Structural Deficit in State's Tax Policy

In 2014, (the most recent year for which there is data) Illinois ranked 46th among all 50 states, in number of state workers per 1,000 residents. Illinois’ total state AND local tax burden, as a percentage of personal income, ranks in the bottom 10 of all states (42nd), and data from the Federation of Tax Administrators indicate Illinois consistently has the second lowest tax burden in the Midwest.

In calendar year 2016, Illinois had the 5th largest population according to Census Data, and BEA
Data places Illinois 5th highest in overall state Gross Domestic Product (GDP) and 12th highest in
state GDP per capita in the nation. Despite this, in FY2016 Illinois ranked 31st in General Fund
spending on services per capita, and 39th in General Fund spending on services as a share of
GDP.

Illinois has a debt problem. The State’s deficit in its General Fund dates back to 1991. For decades, Illinois' poorly designed tax policy created an ongoing structural deficit, adjusting solely for inflation and population. Tax revenue hasn't grown at a rate sufficient to cover the increased cost of delivering the same level of services from one year into the next. The implementation of the Edger Ramp in 1996, which has been compared to a “balloon mortgage on steroids”, and our legislators’ negligence in meeting employer contributions for its five state pension systems has exacerbated the State’s debt, turning it into a crisis that’s recklessly jeopardized retirement finances for scores of public sector workers.

Total pension debt increased $7B from 2015 ($109B) to 2016 ($116B). It’s predicted to be at more than $130B by the end of 2017. Currently, 8 out of every 10 taxpayer dollars paid into the state’s annual pension contribution go toward paying off unfunded liability, only 2 of every 10 taxpayer dollars actually fund current benefits.

The State’s debt continues to negatively impact finances at every level of government, impair our access to quality public services, encourage the transfer of public sector services to the private sector, and threaten our quality of life and financial stability. As the Illinois Supreme Court reminded elected officials who tried to push unconstitutional legislation holding educators accountable for the mess they, themselves, created, the funding of public pensions is a moral responsibility of the State, and as such, the State needs to act immediately and concertedly in advancing and securing its resolution. The Center for Tax and Budget Accountability (CTBA) recommends re-amortization. Re-amortization of current debt will increase current expenses now but will flatten the Edgar Ramp, alleviating steep increases through FY2045 and allowing for
predictable, more manageable payments and financial planning over its duration.

There is a solution to our legislator induced debt catastrophe, and it doesn't involve using teachers as scapegoats. With the 2018 Primary Election just around the corner, citizens of Illinois need to lead. The farther legislators push their problem off into the future, the larger their financial mess will become. The public must demand that our legislators do what's right, not what's convenient - if they can't solve their problem, then the public needs to solve it for them. If we don't, it will be our children and grandchildren who pay the price.