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Borrow, defer and cut

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* Gov. Quinn signed a bill yesterday appropriating money for the MAP grant scholarship program without actually funding it…

State lawmakers last week agreed to appropriate an extra $200 million for the program but without deciding where to get the money.

The “best and quickest way” to get the revenue is with the passage of a statute allowing for so-called interfund borrowing, Quinn said Sunday. That would enable the state to borrow money from some state accounts that have large surpluses. He plans to identify the accounts this week, he said.

“It’s a financial technique used by many, many states,” Quinn said. “We have proposed a bill to the General Assembly about that. We hope to get it passed.”

More…

After students and university presidents took their pleas to Springfield to restore the grants, Quinn announced a plan to borrow $1 billion from some of the state’s roughly 600 special funds. While the state needs only $205 million to pay for MAP grants for the spring semester, Quinn on Sunday did not say what the remaining roughly $800 million would be used for. He has said the dollars could be used for “unmet needs,” such as the state’s backlog of medical bills.

Any money borrowed from accounts would be repaid in 18 months, Quinn said.

Since a tax hike appears off the table for the foreseeable future, borrowing, deferring and cutting is the only way out of this mess - even though it just buries the state deeper and deeper in red ink.

* But since both Democratic gubernatorial candidates are battling over their dreamy tax hike plans, the Institute on Taxation and Economic Policy out of DC has a new suggestion for Illinois policy makers: Implement the original Pat Quinn tax hike plan now and then do Dan Hynes’ plan later…

While much of the press coverage of these two sets of recommendations has emphasized their differences, the reality is that Illinois policymakers would be wise to adopt both of them. In the short run, given the depth of the state’s fiscal woes, the restrictions imposed by its constitution, and the extremely regressive nature of its tax system, the most progressive, most economically sound, and most timely option available to state legislators for generating additional tax revenue is an increase in Illinois’ single income tax rate. In the long run, a graduated income tax would be preferable, as it would further enhance tax equity and would put Illinois’ tax system on a more sustainable path. The former does not – and should not – preclude the latter, nor, due to the time likely required to enact it, is the latter a complete substitute for the former. Indeed, policymakers should view an increase in the existing single income tax rate as a bridge to a graduated rate structure, a bridge that could be removed once that new structure is in place.

The problem, of course, is that Quinn’s plan was never taken all that seriously. There were so many exemptions that the tax rate had to be increased too high to produce needed revenues. Quinn eventually backed all the way off his proposal by the end of the legislative session. Then again, the Hynes income tax hike plan won’t be all that easy to pass, either. Keep that in mind when reading this excerpt from ITEP’s press release…

In particular, the report finds that:

· the income tax plan put forward by Governor Quinn in March 2009 would reduce the taxes paid by 27 percent of Illinois residents – and leave them unchanged for another 15 percent – yet would still generate roughly $3 billion, if in effect in 2011. Of that $3 billion, close to $2.5 billion would come from the wealthiest fifth of Illinois residents.

· the Hynes proposal to create a graduated income tax would represent an even more targeted approach to generating additional revenue, but would be less effective in helping to balance the budget. Approximately 95 percent of the additional $2.2 billion the Hynes plan would yield if in effect in 2011 would be paid by the richest 1 percent of Illinois taxpayers, taxpayers whose average income is expected to exceed $1.5 million that year.

Again, I seriously doubt that either plan is likely to see the light of day any time soon, unless the political climate abruptly shifts.

* Meanwhile, almost nobody wants to talk about one of the biggest elephants in the room: The total tax exemption on pension incomes. The phrase “Seniors ride free” doesn’t just apply to mass transit…

Give up the pass, seniors. The free rides are over. Not right away but soon enough. What never should have happened in the first place is about to be fixed.

If common sense prevails, the General Assembly soon will overturn a ridiculous law passed last year allowing anyone 65 or older to ride for free on the Chicago Transit Authority, Metra and Pace.

We apologize to our elders, but it was only a matter of time before you had to pay up again.

Thoughts?

* Related…

* AP: : Hynes, Quinn gloss over tax facts

* Sun-Times editorial: Illinois needs a new tax system — one that treats lower earners more fairly and generates more income. Until we get it, we’ll keep romping in dreamland until the state goes broke.

