Taxpayers’ Federation of Illinois Statement of Principles -- 2010
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The State Operating Budget
Illinois state government is primarily a “funder” of government services rather
than a “provider” through direct service delivery. The vast majority of services
are provided by local governments, higher education institutions, and by non-profit
and for profit healthcare and human service providers.
The current operating budget is critically out of balance. Spending far exceeds
current revenues. Appropriations are not sufficient to pay vendors for current
services they provide under various state programs. Due to the recession own
source revenues have fallen dramatically with no corresponding reduction in program
costs or eligibility. The state is financing the operating deficit through
multi-year borrowings, deferral of vendor payments, and the non-recurring “federal
stimulus” program.
A fiscal plan must be developed that balances current expenditures with current
revenues. The first step must be to identify cost savings through program
elimination, eligibility curtailment, or service cost reduction. One part of the
plan needs to include the unfunded pension and employee/retiree healthcare programs.
Employer/employee cost sharing, benefit accrual rates, age eligibility, and cost of
living adjustments need to be revised to more current “private” sector standards.
The Federation believes only benefits accrued to date for current employees are
protected by the “non-diminishment” clause of the state constitution.
The state should avoid establishing new programs or expansion of existing programs
until a balanced budget is achieved.
Illinois’ Tax Structure
The Taxpayers’ Federation of Illinois supports a responsible tax structure imposed
on the residents of our state and the businesses and non-residents that do business
in our state. “Taxes are the price we pay for a civilized society.” (Justice Oliver
Wendell Holmes Jr.)
The state fiscal health is dependent upon our citizens having opportunities for good
jobs and their resulting consumption of goods and services. A tax structure that
encourages investment in Illinois that produces those opportunities is a prerequisite
to the state’s fiscal well being.
A state and local tax structure that is balanced between the three main sources or
revenue (property, income, and sales/excise taxes) that are commonly used by our
country’s state and local governments should be our goal. Significant reliance on a
unique source of revenue that is generally not employed in other states causes concern
by investors about our job creation and investment environment.
In addition, significant reliance on revenue streams that have little natural growth
potential to finance governmental programs that have regular inflation pressures and
increased demand due to demographic changes is not sustainable. The state should be
careful not to over rely on “no growth” revenue sources.
The Capital Budget and State Assets
The state should have a “rolling” five year capital investment plan that will assure
the state’s assets are maintained and that there is investment in new assets that are
required to keep Illinois competitive with other states for private investment and job
creation. The plan should not include spending for “special projects” that are
generally considered outside the scope of maintaining the state’s infrastructure.
The capital investment plan can be funded with bonds to be serviced and retired over
the expected life of the assets for which the proceeds were invested. The capital
budget and debt service should be supported by a dedicated portion of the state’s
recurring own source revenue streams.
It is appropriate for the state to evaluate its capital assets from time to time to
determine whether the sale or other form of privatization is in the public interest.
The proceeds from the disposition should be dedicated to the retirement of debt
(including unfunded pension and post-retirement healthcare obligations). Use of
proceeds from the sale of assets to finance the state’s capital needs is not
sustainable and the asset disposition proceeds will not be available for future
capital programs. Proceeds from the disposition of an asset should not be used for
operations of existing government programs.
Government Structure
Illinois has more units of local government than any other state in the nation. It is
difficult for our citizens to know who they should hold accountable for their local
services and the associated tax burden when the functions of government are so widely
dispersed. It is not uncommon that a taxpayer’s property is within the governmental
boundaries of 8-12 separate units of government. In some cases they may have similar
or the same government functions, i.e. roads and bridges.
Government economy and spending prioritization is hard to achieve with so many
governmental units. The General Assembly should continue to find ways to encourage
governmental consolidation, intergovernmental cooperation and efficiency. At a minimum
the General Assembly should not allow the creation of new special purpose forms of local
government. If a new function of government is deemed advisable it should be incorporated
into the function of existing general purpose governments. We will support initiatives to
streamline our governmental structures to produce greater accountability, efficiency, and
transparency of operation and purpose.
Locally controlled employee pension programs have also been underfunded. The General
Assembly should refrain from enacting any expansion of benefits before a fiscal plan is
in place to address the underfunded plans and a revenue source is identified to fund the
pension expansion.
January 27, 2010
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