Behind the Headlines: The ‘Grand Bargain’ Budget Compromise
If you’ve read the recent headlines, you know there is a “Grand Bargain” budget “compromise” being negotiated by Illinois Senate President John Cullerton and Senate Minority Leader Christine Radogno. Illinois need a solution to the budget crisis. But is this compromise right for the state’s families and businesses?
To find out, we have to look behind the headlines at the policy making news, and solutions that should be part of the conversation. We also look at what free-market advocates have to say and the facts that inform their views.
The Senate ‘Grand Bargain’ Budget Compromise
Tax Hikes Now. Reform Later.
The policy making headlines is a compromise, negotiated by Senate President John Cullerton (D-Chicago) and Senate Minority Leader Christine Radogno (R-Lemont) that raises taxes and increases borrowing. It does little to reform the state’s reckless spending or failed systems.
According to analysis from the Illinois Policy Institute, the ‘Grand Bargain’ Budget includes:
- 33 percent income tax hike: The proposal hikes personal income taxes up to 4.95 percent, up from the current 3.75 percent and corporate rates to 7 percent from 5.25 percent. This will cost Illinoisans at least $5 billion a year, or an additional two weeks of pay.
- New sugary drinks tax: Illinoisans will also be hit with a new sugary drinks tax that would take another $200-$300 million from Illinoisans wallets annually.
- More borrowing to cover unpaid bills: Illinois politicians propose to borrow $7 billion to pay down the state’s unpaid bills. But with no major accompanying spending reforms, unpaid bills will only continue to grow.
- Pension “reform”: The reforms don’t end Illinois’ broken defined-benefit pension system and do little to fix the $130 billion pension crisis.
- CPS pension pickup: The state will bail out Chicago by paying $215 million in 2017 and $221 million in 2018 to the Chicago Teacher’s Pension Fund. Every year after, the state will pay for the annual (normal) cost of Chicago teachers’ pensions.
Stop the Presses
Government tends to lack creativity. When social services or government worker salaries are on the line, legislators often take the easy route: just raise taxes.
But, there are more innovative plans than the costly ‘Grand Bargain’ budget. And one of those plans just might change the story in Illinois.
To this end, the Illinois Policy Institute has developed a plan that fills Illinois’ $7.1 billion budget hole and balances the state budget without tax hikes. The plan:
- Enacts comprehensive property tax reform – $3.4 billion in savings
- Ends Illinois’ pension crisis through self-managed plans – 2018 pension contribution $1.65 billion less than baseline
- Aligns AFSCME costs with what taxpayers can afford – $1.1 billion in savings
- Streamlines Medicaid spending – $415 million in savings
- Prioritizes students over administrators in Higher Education – $500 million in savings
What are free market advocates saying about the ‘Grand Bargain’ budget compromise?
“[Senate Minority Leader Christine Radogno] is pushing the Democrats’ agenda – in the form of a legislative “grand bargain” complete with huge tax increases and fake reforms. I mean, she’s already entertained a tax on soda – and not because she cares about your health – and something called – I kid you not – a “business opportunity tax,” which will do nothing other than give businesses the opportunity to flee to Wisconsin or Indiana. So why has she done this? The answer: Because she never has been, and is not now, a free market conservative.” – Pat Hughes, Illinois Opportunity Project Co-Founder, Two-Minute Warning
“The Senate plan now on the bargaining table in Springfield has been branded a “grand compromise.” A grand compromise with whom? Taxpayers clearly don’t have a seat at that table. The multibillion-dollar tax-hike plan is a handshake between politicians and special interests that does nothing to fix our state’s structural overspending. In fact, another tax increase will be the final nail in the coffin for Illinois.”– State Representative Jeanne Ives (R-Wheaton), Chicago Tribune
“It takes courage [to balance the state budget without raising taxes]. As you know, there’s a short supply of that in Springfield… The bottom line is that you have to slow the rate of growth in spending, so that it grows more slowly than revenues… What the Senate discussion fails to do is address the drivers of spending. What our proposal does is address every major driver of spending at the state and local level. And that is how we close the $7.1 billion budget gap.” – John Tillman, CEO, Illinois Policy Institute
“We have to insist that [a budget compromise] include broadly the things that state government is responsible for.” – Steve Rauschenberger, Illinois Rising: What Illinois Needs in a Budget vs. What Democrats are Proposing
- Illinois’ bond ratings, the lowest of any state, are near junk status.
- Illinois is projected to have a budget deficit this fiscal year of $5.3 billion.
- Illinois owes vendors about $10.8 billion in unpaid bills.
- Illinois’ pension system, serving more than 815,000 public employees and retirees, is the worst funded in the nation.
- Illinois’ unfunded liabilities stood at $129.8 billion last June, up from $2.5 billion in 1971, the year Madigan joined the legislature.
- Illinois’ pension obligations are now projected to consume about a quarter of state operating revenues every year through 2044, raising the specter of steep tax hikes or deep cuts to public services.
- Illinois’ unpaid bills could reach $47 billion by 2022