We Have a Budget, Now, Reform!

The first hurdle has been cleared in Illinois’ arduous effort to write a budget. After two years of stalemate one has passed, albeit without the approval of Governor Bruce Rauner and by overriding vetoes in both the legislative houses (including defections by GOP representatives and Democrats). Threats by credit rating agencies to downgrade the state’s credit to junk status certainly put the fire beneath officials to end this stalemate. The threat to the state’s long-term fiscal health has not passed, however, and frankly much harder work is ahead for lawmakers as they try (or at least claim they are trying) to whip this state into shape.

Reform is needed–desperately! With the stalemates in Springfield, animosity high between the parties, and a increasingly weary public the idea of reform seems unrealistic and far off. Nevertheless, now is the time to talk reform, nay, demand it and make it happen. An obvious detriment to instituting reform is the absence of a clear coalition to lead discussions on government reform and identify policies for implementation in the short-, medium-, and long-term. (Why not add my two cents?) Fundamentally, the state needs to re-evaluate just about every aspect of how it runs, from taxes to education to local governance to voting and elections, to ensure it can actually transform into a livable place. None of this will be easy, but as citizens we must begin crafting ideas that we can present to lawmakers.

Residents should not be pessimistic about the potential of this state although lately the negative headlines reinforces a towering pessimism that has descended on this state. Yet, Illinois, in spite of its many problems, still has huge potential to succeed.

First, let’s remind ourselves that Illinois is actually quite a wealthy state. It’s fiscal problems do not lie in a lack of economy or human capital. Indeed, residents need to understand this state’s wealth and potential to know we can and must demand more of the government, which (reminder) we elect.

As of 2010, Illinois had the fifth largest state economy in the US and the 13th highest state GDP (excluding Washington, DC), and the latter is higher than the national average. To put this in perspective, Illinois’ economy is as large as Turkey, which ranks 17th in
the world according to the IMF. Illinois also produces a surplus in federal revenue from the states. In fact, it ranks fourth in the size of its surplus (the money sent to the federal government in taxes versus the amount of federal money spent in Illinois). This speaks to the state’s revenue potential.

Likewise, if Chicago was a county, its economy would be worth well over a half billion dollars, according the Brookings Institute. This would put it around Argentina or Saudi Arabia in economic size.

None of this speaks to the health of the state’s economy. The ongoing crisis in Springfield and Chicago’s City Hall will have a long-term impact on how well the state and city can perform. That said, Illinois has a really strong footing to build upon. Additionally, the state has shown itself to be open to progressive policies even if it is not a national leader. Then again, it has also kicked the can down the road consistently deepening a crisis that for years was growing more obvious. Reform is going to have to come in waves, but each should lead to and build off the other. It will not happen without the increasingly incessant voices of voters on these issues. Thus, I present a rough framework for reform.

Producing Reform

The fact of the matter is that a number of ideas for reform exist. I am not coming up with anything new or radical. What I am doing is trying to organize a set of ideas presented from multiple fronts in a way that is digestible and coordinates ideas from a number of fronts. Voters need to begin demanding and showing they expect law makers to follow through on changes. This has to be a packaged deal.

The Short Term

There is a short list of ideas that could reasonably pass in the next legislative session, or at least within a year. These should be made as an indication to residents that reform efforts are underway. They include:

  • Legalization of recreational marijuana use and its sale, which creates new business opportunities, produces millions in new revenue, and eliminates incarceration for a victimless crime.
  • Expand the franchise with automatic voter registration (currently underway).
  • Establishing a non-partisan, independent commission to draw voting districts to eliminate partisan districting (may be forced due to a decision by SCOTUS concerning a case out of Wisconsin).
  • Re-write the Illinois Election Code so that the election of all state legislative seats and the governor is done by a run-off system, wherein the two rounds of voting occur; the top two candidates in the first round run head-to-head in the second. This is similar to the French system and would open more space for independent and third party candidates.
  • Explore putting term-limits in place for the Governor and State Representatives leaving.*
  • Beginning in 2018 (and this is important for the later efforts) issue biannual budgets. This allows legislators more time to focus on the details of legislation and reform and spend less time every year bickering about budgets.

