Illinois ended its two-year budget hiatus earlier this month, but the state's financial plan still lacks the essentials needed to sustain it over the long term, according to a University of Chicago professor.
The budget, pushed through under the leadership of Democratic Ill. House Speaker Michael Madigan and Democratic State Sen. President John Cullerton, includes a 32 percent income tax increase, which sparked Republican Gov. Bruce Rauner to veto the spending plan and led Michael Lucci, the vice president of policy for the Illinois Policy Institute, to say that the plan will "further hamper economic growth."
Rauner's veto was overridden in the General Assembly , but the budget's implementation will not stop tax experts and critics from highlighting why the plan is problematic for Illinois.
Julie A. Roin, a Seymour Logan professor of law at the University of Chicago who specializes in tax policy, says that since the state is spending more money than it is collecting, the budget will serve as a short-term fix to a much deeper problem.
"The big problem with Illinois, and the city of Chicago, is that the amount of money they are collecting in the form of taxes does not match the amount they are spending to provide public services," Roin told Cook County Record. "The government raised enough short-term revenue to perhaps continue access to the debt market, but they haven't come to grips with the need to cover not only the expenses of the current year, but also make an attempt to pay down the enormous amount of accrued debt."
When Moody's Investment Service wrote a report on the Illinois financial crisis and the possibility of its credit rating being reduced to junk, the subject of pension debt was mentioned. Roin explained that the state's pension debt will likely have to be paid for by the current generation of workers.
"The state of Illinois hired a lot of employees, paid them cash salaries plus the promise of pensions, but didn't put the money away that was required to pay those pensions," she said. "So, somebody's got to make good on those pension promises, unless the state doesn't pay the employees their pensions. That would be terrible, because if those pensions aren't paid, then those employees would be left with nothing. Current and future taxpayers will be paying in their own taxes the amounts that should have been paid in the previous generation of taxpayers."
Although the state is in a horrible bind where increasing taxes seems to be one of the only options, Roin said, there is still hope for Illinois' financial future.
"There are two things the state can do about its financial crisis," Roin said. "One is to raise taxes, the other is to reduce services. Residents can look forward to tax increases in every area. And if the state is going to continue to provide the current level of services or anything close to the current level, the intelligent thing would be to broaden the tax base."
To raise the necessary amount of money, Illinois will need to increase the tax burden on a large number of its residents, Roin said.