Budget expert calls Quinn tax proposal ‘insufficient’
One percentage point increase for education would be “counterproductive”
Gov. Pat Quinn has called for an income tax increase to prevent cuts to education funding, but one budget expert says the proposal would not be enough to get the state back on track.
In his annual budget address March 10, Quinn said the state would have to make “draconian cuts” of $1.3 billion from education funding unless there is an income tax increase from the current three percent to four percent. Quinn proposed the increase to replace soon-to-expire federal stimulus funds that prevented education cuts in Fiscal Year 2010.
But Ralph Martire, executive director of the Center for Tax and Budget Accountability, says the proposal would be “insufficient and probably counterproductive.” Martire, who writes a newspaper column on state budget and tax issues, served on the budget advisory board for former Gov. Rod Blagojevich’s transition team and has taught courses on tax and education policy at Illinois State University.
By only raising the income tax to four percent, Martire says, the state will not generate enough revenue to avoid education cuts down the line, and Quinn will likely use up his only chance for an increase. Instead, the state should bite the bullet and raise the income tax to five percent, he says.
“With that increase, they will be investing in just a very basic level of public services in the future, and so it needs a revenue investment, at a minimum, of about five billion (dollars), probably closer to seven. Passing a one percent tax increase just doesn’t get you there,” Martire says. “It may be laudable to be concerned about education, but if you get that one percent, you’re not getting anything else, and so you are dooming yourself to continued ongoing deficits. Then, down the road, you’re going to be right back where you were, cutting education.”
Martire says the current budget woes are a symptom of larger structural problems: a pension system with $74 billion in unfunded liability and an income tax that hasn’t kept pace with the costs of providing services.
“Let’s not kid ourselves; Illinois’ problems are structural and long-term,” he says. “The recession is going to go away and our problems are still going to be here. We really need a long-term reform. We can’t just try to blame the recession for everything. It has certainly made things worse, but it is not the cause, and that needs to be understood by everybody that’s a major decision-maker.”
Quinn’s budget proposal does not assume a tax increase will pass, and instead calls for big cuts, like $793 million from the teacher retirement system, $102 million from higher education and $66 million from special education, among others. Quinn is also calling for $4.7 billion in borrowing for Fiscal Year 2011 and pushing back about $6 billion in debt until next fiscal year.
In his budget address, Quinn touted efforts to reform state pensions by limiting contributions to pensions of new state hires – which he says would save $300 million in the first year – but Martire says similar efforts in the past have amounted to nothing, and the savings from such a reform would take many years to materialize.
“There’s been nothing more closely approximating smoke and mirrors in budgeting balderdash than the pensions reforms that have been proffered to date,” Martire says. “All they really care about from these pension reforms – and this is a broad stroke ‘they’ – is saying, ‘Gee, sometime down the road we’re going to save all these billions of dollars, so let’s front-load those savings today.’ … They’re not really doing it for the pension reform; they’re doing it because they’re not willing to deal with the budget crisis.”
For more information: Center for Tax and Budget Accountability: www.ctbaonline.org; Illinois Budget: www.budget.illinois.gov.
Contact Patrick Yeagle at email@example.com.