Frankly, it’s naïv to think all this could pass, but they’re reasonable first steps. (I lack confidence electoral reform would happen, for example). Now that a budget has passed voters need to turn their attention to discussing such immediate opportunities for reform with their legislators.

The Medium Term

The first round of reforms should achieve a few things: create a more equitable electoral system, produce new revenue through alternative sources, and regain the trust of voters. The second set of reforms, ones that may take longer, should begin addressing some of the structural problems in the state like tax equity.

  • Establish a graduated income tax on residents beginning with the 2018 budget. This should use the new 4.95% rate as the base (pegged to Illinois’ median income). Illinois has one of least progressive income tax rates in of US states.
  • Establish an additional 1% municipal income tax (on top of the state income tax regardless of income bracket, see above) that is split equally between the municipality where individuals have their residence and where they make their income. This ensures all municipalities have a dedicated revenue source beyond property taxes and ensure municipalities with large employment bases receive the revenue to fund services used by people employed there but not living there.
  • Reform of Illinois’ sales tax to ensure it’s also progressive. This includes removing taxes on general necessity goods such as basic clothing items (following Minnesota’s model) and food items. (Luxury clothing should not be exempt.) Additionally, as people consume more services and fewer products the tax code must be rewritten to emphasize taxing services (especially luxury services) which are generally exempt at the moment. A reasonable solution would be to pass legislation mandating increased taxes on services to overlap with current sales tax rates before those changes take effect. (This would, similarly to a plan by the Civic Federation, create a one-time boost in state revenues to help pay of backlogged bills.) Finally, sales tax surcharges should be permitted, indeed actively encouraged, for products that have negative impacts on individuals and/or societal costs or consumption of which is entirely voluntary and unnecessary for a person’s basic well-being (private cars and trucks, candy, cigarettes, alcohol, marijuana, pop etc.).
  • Increase the gas tax. The low state and federal gas taxes are a scourge on transportation infrastructure maintenance and investment. An increase in the tax has to include a provision that the tax will also rise with inflation to ensure revenue stays adequate. Additionally, an increase must be married to a provision that shows a commitment to economically and environmentally sustainable investments, including a moratorium on new road projects until current infrastructure receives high grade marks again. This should exclude mass transit infrastructure.
The Long Term

This is the hard part: Illinois needs to begin instituting broad structural reforms to make sure that is a well-oiled, high efficient machine. This most palpably means tackling the problems of pensions (which I frankly, have no clue how to address), government waste, and education funding.

  • Reforming education funding and the structure of Illinois’ education system will go a long-way to funnel to money where its needed: the classroom. A good start is the education funding reform bill that passed the state legislature, but it is only a stop-gap measure, as it does not address the bane of Illinois’ school funding problems: too many administrative levels. Per a Metropolitan Planning Council report, decreasing the amount of administration (read: number of school districts) and associated costs would produce the millions the schools need without increased revenue.
  • Decrease the number of other governments. Illinois has over 7,000 units of government, which is almost three times the number of government units in California, a state that has over three times the population and is 2.5 times the size of Illinois. Absurdity is what you would call this. This should include combining and condensing school districts (per the point above), combining government units that perform similar tasks as other units, and encouraging annexation to lower the number of cities, towns, and villages in the state (especially in Chicagoland).

A series of difficult years and legislative sessions are ahead of Illinois as the state pulls itself away from the brink. Success requires due attention by residents and a strong body of voices advocating for a cohesive series of reforms to make the state more politically and economically equitable, sustainable, and efficient. There are many much larger issues than the state budget for the state to begin addressing in earnest (police violence, the wealth gap, global climate change etc.). The longer the state bogs itself down in budgetary challenges, the less time is spent on addressing real issues.

*I do not believe in total restriction on how long all members of government may serve, thus I exclude the Senate as a balance.