It is a bit of a problem: Illinois is not exactly flush with cash, and either services have to be cut, or taxes raised. Neither is politically viable, but ignoring the deficit is not good long-term strategy. Of course, just like in Washington, D.C., deferring decisions until later is a bi-partisan sport.
Illinois Gov. Pat Quinn has proposed cutting spending and raising taxes to deal with one of the biggest state budget crises in the nation, but his plan will likely be unpopular with some voters and lawmakers during a tough election year.
Illinois’s deficit through mid-2011 is estimated at $11 billion to $13 billion—close to 50% of the expected $26.7 billion in available revenue for the coming fiscal year, which begins July 1. That is among the worst such percentages among states. Health-care and social-service agencies routinely wait three months or more for the state to pay its bills.
The state pension system also is the worst-funded in the U.S. Illinois borrowed nearly $3.5 billion last year to make its annual pension payment. State auditors estimate that the pension systems are underfunded by $62 billion.
Warning residents that the state faces a fiscal crisis, Mr. Quinn’s office on Wednesday posted his proposals, along with preliminary budget figures, on a state Web site. He isn’t set to deliver his formal budget speech—which kicks off the legislative process—until March 10. Law
[Click to continue reading Illinois Airs Plan on Deficit – WSJ.com]
and even cutting the obvious fat from the budget is not enough
The problem is that Illinois needs billions, not millions, of dollars in increased revenue, lowered spending or both. Many citizen suggestions are prohibited by state or federal law, or make no meaningful dent in the deficit.
In fact, Mr. Quinn’s proposed cuts and revenue increases, if passed, wouldn’t fully resolve the deficit. The governor also wants the state to borrow more and to request more federal assistance. States have been using federal stimulus money to prop up their budgets, particularly in education and health care, but that funding is set to largely disappear by the end of the year.
One of these days the accounting trickery will have to end, both in Illinois, and other similarly strapped for cash states, and on the federal level. But not this year presumedly.
Mr. Quinn and research groups that have analyzed Illinois’s budget say the state consistently spends more than it collects in revenue. For years, lawmakers and governors have relied on borrowing and one-time accounting moves to make up the difference.
but as James O’Shea reports in the NYT:
With a fiscal crisis looming in Illinois, some influential people concerned about the dismal condition of the state’s finances are proposing that lawmakers increase the individual income tax rate by two-thirds and the corporate rate by one-third.
Taxes are a hot political issue. Illinois has the lowest income tax rate of the 41 states that tax wage income, so the low rate on income makes the tax a juicy target during a tough budget fight. But since governments also impose taxes on sales, property and other transactions, getting a handle on where Illinois stands is not simple.
[Click to continue reading Chicago News Cooperative – Looking to Taxes as Solution to a Crisis – NYTimes.com]