

Comment by Johnny Q. Suburban Tuesday, Mar 25, 14 @ 10:20 am
If the Speaker wanted to only help Chicago and not all IL schools, then he would have proposed the tax surcharge on incomes over a million dollars be directed only to the school district in which the taxpayer resides and not distributed statewide. Lots/most millionaires in IL effected by this live in Chicago.

Comment by Illinois - You Put Me In A Happy Place Tuesday, Mar 25, 14 @ 10:21 am
== do you realize we have students downstate? ==

If revenues were not distributed equally based upon enrollment, then what distribution formula would satisfy the critics?

Comment by cicero Tuesday, Mar 25, 14 @ 10:21 am
Do you realize we have schools downstate?

Based on his post, I’m not sure you do…

Comment by Original Rambler Tuesday, Mar 25, 14 @ 10:23 am
This is victimhood scenario #2 for IPI.

Last week the IPI scenario was that Madigan’s surcharge was “an attack on the middle class, small businesses, and family farms.” Who are the supporters and funders of the GOP.

Of course that claim was completely false since none in the “middle class”, and the vast majority of small business owners and family farmers do not take home more than $1 Million in net taxable income, and thus would not be subject to it.

What next for IPI?

That this is really part of a conspiracy to kill the charter school movement?

or a really move to punish Rauner’s funders?

or something to trade off in favor of killing the term limits amendment?

Comment by Walker Tuesday, Mar 25, 14 @ 10:28 am
“satisfy any needs to penalize wealthy citizens”

Whip me, beat me, call me trash.

With due respect, this is standard victim-talk from the right. No one seeks to penalize the wealthy. When times are tough and the wealthy are doing well, as is the case today, it makes sense to go there to get some help. That’s probably why so many Illinoisans support the millionaire surcharge.

We also have to account for wealthy people who support the surcharge. I don’t know what their numbers are, but they exist.

“While it may cause liberal Democrats to fall in blissful dreams filled with rainbows and unicorns”

That would also include a good number of Republicans and Independents who also support the millionaire surcharge.

Comment by Grandson of Man Tuesday, Mar 25, 14 @ 10:29 am
If there is a legal and constitutional way to change the pension system…

Stop right there.

There is. It is the job of a Speaker, who has been in the freaking General Assembly since the French moved out of Illinois territory - to use his immense personal political power - to address the fundamental problem here.

Throwing money at it is immoral. Not fixing this problem while it bleeds money is also immoral. Giving up and throwing money at it is both immoral and stupid. While it might win you the next election, it is political and it is immoral.

No way am I saying that paying pensions is immoral. No way am I saying that paying what we have pledged to our public servants is immoral. So don’t throw grandma or grandpa at me as though I am robbing someone of their wheelchair in order to satisfy this argument.

We have to demand better from our elected officials to address the problems facing our state. If we did - there would be NO BRUCE RAUNER. There would be no need for billionaires to market their way into our governor’s mansion.

Bruce Rauner’s success is due to the fact that our state government and politics repeatedly fail and have been doing so for over a decade. No citizens should have to put up with Ryan, Blagojevich, Quinn, craptastic state bonds, busted budgets, a $100,000,000,000 busted pension fund - and keep right on voting into office the idiots who have sat on their haunches and watch it happen.

If the job was done - there would be no outsiders dumb enough to think they could do the job the insiders have publically demonstrated that they have been too corrupt or incompetent to do.

When a state gets as bad as Illinois is right now - you have no right to complain about the folks unhappy with the status quo - no matter how loony or foolish you think they are.

Comment by VanillaMan Tuesday, Mar 25, 14 @ 10:33 am
Between the 3% surcharge and potentially taxing pension income above $50,000, this state is in serious trouble if they think these are the solutions. Some people (not all) will leave, plain and simple. We should be encouraging people to stay rather than drive them away. The people that pay these taxes are the most mobile. This does not solve the pension problem, it only plays to the voters who think the wealthy need to pay for everything. Maybe the public Illinois pensions need to be inline with that of the private sector. Just sayin…. But also true is that both democrats and republicans, for years, have raided the pension funds rather than face up to good fiscal management. They both suck….

Comment by sloman2001 Tuesday, Mar 25, 14 @ 10:39 am
Until downstate realizes that it’s the ‘burbs that are more the enemy than the City, rhetoric like this will continue.

As for IPI, why does anyone even listen to them? I can’t think of many organizations with less legitimacy.