* Hynes: Plan to fix budget won’t be popular: Next, he said, the state must look to a number of revenue measures, including expanding the sales tax base to include “luxury” services such as elective cosmetic surgery, country club memberships and dating services; expanded gaming; and closing some corporate tax loopholes. The “toughest part,” he said, will be persuading voters to adopt a new, graduated state income tax, as opposed to the current flat 3 percent individual income tax.

* Zorn: Which political TV ad for governor should we trust?

* Free rides for seniors proving too costly for RTA: A University of Illinois at Chicago Urban Transportation Center analysis found that free rides for seniors and disabled individuals will equal a loss of more than $1 billion for the CTA, Pace and Metra by 2030.

* State just digs another hole with MAP vote

* Legislature reinstates MAP Grant on Lobby Day - Some wonder if controversy was real

* McCarter: Democrats plan new sales taxes: But Steve Brown, the spokesman for House Speaker Mike Madigan, shot down McCarter’s prediction that new taxes are on the agenda when the statehouse’s next regular session begins in January. “I would say his perception is not terribly accurate,” Brown said.

posted by Rich Miller
Monday, Oct 19, 09 @ 9:49 am

Comments

Until you can prove that a legislator can propose ending the free rides for seniors without committing political suicide, the General Assembly won’t touch that third rail!

Comment by fedup dem Monday, Oct 19, 09 @ 10:00 am
The MAP “crisis” was a scam. Create a problem, barnstorm the state then find a solution (not a real one, by the way).

All this nonsense about $200 million when you’re $10 billion in the hole is just goofy.

Even if Quinn’s or Hynes’ plans were approved, it’s not nearly enough revenue to get out of the hole, and the stimulus money is going to go away.

There’s a reckoning coming. I don’t see how Medicaid eligibility, K-12, and Human Services don’t get whacked. And the share of income tax to local governments has to look tempting as well.

Comment by wordslinger Monday, Oct 19, 09 @ 10:04 am
I don’t see much hope for a tax increase in any form, and these short term borrowing solutions are only making things worse. It’s time for the State to start with a zero budget and only fund up to our current revenues.

Comment by Pelon Monday, Oct 19, 09 @ 10:16 am
Well, if there is a reckoning coming, it’s hard to
believe, because Houdini Quinn keeps pulling money out of hats whenever the pressure (or possible negative impact on his election bid) gets too heavy. Why would we believe he couldn’t keep doing it.

And if there are funds with “large” surpluses, what are they? Why haven’t the funds been spent already. How much money is in these funds and why wasn’t this borrowing part of the original budget plan.

Were these funds the same ones that our Blago was frequently criticized for “sweeping.” But is it
OK for our Pat to do it?

Ah transparency. It ain’t there. No wonder it’s so hard to get ordinary citizens to support a tax hike. Not only do they believe, like me, that huge sums are going to fall of the money truck into the laps of connected Dems and their relatives and campaign contributor no matter what happens, but our Pat keeps doing the magic tricks. Why worry?

Comment by cassandra Monday, Oct 19, 09 @ 10:19 am
The spiral cannot continue. Perhaps Gov. Quinn should read Mr. Kipling.

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peters to pay for collective Paul;
But though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said “If you don’t work you die.”

Comment by Fan of the Game Monday, Oct 19, 09 @ 10:21 am
Senior free rides should disappear. The half-off deal was plenty generous enough. Ever ride a Metra train before, and see all the law firm, accounting firm etc. partners in $1,000+ suits and $250+ shoes wave their free card at the conductor while the blue collar guy pays his full share? Enough said.

Comment by Niles Tonwship Monday, Oct 19, 09 @ 10:23 am
Wordslinger is right. The problem is not just the politics of the situation, it’s that no solution on anybody’s radar screen comes anywhere near to solving the budget problem. What’s surprises me here is the passivity of the business community in all this - a fiscal tsunami is going to be a disaster for business up and down the line.

PS As someone who has benefited from free rides, I have no problem giving them up, and voting for someone who takes them away…

Comment by erstwhilesteve Monday, Oct 19, 09 @ 10:30 am
OMG…a non IL paper suggest that state fiscal problem could spread beyond IL. That might hurt StateWideTom’s effort to blame it all on the Ds.
Here is a little taste from the WSJ…
By S. MITRA KALITA
Middletown, Del.

