Civic Federation Calls for Caution in State Budget, Praises Illinois’ Recent Financial Progress


The exterior of the Illinois State Capitol is pictured in Springfield. (Andrew Adams / Capitol News Illinois) The exterior of the Illinois State Capitol is pictured in Springfield. (Andrew Adams / Capitol News Illinois)

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As Illinois legislators decide how much of Gov. J.B. Pritzker’s proposed budget they’ll leave intact, a fiscal watchdog is weighing in and advising serious introspection.

The Civic Federation praises Illinois’ “significant progress on stabilizing its finances” and praises steps Pritzker wants to take to further do so, like bringing the state’s malnourished pension systems to 100% funding.

But in a report released Tuesday, the Civic Federation also warns that the governor’s $52.7 billion spending plan for the fiscal year starting in July is 4.5% higher than the current year’s operating budget, and that it’s balanced on “revenue enhancements” — moves that could undermine the recent progress.

Read the full report.

None of Pritzker’s proposed sources of new revenue are tax hikes that would obviously hit residents’ pocketbooks, though he does want to artificially keep the standard tax deduction at $2,250, which would lead to taxpayers giving the state an estimated $93 million more. Other revenue enhancements are directed at businesses, including increasing a sports betting tax from 15% to 33%; reducing the cut of a fee paid to major retailers for collecting sales taxes on the state’s behalf; and reducing the tax deduction corporations can take on net operating losses.

“Further tax increases could prove unsustainable for taxpayers given the State’s already high tax burden,” the report reads, arguing that the increased spending could “create pressure points that are difficult to sustain” and force the state to “make choices in forthcoming years.”

Pressure points include expected significant 17% hikes in the cost of health insurance for state employees, which includes $210 million in expanded coverage of weight-loss injectables like Ozempic, as detailed in a report by WBEZ.

While some of these pressure points are beyond the state’s control, the report said increasing expenses nonetheless force areas like education to compete for limited resources — a situation exacerbated by Illinois lawmakers’ regular habit of “passing hundreds of pages of legislation at the tail end of the General Assembly session each spring, with little time for sufficient vetting and explanation.”

The Civic Federation recommends Illinois get serious about developing a long-term, sustainable financial plan and about evaluating the state’s outdated, volatile tax structure.

“Illinois cannot simply hope that its remaining fiscal challenges will disappear on their own,” the report read. “They will not until they are addressed head on.”

With pandemic-era federal government grants going away, Illinois “needs to consider how it will continue investing in programs and services with a reliable and secure revenue source,” the report said. “It will be critical for the State to broaden its tax structure to reduce regressivity while promoting growth.”

While not specifically endorsing putting a sales tax on services, the report makes mention that Illinois applies a sales tax only to goods in direct contrast with modern economic trends.

Pritzker has opposed a sales tax on services, though in early May did not outright reject it when asked about potential funding sources to support public mass transit. In response to reporters’ questions, Pritzker said he had been opposed in the past to a service sales tax, but he didn’t want to take any options off the table.

The Civic Federation recommends something be done to shore up public transportation in short order and calls on Pritzker and the General Assembly to get serious about working with the Regional Transportation Authority, the Chicago Transit Authority, Metra and Pace to restructure and consolidate.

“Failing to reform the governance structure of the region’s transit agencies would only lead to the continuation of flawed, inefficient transit services,” the report said.

Once the agencies are restructured, the Civic Federation said, additional state funding “will be critical.”

Also missing from the Pritzker’s budget plan, the Civic Federation said, is money for municipalities that would take a hit should lawmakers get on board with the governor’s proposal to eliminate the state’s 1% sales tax on groceries.

It’s a made-for-the-campaign-trail move, in that erasing the tax would please inflation-weary shoppers at no cost to the state budget or state-supported programs, given that grocery tax money goes to municipalities.

But the Civic Federation said it’s concerned about the impact the loss of $325 million would have on towns and cities across the state, and recommends Illinois does something to offset that loss. If, as Pritzker has suggested, the state gives municipalities the power to levy their own grocery sales tax, the Civic Federation said changes should be phased in so that local governments can appropriately plan.

“Additionally, the State should consider providing other sources of revenue to local governments to fully offset the revenue loss,” the report said.

Coupled with the report’s calls for caution, however, is praise for areas where Pritzker proposes direct additional dollars next year, including the governor’s proposed $350 million increase to the state’s schools, $10 million more for the Monetary Award Program that helps low-income students pay university tuition, and restoring cuts previously made to “critical programs.”

In a state that “historically struggled” to put in what’s due to the pension funds and used “gimmicks” to reduce payments, Pritzker’s proposal to put in the full $10.1 billion share for the coming year is commendable, the Civic Federation wrote.

The General Assembly is set to adjourn anytime from May 24-31, with the 2025 fiscal year beginning in July.

The Pritzker administration recently requested state agency leaders prepare contingencies with $800 million in cuts should legislators fail to approve his suggested revenue increases. The move could be a means of getting state senators and representatives on board by making clear to them which programs would be on the chopping block.

The governor on Monday said there’s reticence from legislators, which he chalked up to misinformation.

He said in past years the General Assembly has approved 90-95% of what he’d proposed for Illinois’ budget, and that the process builds in an opportunity for legislative tweaks and negotiations.

“My one principle around this budget is it’s got to be balanced,” Pritzker said. “We’re not going to overspend.”

Contact Amanda Vinicky: @AmandaVinicky | [email protected]


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