More Sober Approach Is Needed to Illinois Budget

Published June 10, 2005

Gov. Rod Blagojevich has taken some heat–and quite rightly so–for a smoke-and-mirrors FY 2006 state budget that will put huge burdens on future taxpayers–and lawmakers.

But too many of the governor’s critics have focused on the revenue side of the budget, criticizing Blagojevich’s campaign promise not to raise state income or sales taxes. From the perspectives of both politics and policy, that was one of the few good promises the governor has made and kept.

The problem in Illinois is not too little revenue. The problem is too much spending.

In 1998 Illinois’ total budget was about $38 billion. The FY 2006 budget, passed less than two weeks ago, is $54.4 billion. Or maybe $55 billion. Or maybe $58 billion. All three of those estimates were made by the governor and lawmakers after passing the budget at the end of May. So much pork spending was promised in last-minute backroom deals that no one knew exactly what had been promised or how much it will cost.

Giving lawmakers the benefit of the doubt, let’s go with the low estimate of $54.4 billion. That’s $16.4 billion more than in 1998–a nearly 50 percent increase in spending. From FY 2002 to FY 2005, Illinois increased state spending by 31 percent, according to the National Association of State Budget Officers. The FY 2006 budget continues that surge.

State spending is growing several times faster than inflation, the state’s economy, and family income.

The FY 2006 budget sends more money to public schools and other things that are high priorities for a large number of Illinoisans. But those priorities have been getting budget increases for decades … and there is little evidence we are getting anything close to our money’s worth. Worse still, the state is spending billions of dollars on things that are low priorities, or no priority at all, for most citizens.

Illinois has the weakest job growth of any state in this region, and a major factor is the state’s relatively hostile business climate. Hundreds of business tax and fee increases have been levied by the Blagojevich administration, hoping to stay under the radar screen of tax-weary voters. The previous governor, Republican George Ryan, did the same.

In 2004, Illinois ranked 46th in the nation on the “U.S. Economic Freedom Index,” a measure based on taxes and regulations produced by the Pacific Research Institute.

Some lawmakers contend Illinois is a low-tax state, but that is false. The Illinois Policy Institute last year analyzed the combined state, local, and federal tax burdens and determined Illinois residents have the 14th highest total tax burden in the nation. Also in 2004, the Tax Foundation, a national tax watchdog group, ranked Illinois as having the 13th highest tax burden after factoring in the federal tax bite.

Higher income taxes are always touted as the solution to the state’s chronic budget problems, including when Gov. Jim Edgar turned a “temporary” income tax surcharge into a permanent tax hike. That tax hike and hundreds of other fee and tax hikes passed since then have not kept Illinois lawmakers from raiding teachers’ pension funds and complaining about having t make “cuts.”

The irony here is that Gov. Blagojevich identified the problem shortly after taking office in 2003, when he complained Illinois lawmakers spend money “like drunken sailors.”

Until lawmakers and the governor take a far more sober approach to their job, no amount of tax increases will put the state on firmer financial footing.

Steve Stanek ([email protected]) is the author of Heartland Policy Study No. 107, “Illinois’ Public Pension Crisis,” released on May 24, 2005. He is also managing editor of a monthly publication addressing budget and tax policy issues across the country.