To Avoid Harmful Cuts,
Lawmakers Must Choose Revenue
June 9, 2015
David Lloyd
Director, Fiscal Policy Center
Voices for Illinois Children
ILfiscal.org
[email protected]
Governor’s Unbalanced Budget Proposal
Governor’s Budget Would Cut Into the Bone – Still Billions Short
Revenue Loss Due to Rate Expiration
$5 - 6 billion
Budget Gap for FY 2016 (GOMB)
$6.1 billion
Governor’s Proposed Budget Cuts
Pensions
$2.2 billion
Likely Unconstitutional
Medicaid
$1.5 billion
Requires fed Approval
Group Health Insurance
$700 million
Subject to negotiations
$4.4 billion
Other Cuts
$2.2 billion
Other Cuts Must Increase
Dramatically without
revenue
2
(Some of) Gov. Rauner’s Proposed Budget Cuts
 $148 million cut to child protection
 $600 million cut to local gov’ts
 $200 million cut to public transit
 $165 million to heating assistance
 $387 million cut to universities
 $9.8 million for breast and
cervical cancer screenings
 $82 million cut to mental health
treatment
 $28 million cut to substance abuse
treatment
 $62 million cuts to services for
people with developmental
disabilities
 $110 million cut in in-home nursing
services for people with disabilities
 $462,000 cut for child vaccines
 $135 million cut to child care
 $6 million cut to HIV/AIDS
prevention, pharmaceuticals,
other services
 Elimination of community-based
grants for autism, epilepsy,
respite care and sudden infant
death syndrome.
 $23 million cut to services for
developmentally disabled infants
and toddlers
3
Not Just Numbers On A Spreadsheet
Elimination of community-based grants for
autism, epilepsy, respite care for family
members caring for a loved one
155,000 poor families lose
heating assistance
Increased
university tuition
14,000 youth lose access
to after school
opportunities
Over 12,000 fewer women
Cut off infants and
receive cancer screenings
toddlers with
“moderate”
development delays
from services to help
them catch up
Children aged 6-12
can no longer enroll in
child care assistance
Restrict mental health
and substance abuse
treatment  increase
other costs later
2,400 young adults
transitioning from foster
Medicaid patients
care to independence
cannot receive
lose services
Increased public
dental / podiatry
care
transit fares and
Deny in-home nursing
services to seniors and
service cuts
1,300 homeless
those with severe
disabilities
youth lose supports
4
Cuts Increase Other Costs / Suffering
Early Intervention
 $23 million cut would deny 10,000 kids services
 Special education costs 2.5x more per year than Early Intervention
Mental Health / Addiction Treatment
 $113 million cut between fiscal years 2009-11  $131 million in increased
hospitalization and institutionalization ($18 million more)
 Gov. Rauner proposed $110 million more in cuts
Supportive Housing
 Costs $11 per day
 Prison = $102 per day
 Mental hospital = $350 per day
 Gov. Rauner proposes cutting
79% cut ($12.6 million)
5
Families & Communities Already Cut Deeply Since 2009
Program
Cuts 2009-2015
Impact already felt
Gov.’s additional cuts
Child
Protection
$193 million (22%)
Higher caseloads,
violations of federal law
Another 20% budget cut
Another $1 million cut
Homeless
Prevention
60% cut
8,600 fewer families
receive help
Child Care
Assistance
Increased parent
copayments and
reduced eligibility
11,000 fewer children get
assistance
6-13 year olds ineligible,
parents can’t afford to work
 100,000 kids lose access
13,500 fewer youth
participate
Completely Eliminated
 14,000 more youth lack
opportunities, increased
youth violence
Teen REACH
(afterschool)
More than 50% cut
 nearly 1,000 more
families go without
homeless prevention
6
Reality Check: Illinois does not have a
“spending problem”
Compared to the rest of the nation, Illinois is a
low spending and small government state
33rd
State spending as a % of
state’s economy
50th
Full-time state workers per
1,000 residents
th
49
Medicaid spending per fullbenefit enrollee
Sources: National Association of State Budget Officers (2013), Census
(2013), and Kaiser Family Foundation (2011)
7
Illinois Has Below-Average Revenue
After 2011 Income Tax Increase, Illinois Was Still Below U.S. Average
8
Lawmakers’ Choice: Revenue or More Cuts
To Close Budget Gap Without Gutting Services / Investments,
Must Raise Revenue
Public Safety
5%
Higher Education
5%
General Services
3%
 Over 50% of General
Funds budget very hard /
impossible to cut.
Pensions
17%
Group Health /
TRIP
5%
Debt Service
6%
K-12 Education
18%
Transfers Out
7%
Human Services
15%
Medicaid
19%
 Must go where money is
to close huge budget
gap  If one area not
cut (e.g. K-12
education), other areas
must be cut more.
 Cutting things like Early
Intervention, child care
assistance, and
afterschool programs
puts more strain on
public schools.
Source: FY 2015 data from Senator Heather Steans.
9
Personal Income Tax Options
10
Personal Income Tax Options
Restore Portion of Personal Income Tax Rate
 Rate rollback will
cause $4.8 billion in
lost revenue in 2015.
 Every 0.25% increase
results in about $1
billion in revenue.
 Rate affects how
much is raised by
taxing a portion of
retirement income.
 Personal income tax
rate must be part of
solution.
11
Personal Income Tax Options
End Blanket Exemption for Retirement Income
 The exclusion of all retirement
income from the individual
income tax is the largest tax
break in Illinois. With rapid
growth of the aging population,
the costs will quickly increase.
Note: At 3.75% income tax rate.
 Allowing the exemption of
retirement income up to a
capped amount is a more costeffective way to provide tax
relief to seniors living on fixed
incomes.
12
Business Tax Options
13
Business Tax Options
End Tax Break that Rewards Businesses for Investing Outside IL
 Federal tax break that Illinois is automatically tied to.
 Lowers businesses’ taxable income for qualifying investments
made in any state – even outside Illinois.
 Should not be lowering Illinois taxes for companies for making
investments in Wisconsin or even Alaska.
 Closing would raise roughly $100 million per year.
14
Sales Tax Options
15
Sales Tax Options
Illinois Needs to Expand Sales Tax to Include Services
 Rotary-dial sales tax for a smartphone
economy.
 Economy increasingly based on sales.
 Broadening sales tax base makes revenue
system more stable.
16
Excise Tax Options
17
Illinois Constrained By Unfair Flat Tax
Low-Income Households Pay More As % of Income
Than High-Income Households
 Constitutionally-mandated flat
income tax limits policymakers
options.
 Raising revenue is necessary to
protect services and investments
that create opportunities for lowand middle-income Illinoisans.
 Increasing state Earned Income
Tax Credit (EITC) can target relief
to low- and middle-income
families.
 Lawmakers should also give
voters the opportunity to amend
constitution to allow for a fair
income tax based on ability to pay.
18
In Summary
Legislators and Governor Rauner Can Choose to Avoid Harmful Cuts:
 Additional cuts to vital services and investments are a choice
 Policymakers have more than enough revenue options to avoid cuts
 Now is the time to enact important reforms to antiquated revenue system
Spread the Word – Don’t Cut Families and Communities:
 Call the district offices of your state senator and representative
 Provide examples of how real people are impacted by cuts to vital services
 Encourage others to do the same
When advocating for specific programs, also advocate for revenue.
Without revenue, all budget areas are at risk – and it will be impossible to
strengthen our families and communities to build a stronger Illinois.
19
Social Media
Facebook/ResponsibleBudgetCoalition
@respbudgetil
@Voices4ILKids
#chooserevenue
#twill
20