Group lists suggestions for Illinois' finances

Wednesday, September 15, 2010

What are Illinois' options for closing its budget gap?
Here are some of the proposed solutions, together with comments from R. Eden Martin, president of the Civic Committee of the Commercial Club of Chicago, whose group is part of the Illinois is Broke coalition.

* Just raise taxes. To close the budget gap, the Illinois income tax would have to go from 3 percent to 8.2 percent for individuals and from 4.8 percent to 13.1 percent for corporations. "Companies, investments, jobs and people will flee -- which will further increase the burden on those who remain."

* Hope for a federal bailout. That's under some discussion now. With a price estimated at between $1 and $3 trillion, the national government would borrow to fund all other government pensions. Illinois, as the worst state in the union, would be a net winner. But Martin is not impressed.

"As a citizen, how would you feel about it?" he asked. Federal borrowing, he said, would have the "corrosive effect" of rewarding bad government. After that, he noted, who could get legislators to make any tough decisions?

* Raise the Illinois income tax from 3 to 5 percent, but use $1 billion of the new $6 billion to send property tax rebates to people. The rest of the money would be borrowed. That has been discussed as a legislative compromise.

"We aren't going to solve this unless we stop borrowing," Martin said. He also noted that property tax receipts hold up better in a recession than either sales or income tax, so that may not be the best place to cut.

* Change Illinois' pension system going forward. New public employees after Jan. 1 will face lower cost of living adjustments in future pensions and have to work longer to get any pension -- to Social Security age.

But Illinois is Broke would go further. Martin said people would keep what they have already earned, but even current employees would face lower pensions and health benefits for future years worked. The net savings would be $3 billion a year. Martin added that if a good-faith effort is made to cut other expenses, he personally "could very well support a tax increase."