…When Mr. Markell, a Democrat, took office 10 months ago, he inherited an $800 million budget shortfall. He has cut state employees’ salaries, grounded the state airplane and closed the Museum of Small Town Life, among other measures. Now, he is traversing his tiny state to tell constituents that his budget problems are theirs, too, and that the problems aren’t going away soon. It’s a tough message for governors to deliver after decades of expanding state services. But the recession is giving them little choice and forcing them to try to change voters’ expectations about what government can provide.

Nationwide, state-tax collections plummeted in fiscal year 2009 by an average 9.2%, adjusted for inflation, the Nelson A. Rockefeller Institute of Government at the State University of New York said last week. In the last three months of the year, collections declined by 16.6% from the same quarter a year earlier.

With wages weak and jobs few, income- and sales-tax revenue is falling, and governors are bracing themselves — and their constituents — for things to get worse. “We are looking at a multiyear problem hitting every single state,” said Robert B. Ward, deputy director of the Rockefeller Institute. “The depth of decline right now is really unprecedented in modern times.”

States also are contending with great uncertainty. Indiana recently discovered it was $166 million short of its forecast for September tax collections. Fresh from passing a two-year budget, Gov. Mitch Daniels, a Republican, warned that more cuts could be on the way, talking of possible layoffs and trimmer school budgets…”

Comment by CircularFiringSquad Monday, Oct 19, 09 @ 10:32 am
I’d like to hear from some seniors before I decided. $22k a year is an awfully low bar. And how many accounting firm partners are working after 65 and also riding Metra. A negligible
number. If we’re talking outrage, how about unionized state employees getting 4 percent raises every year under the current 4-year contract. Negotiated by….Democrats, of course.

Seniors are more likely to suffer extended periods of unemployment than younger folks but they, like so many Americans, are suffering from the current recession–value of houses has dropped, deferred comp accounts have dropped, medical costs going up (even Medicare), and
increasingly the kids can’t help, because of their own struggles with the current economy.
They have less time to make it up. Why would our Pat single out these “selected Peters” for a hit. If that goes over smoothly, will that be a signal to go after their pensions by taxing them. And so on.

I don’t think Quinn has made enough progress on the shared sacrifice program for any “selected
Peters” to give up benefits without a fight. Even
small amounts of government aid can be very helpful–and not just to the under $22k crowd.

Comment by cassandra Monday, Oct 19, 09 @ 10:37 am
Word is spot on. How many times does Quinn think he can cry wolf and then come up with funds from some source or another and still maintain any credibility? Who does he think he is, the CTA? Another problem has just supposedly been solved. Now he will have another $1 billion in these funds to “borrow”? It is not looking very good for those of us waiting for a tax increase. If they won’t vote for one before the primary, why would they vote for one right before the general? If this wasn’t so sad it would really be funny.

Comment by Bill Monday, Oct 19, 09 @ 10:37 am
Considering the initial reluctance of PQ to rescind the seniors’ perk for mass transit, I can’t envision any scenario in which the governor or the legislature discovers the political fortitude to even consider ending tax breaks on pensions.

Again, it’s long past due to seriously debate applying the sales tax on services, coupled with a reduction in the rate. In addition to being progressive in general, wouldn’t it also deliver more revenue to the metro mass transit systems by virtue of the 2008 doomsday tax increase?

Comment by The Doc Monday, Oct 19, 09 @ 10:38 am
Cassandra—”Well, if there is a reckoning coming, it’s hard to
believe, because Houdini Quinn keeps pulling money out of hats whenever the pressure (or possible negative impact on his election bid) gets too heavy. Why would we believe he couldn’t keep doing it”.—

Ever wonder, Cassandra, where some of that ‘pulled out’ money is coming from? Or where some ’surplus’ fund is found to borrow from? Guess I can’t make the state pay their share of bills on time, but I do happen to expect when a chunk of money is pulled from my paycheck that that money go for and when that money is entended for.

Comment by Cindy Lou Monday, Oct 19, 09 @ 10:42 am
I won’t vote for anyone — repub or dem — not advocating a tax increase. Enough of this. This is crazy.

We need a tax increase and I’m only giving my vote to the guy or gal who has cajones enough to push it through.

The legislative cowardice is appalling.

