Ill. faces Catch-22 on budget
SPRINGFIELD – With Gov. Pat Quinn telling lawmakers to choose between higher income taxes or deep education cuts, either choice could have dire consequences for schools, businesses and taxpayers.
In schools, Quinn’s proposed $1.3 billion education cut could mean massive teacher layoffs, ballooning class sizes, and the loss of extracurricular activities. For businesses, a bump in the income tax rate could force them to cut jobs to save money to meet the heavier tax burden.
And for taxpayers, it will mean forking over more dough without any exemptions to shield poor and working-class families from higher tax bills.
It’s shaping up to be a tough choice with Illinois facing a $13 billion deficit.
Quinn contended that the state needed to raise taxes to prevent deep education cuts that would further damage struggling school districts because it is losing federal stimulus money. But Quinn could look elsewhere to make the cuts, and that led Republicans to accuse him of engaging in scare tactics.
“There’s a fork in the road in Illinois. We’re going to take that particular road that leads to higher learning, better learning and children who succeed,” Quinn said Thursday during a visit to a Springfield middle school.
Quinn was out trying to drum up support for his tax increase that key lawmakers have shown little interest in wanting to pass during an election year.
The Democratic governor asked lawmakers to raise the personal income tax rate to 4 percent from 3 percent and the corporate rate to 5.8 percent from 4.8 percent. That would generate $2.8 billion a year that would go to prevent education cuts and help the state pay schools the money it already owes them.
“Once again, the irresponsibility and lack of accountability by the people in Springfield comes home to roost on the backs of the taxpayers, and that’s why taxpayers should be outraged by this proposal,” said John Tillman, head of the Illinois Policy Institute, a conservative think tank.
Someone with a taxable income of $30,000 would see their Illinois taxes increase to $1,200 from $900 under Quinn’s plan.
Education groups said it was imperative the state come up with the money to avoid the threatened cuts because school districts already were struggling to make ends meet by laying off teachers and eliminating programs.
Quinn’s administration estimated that 17,000 teachers and staff could lose their jobs.
“We hope, but can’t guarantee, it won’t rise above that,” said Ken Swanson, president of the Illinois Education Association, the state’s largest teachers union.
In Effingham, the spending cut Quinn proposed could cost the 3,000-student district about $1.5 million, said Dan Clasby, superintendent of the Effingham Unit 40 School District.
“It would be pretty bleak,” he said.
The district already is cutting its preschool program and getting rid of an after-school program where teachers work with struggling students. Cutting more money would mean bumping up class sizes by as many as five students and laying off teachers and staff.
Swanson said school districts were preparing for the worst and readying layoff notices for teachers they wouldn’t be able to afford to keep next year.
“It should frighten everybody who is sending children to school this year and next year,” he said.
While the threat of cuts is frightening for school districts, Quinn’s tax increase is scary for businesses.
If faced with higher taxes, businesses will look to make cuts elsewhere, said W. James Farrell, the retired chairman and chief executive officer of Illinois Tool Works, a Glenview-based manufacturing company.
“There’s only one other place to go, and you take costs out of the business and costs generally means jobs,” said Farrell, chairman of the Commercial Club of Chicago, a group of business and civic leaders.
Higher corporate taxes will make businesses rethink their plans to come to Illinois or expand their operations here, he said. Farrell complained that the state hadn’t reined in its pension and retiree health care costs, two underlying factors of the state’s financial crisis.
Republican leaders in the Legislature said they wouldn’t consider a tax increase until there were reforms on big-ticket items such as pensions and Medicaid spending.
Quinn proposed balancing next year’s budget by borrowing $4.7 billion to pay overdue bills and letting about $6.3 billion in bills go unpaid.
Those unpaid bills are already a drag on the economy with businesses who are vendors to the state forced to layoff workers and close up shop because it’s a “deadbeat payer,” said Doug Whitley, head of the Illinois State Chamber of Commerce.
Some business leaders would be willing to pay higher taxes to help the state right its finances, he said.
“I believe, given the depth of the problem both in terms of the operating budget and the pension debt, that a tax increase is probably inevitable,” Whitley said. “But no one wants it until government can show it has done something to earn it. They haven’t earned it.”
