Governor Pat Quinn delivered a rosy State of the State address Feb. 1, glossing over projections that within five years the state will face deficits that exceed Illinois' entire annual General Funds budget.

Although his own budget office has said the state must freeze almost all state spending, the Governor unveiled new spending and tax breaks that total more than $500 million.

And, after a 67% tax hike last year that took a week's pay out of the pockets of every Illinois worker, the Governor proposed "tax relief" that would give about $100 back to some families.

Despite massive red ink in the state's Medicaid and public employee retirement programs, the Governor gave only glancing nods to the problems. Although his own Health and Family Services department projects a $21 billion bill backlog within five years, the word Medicaid appeared only twice in his speech and he offered no specifics on how he plans to control costs.

Just two days before the Governor's speech, the widely respected Civic Federation issued a stunning report that confirmed what Senate Republicans have been saying for the past year: despite a 67% tax increase, Illinois continues along an unsustainable spending path that could wipe out basic state services and leave generations indebted just to cover the cost of today's programs.

January 26, 2012

Senate Republicans are looking forward to Gov. Pat Quinn’s annual “State of the State” address on Feb. 1, which they hope will provide insight into the Governor’s priorities for the upcoming legislative session.

State budget forecasts recently released by the Quinn Administration and Comptroller Judy Baar Topinka underscore the importance of addressing Illinois’ multi-billion dollar deficit and burgeoning bill backlog. But while the state’s budget woes remain a top priority for lawmakers, media reports indicate the Governor will likely turn his attention to other important—and contentious—issues like public pensions, taxes, and the Medicaid system.

Illinois’ obligations to its state workers and retirees, and to its taxpayer-financed health care programs, are gobbling up state revenues at an unsustainable rate. Those commitments are increasing each year, and without serious changes threaten to overwhelm available revenues. Senate Republicans are interested in learning more about Gov. Quinn’s plans to tackle Illinois’ Medicaid and pension system obligations.

The Caucus also hopes the Governor explains how he intends to meet his pledge to roll-back the 67 percent tax increase as scheduled, and what spending cuts the Governor will support in order to avoid the $800 million FY 2015 deficit that his budget office is projecting. In order to address that deficit, members are eager for more details about the Governor’s plan to hold education and health care spending level through Fiscal Year 2015.

Senate Republicans stressed they are willing to work with Gov. Quinn and the state’s Democrat legislative leaders to right Illinois’ budget wrongs. Last March the Caucus introduced a “Reality Check” budget proposal that outlines difficult, yet achievable, ways to reduce state spending, return the state to solvency, and roll-back the 2011 tax hike. 

January 26, 2012

The Tax Foundation’s 2012 State Business Tax Climate Index was recently released, revealing Illinois saw the biggest downward shift of any state. The nationally recognized and widely respected non-partisan organization reports that Illinois fell a whopping twelve places in the rankings, from 16th place in 2011 to 28th place in 2012. 

Though the state’s 67 percent income tax hike undoubtedly contributed to the drop, Illinois is a high-tax state in other areas. According to the Tax Foundation, the state ranks as the fifth worst in business taxes, the seventh worst in unemployment insurance taxes and the sixth worst in property taxes. Though some of Illinois’ neighboring states were ranked more poorly in these areas, when comparing rates in all tax categories to those of our neighbors, Illinois takes the cake.

The Tax Foundation highlighted the important role taxes play when it comes to a state’s ability to attract and retain employers. Echoing the concerns of Republican lawmakers, the report noted that, “States do not institute tax policy in a vacuum. Every change to a state’s tax system makes its business tax climate more or less competitive compared to other states, and makes the state more or less attractive to business.” The Tax Foundation emphasized that when higher taxes cut into profits the cost is passed on to consumers—through higher prices, employees—in lower wages and fewer jobs, or shareholders—in lower dividends or share value.

The Tax Foundation report reinforced this, noting, “evidence shows that states with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth. “ The Tax Foundation pointed to former Gov. Rod Blagojevich’s maligned gross receipts tax (GRT) proposal, emphasizing that hundreds of millions of dollars in capital investments in Illinois were halted until the GRT bill was overwhelmingly defeated.

Additionally, the Tax Foundation noted that while a state’s tax burden is not businesses' only consideration when it comes to establishing a presence, it is undoubtedly a compelling one. The report pointed to the recent business tax credits that were approved by Illinois lawmakers in late 2011. The costly credits were negotiated after desirable Illinois companies, including Sears and the Chicago Mercantile Exchange, threatened to leave the state citing the burdensome cost of the state’s new corporate tax increase.

Senate Republicans have been actively advocating for state budget reforms and spending cuts as a way to meet Illinois’ fiscal obligations and roll back the Democrat’s 67 percent tax increase as scheduled. The Tax Foundation notes that “unlike changes to a state’s health care, transportation, or education system…changes to the tax code can quickly improve a state’s business climate.”