Governor Pat Quinn is proposing that Illinois borrow $15 billion from Wall Street to pay old bills. He's calling it a debt bond, I think it's a debt bomb.A one percent income tax hike will finance paying back the loan. The Illinois Policy Institute thinks this is a bad idea and it explains why:
CHICAGO – Governor Quinn's borrowing plan will worsen the state's fiscal health, not improve it, notes the nonpartisan Illinois Policy Institute. The independent think tank points out that while borrowing now might give the state some temporary breathing room, the funding of core government services will be threatened in the future as the cost of debt service mounts.Quinn makes it sound so easy. Here's some deep-winter gloom: What if the state can't pay back the debt bomb? Then where will Illinois be?
"Governor Quinn's borrowing will hit the working class, poor, and disadvantaged of Illinois the hardest," said John Tillman, CEO of the Illinois Policy Institute. "Borrowing costs, combined with annual increases in the expected pension contribution, will crowd out basic government functions in the near future. Our past borrowing is already catching up to us. Illinois would have had an extra $1.6 billion in available revenues this year if not for the debt service costs of previous years' borrowing."
The Institute urges lawmakers to face up to the unsustainable structural overspending that is driving the deficits year after year. The Institute’s Budget Solutions 2011 alternative budget showed how Illinois could balance the FY2011 budget, make the pension payment, and have money left over to begin paying down past-due debt—all without a tax increase or borrowing. Had Governor Quinn followed that road map, the Institute argues, Illinois would be in far better shape today. Instead, Governor Quinn has put his focus on borrowing and tax hikes in order to avoid taking on the public employee unions, Medicaid reforms, and other reforms offered by the Institute and others.
"It's worth remembering that Governor Quinn only found one program—out of thousands—to veto outright when he signed this year's spending bill in July. Had he taken a closer look at structural spending reforms and not agreed to politically motivated 'no layoff and closure' deals with public employee unions, we could be on the path back to recovery instead of being stuck in ever-mounting debt," noted Tillman.
Governor Quinn wants to pair the unprecedented borrowing with tax hikes on those who can least afford it. Under one revenue plan calling for a 66 percent income tax hike, a firefighter and a preschool teacher with two kids earning a combined $80,000 would have to pay $1,440 more in state taxes. This is more than double the expected savings from the federal tax cuts recently signed by President Obama. Struggling families shouldn’t have to bear the brunt of the state's ill-advised spend-and-borrow habits.
The Illinois Policy Institute recently released a study, How to Lose Jobs and Alienate People, providing statewide and county-by-county income and job loss estimates associated with plans to increase the state income tax. The study, along with a tax calculator to see how the tax increase would impact individual taxpayers, is available at www.illinoispolicy.org/taxhike.
Even worse off than it is now.
Related post:
A tale of two states: Illinois wants to borrow, Iowa speaks of "shared sacrifice"
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