Comment by macbeth Monday, Oct 19, 09 @ 10:43 am
Last Thursday there were hundreds of students from all parts of the state in the capitol making a lot of noise about MAP funding. They were loud and full of energy. By day’s end, they were told they were successful in averting the crisis. The MAP grant had been saved. And now they will go back to studying and be silent until they are told again that the program that helps pay their tuition is about to go away.

Right there is the crux of the problem. No one is really connecting the MAP “crisis” with the broader, very real budget crisis for these students and others. Has it been made clear to them that the reason there was ever any question about MAP funding is because there is a structural deficit in Illinois? Will their voices be tied into the more fundamental call for new revenue? Will they show up again in January or the spring when there is a bill on a tax hike in motion to make their voices heard again? If they simply pop up when there is a specific threat to their pet issue and disappear again when fake money is found to deal with their issue, we are never going to get the revenue reform we need.

We need to connect the dots for those students and for everyone else that is worried about their pot of money. At the risk of sounding like I do not care about the needs of the students receiving MAP funding, Quinn needed to step up and say, “No. We cannot fund it. The money is not there. This is why we need a tax hike. Get behind that, and there will be resources for MAP in the future.” That is how you get folks outside of unions and service providers motivated on this issue.

Comment by Montrose Monday, Oct 19, 09 @ 10:53 am
Bill said, “who does he think he is, the CTA?” Good analogy and lol, Bill.

AA thinks you can take Filan out of GUMBy but you can’t take GUMBy out of Filan, if you will.

Still no bonds for capital bill or pensions, but cash in the Road Fund. Also a nice FU to Local 150 that endorsed Hynes. Unbelievable.

Comment by Arthur Andersen Monday, Oct 19, 09 @ 11:03 am
And how many accounting firm partners are working after 65 and also riding Metra.
———————————

Check out both Union Pacific Lines (NW and N) and you’ll see plenty.

Comment by Niles Tonwship Monday, Oct 19, 09 @ 12:23 pm
Niles Township, I have the most brilliant football analogy worked out about your candidate for governor, but I don’t dare post it. My best guess is that you wouldn’t like it, but you would find very little to refute. I’m guessing you watched the Bears lastnight. I’m guessing you probably aren’t too please with their performance.

Comment by Will County Woman Monday, Oct 19, 09 @ 12:52 pm
As a parent, I probably wouldn’t be too pleased if my child too a day out from his expensive tuition that I or his father or both of us sacrificed to give him/her, when apparently there was an “easy” solution all along.

I’d be very concerned about the motivations behind the actions that had been taken over the course of the last month leading up to , and encouraging, the student rallying in Springfield last week.

I’d hate to think that someone put his/her political interests ahead of my family’s real concerns about my son or daughter being able to attend college the next semester. I would hope that neither my child nor I were exploited by the creation of fear and pandemonium.

I probably would have prefered political leadership that when made aware of the lack of MAP funding for the next semester stayed in his or her office and issued a statement to the following effect:

I, as Governor Miss Know-it-All WCW, will do everything in my power to help Illinois students who rely on MAP funding college in the Spring of 2010. I am currently working with my administration to find a solution that will help students. While the state of Illinois is facing difficult financial times, I do not want students or families, or college administrators, to panic because I am confident that a solution can be found for MAP. I fully intend to lead in the effort to find a solution.

@ monstrose,

I would not have told students and families that they are just SOL for the spring, as that would have been mean. But, I do understand where you are coming from.

Comment by Will County Woman Monday, Oct 19, 09 @ 1:13 pm
My late dad’s pension is all my elderly mom has to live on, so I would say no to taxing that. And a few million AARP members would probably agree.

Comment by Gregor Monday, Oct 19, 09 @ 1:20 pm
As I recall the RTA used to just allow elderly passengers to ride on reduced fares. $3.00/ride is a bit steep, for most people regardless of age, but maybe the RTA should just go back to what it used to do with certain riders and just allow them to pay a 50 percent reduced fair, based on means.

Comment by Will County Woman Monday, Oct 19, 09 @ 1:26 pm
I understand that much of the transfer of “surplus” funds will be coming from the road fund.

Wasn’t it just a few months aga that we were told by Quinn, Madigan et. al. that we needed a $31 billion capital bill to fix our “crumbling roads and bridges” and that this couldn’t be done without increased fees, gambling expansion, and borrowing for a capital bill?

