General Assembly Delays Consideration of Revenue Reform

Comprehensive revenue reform gained momentum in this spring’s General Assembly session, although the session will conclude without final action on this crucial issue. Senate Bill 750, as amended, contained the necessary elements for a comprehensive reform that would not only repair school funding but also roll back property taxes and take the general revenue fund out of its constant deficit crisis (known as a “structural deficit”). The bill gained substantial support in the legislature and became the subject of bipartisan negotiations. Those negotiations produced a compromise package, S.B. 755, which moved out of committee but then stalled on the floor. Since the sponsors were unable to procure a confirmed veto-proof majority in time to put the bill to a vote, they decided to postpone the vote for the time being.

The progress this session was substantial and establishes important momentum. While S.B. 755 is not the comprehensive package that is necessary, it nevertheless represented important political movement toward the needed reform. S.B. 755 is limited just to school-funding reform, whereas S.B. 750 contains all the elements necessary to repair the state’s finances.

Part of the problem with revenue reform is the political difficulty of increasing taxes. While most knowledgeable people agree that it is necessary, all concede the political risks. Part of this equation is to emphasize the rapidly growing political risks of continuing to do nothing. Another part of it is to get complete coverage of the issues in the mass media. For example, the Chicago Tribune published an article just as the Senate was poised to consider S.B. 755 in mid-May. The article contained interesting information, but it did not fully treat the issues. Here is the text of a letter to the editor that the Shriver Center sent to the Tribune in response to the article ( Illinois Welfare News goes to press before we know whether the Tribune will run the letter):

Dear Chicago Tribune:

In “Tax Proposal Shifts Pain” (May 18, 2005), Diane Rado reports on the potential net impact on taxes of property owners in metropolitan Chicago if the major state revenue reforms debated last week in Springfield were to become law. Two additional aspects of this issue should be considered.

First, to determine whether the proposal is a good one or not, people should pay attention not only to what the proposal costs but also to what it buys. Most economists and veterans of state budget wars concede (perhaps only in private) that the Illinois tax system is antiquated, unfair, and inadequate to support the programs and services most Illinoisans have come to expect. This includes not just public education but also many other state services that improve economic opportunity, support families, and care for our vulnerable populations—especially the elderly, the disabled, and children. The Blagojevich administration and the General Assembly have done a reasonably good job of patching together budgets without increasing general taxes. However, only a substantial reform of the whole revenue system will put the State on responsible and stable financial ground, capable of meeting obligations and policy goals to a reasonable extent.

The Shriver Center supports revenue reform that not only deals with school funding inequities and inadequacies but also stabilizes the whole state budget. Indeed, if the regular state budget deficits are not alleviated, any school funding progress we make through a more limited reform will never last. A revenue reform proposal that makes Illinois fiscally stable will be well worth the marginal increase in taxes that many (though not all) Illinoisans would face to pay for it. And those reforms would still leave Illinois in the bottom third of all states in household tax burden.

Second, while Ms. Rado’s article focuses on the impact on property owners, a recent study by the Metropolitan Planning Council focuses on the impact of the revenue reform proposal on median-income families (an on-average less affluent group than property owners). Seen through this lens, the impact of the proposal was much lower—in the low hundreds of dollars per family per year. For most families, that is the figure to consult when deciding whether what the proposal would accomplish is worth the cost.

Will your grandfather be able to get his medicine? Will your disabled spouse be able to receive needed therapy? Will your child’s school system be adequately supported? Will the nursing home, hospital, medical practice, community-based living facility for the disabled be there when needed? If you care about the answers to questions like these, you have to think carefully about supporting the full reform of the Illinois revenue system.