Comment by From the 'Dale to HP Tuesday, Mar 25, 14 @ 10:40 am
No one would have to “pour” any tax money into the pension systems if they hadn’t been raided to help everyone in the state. Those pension systems are OWED the money back. I’ll say it again. IMRF, where skipping or diverting payments is not allowed is funded at over 80%. All pension systems would be funded near that figure if the funds weren’t taken for use on others. In addition, when someone said people hate paying other peoples’ pensions, well, as a consumer I hate paying the money that lands in your 401k company contribution, your benefits and your social security…….

Comment by AnonymousOne Tuesday, Mar 25, 14 @ 10:40 am
Once again, let’s remember how this mess came to be: Mike M/John C/Rich D/Gov X failed to even minimally fund the pensions for well over 10+ years. The State Union’s leadership was silent as they endorced these individuals year after year and the membership meekly did not question the lack of funding. Now MM want’s to CYA for the Democratic Party and himself, put in the ever popular “soak the rich” plan. It’s still not going to work, just like the “temp” tax increase did not fix the bill backlog or help with the pension backlog. We simply spend too much more than we take in. The structural defect is out of the control. Pensions cannot grow anymore without doubling property, income and sales taxes. It’s not personal, just finance.

Comment by olok1973 Tuesday, Mar 25, 14 @ 10:42 am
“While it may cause liberal Democrats to fall in blissful dreams filled with rainbows and unicorns”

Or cause IPA to fall into apocalyptic nightmares filled with socialists and Satan’s army of tax and spenders

Comment by Jimbo Tuesday, Mar 25, 14 @ 10:43 am
I don’t need to address the crackpot institute’s propaganda. I would simply advise a legislator to ask the superintendents of his/her school districts how they want the legislator to vote on the measure. I suspect they would love the additional funds.

Comment by Norseman Tuesday, Mar 25, 14 @ 10:44 am
Actually, it’s the suburban schools that arguably are the greatest beneficiaries of this plan. Those are the schools with the highest property tax bases and which rely to a much lesser degree on state funding.

So, by distributing the revenue on a per capita basis, this plan would distribute dollars regardless of need. And the suburban kids, who arguably don’t need it, would get the same share as the kids that do.

I’m guessing that Tillman, as dense as he is, understands this and he understands that this plan may put suburban Republicans in a tight spot. And he’s trying to get out ahead of that by bashing Chicago.

Comment by Raymond Tuesday, Mar 25, 14 @ 10:46 am
I love the ideological contortions Tillman/IPI do. One might think they would favor forcing all school districts to be treated the same (read suburbs and downstate pay their pension obligations instead of the state), but nope, that’ll never happen.

Why do we give even the slightest consideration to these people again?

Comment by Chicago Cynic Tuesday, Mar 25, 14 @ 10:46 am
Raymond is also right.

Rich school districts don’t need the money at all. It is money wasted on them.

Comment by VanillaMan Tuesday, Mar 25, 14 @ 10:58 am
I don’t know if it’s a bailout. The IPI will use anything to push their defined contribution pension agenda. But doling out a large pot of education money equally to each pupil in the state, regardless of local needs or local resources, is highly regressive and irresponsible and exactly what Illinois’ failing education funding system doesn’t need right now.

Which is exactly why I’m convinced that this is just a short-term political move by the Speaker (akin to his brief support for a fracking moratorium last year) rather than a serious policy proposal.

Comment by Commander Norton Tuesday, Mar 25, 14 @ 11:07 am
== And yes, the good folks downstate will again bailout Chicago. ==

There are more millionaires in Chicago than anywhere else in the state. Do the math.

Comment by OldSmoky2 Tuesday, Mar 25, 14 @ 11:16 am
==Raymond is also right.

Rich school districts don’t need the money at all. It is money wasted on them.==

This is almost laughable in my district, which is on the surface well off. Yet, due to the fact that it is a upper-middle class bedroom community with no industrial base, we have had to cut classes, teachers, administrators, some transportation, aides, and extra-curriculars because of the cutbacks by the state. We are hurting and continue to become a shell of what we once were without additional funding. My guess is that there are a lot of other “well-off” bedroom suburban districts in exactly the same spot…

Comment by Bunkus Tuesday, Mar 25, 14 @ 11:59 am
Bunkus is correct that it is not always ease to igentify what is rich or a poor school districts. A district made up of upper middle class housing but little or no commerical acitivity may have smaller property tax bases than a person would think. On the other hand a district with low income housing could have a larger than expected property tax base if they have a large about commerical activity

Comment by RMWStanford Tuesday, Mar 25, 14 @ 12:07 pm
Just a quick reminder. CPS is the ONLY school district in the state which funds its own pension.