Well now it seems that there is more than adeqaute funding available to take care of those “crumbling infrastructure” needs with the money from motor fuel, license, and fuel sales taxes.

In fact, there’s a SURPLUS!

I guess Spingfield CAN fool all the people all of the time, if the right people can wet their beak and the press gives them a pass!

Comment by PalosParkBob Monday, Oct 19, 09 @ 1:42 pm
Hynes v. Quinn

I think I might get it now…maybe Pat Quinn wasn’t railing against the Machine and system for years because he disliked it. Maybe he was railing against the Machine and system for years because he was not a part of it?

In his first campaign ad Pat Quinn attacks Dan Hynes suggesting that Hynes is part of the same old games. But, it is actually Pat Quinn who is part of the same old games, and here’s how:

Hynes isn’t playing Blagojevich style shell games of raiding money from funds to pay for things today, and doesn’t propose to do so, but Quinn is and wants to. “I’ll glady pay you next Tuesday for a hamburger today.”

Hynes isn’t endorsed by the democrats appearing on the Sun-Times list of pols who asked Blagojevich for favors only to do him in, in the end. Quinn is endorsed by many of the democrats on the Sun-Times’ list.

Hynes isn’t the Dems’ slated candidate, but Quinn is. Hynes cautioned the Dems against slating, as a way to distance itself from its old ways—the ways that brought Blagojevich into office and kept him there for a second term. Quinn on the other hand not only eagerly sought out being the Machine candidate, he welcomed it with arms open wide, as if it were the best thing ever.

Throughout all of 2006 Quinn went around the state of Illinois and appeared on TV numerous times saying that Blagojevich was “honest,” but Dan Hynes did not.

Hynes represents change from the old games played all too often in Illinois’ democrat party—the games that brought us Blagojevich. Meanwhile, Quinn is playing some of the games in the book here—the same book that brought us Blagojevich.

Insanity is doing the same bad things over and over, and expecting a different or better result?

Comment by Ghost of Christmas Past Monday, Oct 19, 09 @ 2:38 pm
–I think I might get it now…maybe Pat Quinn wasn’t railing against the Machine and system for years because he disliked it. Maybe he was railing against the Machine and system for years because he was not a part of it?–

Bingo. Quinn’s not from Mars. He’s a good Irish Catholic lad from Fenwick. He didn’t want to pay his dues to the old padrones (sorry, mixed ethnic metaphor). He’s always tried to cut in front of the line, with mixed success.

Having said that, there’s no “Machine” like there used to be. Now, there’s a loose collection of political cutthroats and scalawags. They can come together at times, but will sell each other out to the federales at times, too (you think the feds dug through volumes of the city budget for the Hired Truck stuff?).

But a Machine? Not like in the day.

Comment by wordslinger Monday, Oct 19, 09 @ 3:38 pm
Word, you aren’t pining away for the good ole days are you? kinda sounds like it. They don’t make ‘em like they used to. It’s the times, they are a changing. [insert cliche here]

Comment by Will County Woman Monday, Oct 19, 09 @ 4:08 pm
–Word, you aren’t pining away for the good ole days are you? kinda sounds like it.–

Not me. It’s just rather silly, unproductive and lazy to rail against an entity that doesn’t exist.

Comment by wordslinger Monday, Oct 19, 09 @ 4:26 pm
it does kinda sorta–I agree with you that it’s a loose aggregation. Then again, it is strong enough to still be a force with which to reckon and membership/acceptance is still highly coveted.

Comment by Will County Woman Monday, Oct 19, 09 @ 4:32 pm
are you guys reading stuff from the news and blog tabs? Laura Washington & Carol Marin have both written about the CSU thing. Washington pulls no punches. (that’s not to suggest that Marin did btw)
http://www.thewashingtonreport.org/?p=343

Comment by Will County Woman Monday, Oct 19, 09 @ 4:38 pm
McCarter is my senator and is Frank Watson II. He criticizes all Dem policies no matter what they are and plays the Chicago versus downstate card a lot. Friend of mine have met him and say he’s a nice guy but I was hoping for more restraint and a more cooperative tone with Frank gone. It just seems like more of the same unfortunately.

Comment by illinois democrat Monday, Oct 19, 09 @ 6:22 pm