Asking Illinoisans to pay more in taxes to receive less in services has been the trend in State Government for the past DECADE, driven by the ever-growing cost of Illinois’ worst-in-the-nation pension crisis. Illinois voters soundly rejected income tax hikes as a strategy to fix the state’s financial problems on Election Day, with nearly 55% saying “no” to the so-called “fair tax” amendment. Lawmakers should now turn their attention to reforming the state’s worst-in-the-nation pension crisis. The only realistic path to balancing Illinois’ budget while protecting programs for the state’s most vulnerable residents starts with a constitutional amendment to allow pension reform. Instead, Gov. J.B. Pritzker now warns he will look to some combination of “painful” cuts and tax hikes on everyone. All program spending, including core government services, could face up to 15% across-the-board cuts. He’s also considering supporting a hike in the flat tax by up to 20%. Pritzker should abandon both of these crude deficit-closing strategies and pursue better available alternatives. ‘Fair tax’ fallout Springfield should not ignore the clear message Illinois voters sent when they decisively rejected the statewide “fair tax” referendum: further tax hikes are the wrong strategy to balance the budget. Moreover, indiscriminate cuts to public safety and education would deprive vulnerable residents of services they rely on and threaten to further derail Illinois’ weak economic recovery from the COVID-19 recession. Instead of doubling down on the same failed strategies that gave Illinois the nation’s lowest credit rating, Springfield should send Illinois voters a pension amendment to fix the root cause of the state’s overspending. The Illinois Policy Institute’s budget plan, “Illinois Forward: A 5-year plan for balanced budgets, declining debt, and tax relief,” presents a comprehensive path to fixing the state’s finances while protecting both taxpayers and residents who rely on essential government services. Meanwhile, these tax increases have driven Illinois’ total state and local tax burden to one of the highest in the nation. Illinois Policy Institute analysis found the 2011 state income tax hike cost the state economy $55.8 billion in gross domestic product, along with 9,300 jobs over four years. Residents are voting with their feet, heading to states with lower taxes and better managed finances. Illinois has lost population for six years running, driven primarily by adults in their prime working years leaving for other states. The most common reason residents give for wanting to leave is the high tax burden, according to public opinion polling conducted for NPR and the University of Illinois-Springfield. Analysis from the Illinois Policy Institute has uncovered a weak housing market and poor job opportunities as other core causes of the exodus, which are linked to the tax burden. Pritzker must fix Illinois finances without tax hikes or borrowing Pritzker was right when he said, “Illinois’ fiscal problems haven’t gone away. We now sit at a crossroads. Our state finances still require fundamental structural change.” He articulated worthy goals for himself as governor, “I promised to be a governor who balances the budget and pays the bills that my predecessor left behind. I promised to make sure that our kids get a good education that we invest in job creation and that we build a better future for Illinois.” But the only path to fixing Illinois’ finances through structural change and achieving Pritzker’s other stated goals begins with constitutional pension reform, which Pritzker has opposed to date. Under the Taxpayer Protection Act, Illinois would initially be eligible for an estimated maximum of nearly $3.1 billion in aid. That aid should be combined with pension reform, targeted budget cuts using outcome metrics, and other structural spending measures such as reducing administrative bloat in education. For decades, Illinois has asked its taxpayers to pay more in income and property taxes to receive less in services. That was the status quo rejected by voters in the “fair tax” referendum. Rather than promising more of the same, Pritzker should commit to pension reform and structural changes that can balance Illinois’ budget while respecting taxpayers. Adam Schuster Senior Director of Budget & Tax Research Page 13
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