CHICAGO – The civic arm of a prominent Chicago business group endorsed cuts, tax hikes, and non-budgetary reform proposals to end the state’s budget crisis and stabilize its finances over the long-term.
The Civic Committee of the Commercial Club of Chicago, which had long advocated for state pension reforms, offered its proposals to clean up the state’s fiscal mess in a plan it released Thursday.
“The challenges facing Illinois are considerable and the passage of time only makes the task of bringing Illinois back to financial solvency increasingly difficult,” said committee member Jay Henderson, chairman of the task force that developed the report.
Illinois’ performance on key economic measures underscores the urgency for action, the group said, citing the state’s population decline, weak employment growth compared to other states, and status as state with the lowest bond ratings.
The committee's framework calls for $8 billion in new annual revenue and $2 billion in annual expense cuts between fiscal 2018 and 2022. The group recommends changes to the group health insurance plan, procurement reforms, and constitutional pension reforms to achieve the cost reductions and savings.
The pension reforms don’t include the so-called consideration model supported by Gov. Bruce Rauner and being promoted in separate House and Senate bills.
Potential revenue sources include increasing personal and corporate income tax rates, taxing all federally taxable retirement income, eliminating certain exemptions for taxpayers with annual income over $50,000 , and expanding sales tax to certain consumer services.
Some of those proposals are in the “grand bargain” package now before the Senate with a notable exception being the tax on retirement income.
“We’re aware that these efforts will require sacrifices and compromise from a wide range of people. We must all work together,” committee chairman Rick Waddell said in statement. “The substantial nature of these recommendations reflects the seriousness of the issue and the importance of a long-term plan that is comprehensive and fiscally-sound.”
In the report entitled “Bringing Illinois Back: A Framework for our Future,” the group agrees with Rauner that reform measures that may help improve the state’s job climate are needed including consolidation of local governments and reforming worker’s compensation. The group also supports an overhaul of the state’s education funding formulas.
Rauner’s refusal to support tax increases without non-budget related reforms and Democratic opposition to the demands has driven the nearly two-year-old budget impasse that threatens the state’s investment grade status.
“In developing this report, the Civic Committee observed that Illinois’ current policies often make it an outlier compared to other states,” the group said.
The Senate’s “grand bargain” package includes worker’s compensation reforms that are close to being finalized. The Senate on Wednesday passed pieces of the package including local government consolidation and procurement reforms bills. An overhaul of school funding formulas also won approval but Rauner and GOP senators slammed the bill and want further negotiations.
Pension changes that would initially save $1.25 billion annually and could eventually save more than $2 billion, if upheld by the court, are part of the legislation and are also advancing in the House. The Senate’s proposed budget calls for $3.8 billion in cuts and $5 billion of new taxes primarily from a seven-year income tax hike.
“Grand bargain” negotiations remain stuck on the length of a local property tax freeze and a final agreement on a $36 billion fiscal 2018 budget. No votes were taken Thursday but the Senate returns Friday. The fate of the proposals in the House remains unclear. The civic committee report does not address local property taxes.
The governor's declined to comment on the report.