Every other district is part of TRS.

How about we roll the CPS pension into TRS, then use the surtax money to fully fund TRS?

In the end, this is really a bailout of downstate school districts. I’d be willing to guess that the overwhelming majority of households with annual income of over $1 million/year live in Chicago and the suburbs. Yet, the money is going to be distributed based on total student enrollment in each district. So, if 90% of the millionaires in Illinois live in Chicagoland, but Chicagoland only has about 2/3rds to 3/4th’s of the state population, then the net impact of this is, yet again, a flow of wealth from Chicagoland to the great expanse of empty farmland.

Without Chicagoland, Illinois would like a lot like Iowa, only without all the big cities.

Comment by jerry 101 Tuesday, Mar 25, 14 @ 12:27 pm
Chicago’s GDP: $524 billion (http://www.brookings.edu/~/media/Multimedia/Interactives/2013/tentraits/Chicago.pdf)

Illinois GDP INCLUDING Chicago: $695 billion (http://research.stlouisfed.org/fred2/series/ILNGSP)

How about this: Chicago no longer gets a dime from the state but we pay zero state taxes.

Deal?

Comment by Will Caskey Tuesday, Mar 25, 14 @ 12:35 pm
Call IPI cynical. Call them idealistic. Call them on being unrealistic sometimes. Don’t call them stupid. Whether you like their observations or solutions or not, it appears they and MJM are the only ones throwing them out there for each side to beat up on. You just can’t start with a fundamental argument that taxes aren’t high enough. They’ll never be high enough if you don’t fix the fundamental problems that cause the system to be a bottomless pit. YDD is absolutely right when he raises the level to call this immoral. It is immoral. You’ve got two sides speaking past one another playing tug of war. The promise of a decent education for every child is the rope. Once they start with the students and work their way backwards they’ll be on to something. We’re always seeing this problem attacked from a position of Teacher-centric instead of Student-centric. Fix the foundation. Then build.

Comment by A guy... Tuesday, Mar 25, 14 @ 1:41 pm
@olok1973:

The pension problem is more than just a Democrat problem. I get so sick and tired of the dishonesty of people in this debate.

Comment by Demoralized Tuesday, Mar 25, 14 @ 1:46 pm
Will, too broad. Let’s make it neighborhood/ward by neighborhood/ward or even person by person.

Comment by Wumpus Tuesday, Mar 25, 14 @ 1:48 pm
I don’t think it’s broad at all. No one whines about, like, Naperville being a drain on the budget. And Rich has noted before that regional inflows/outflow analysis isn’t done because it’s “controversial.”

So let’s not measure it! The state can be a downstate pension fund with a police force and Chicago can take care of its own affairs.

That would be a win for conservatives right?

Comment by Will Caskey Tuesday, Mar 25, 14 @ 2:20 pm
If our downstate friends truly want to prevent one part of the state from subsidizing another, they should ask Madigan to amend his plan so the surcharge revenues are distributed to schools solely in the counties where the millionaires live. Will any of our downstate friends take that deal?

Comment by Anon Tuesday, Mar 25, 14 @ 2:34 pm
IPI favors a “consumption tax”….what would that cost Chicago?

Comment by flea Tuesday, Mar 25, 14 @ 3:35 pm
The WSJ editorial is just out-of-town-stupid. They do it all the time on their edit pages.

Their news pages still maintain very high standards, imho.

Comment by wordslinger Tuesday, Mar 25, 14 @ 3:53 pm
How about adopting California’s approach of taxing retirement income based on where the income was earned?

Comment by Plutocrat03 Tuesday, Mar 25, 14 @ 4:18 pm
WS, without causing you to faint, let me say that I agree completely with your opinion on the WSJ.

Comment by A guy... Tuesday, Mar 25, 14 @ 5:21 pm
guy, I don’t call them stupid, I call them morally challenged. They deem it a huge scandal to point out that the largest school district in the state will get the most money in a per-student distribution. They are telling the truth, but in a way intended to mislead. I suspect that if we examine the proposal carefully we will find that the smallest school district in the state will get the very least money in a per-student distribution. Shocking!! Duh!

Comment by steve schnorf Tuesday, Mar 25, 14 @ 9:44 pm
Well said Steve!

Comment by Norseman Tuesday, Mar 25, 14 @ 10:50 pm