Political Rewind: State's Promise to Pay Not a Guarantee

Editor's Note: This article was created by aggregating news articles from Illinois Statehouse News that were written by various Illinois Statehouse News reporters.

Cost of tax breaks up as support wanes

A tax break package meant to boost a business community hit by the Great Recession could cost the state $848 million in just three years.

The only funding source specifically outlined to date for the package is a change to the Illinois tax code that would bring in $571 million next year and $354 million in 2013 before running dry. 

At the same time, the provisions would cost more and more. By 2014, the state would face $848 million in lost tax revenue, a number that would only grow. 

But that’s assuming no significant jobs are added or businesses expanded, the opposite of the intent of the package, state Rep. Ed Sullivan, R-Mundelein, said at an Illinois House Revenue Committee hearing Wednesday.

Illinois’ promise to pay not a guarantee

Illinois’ fiscal woes are becoming a hard lesson in the difference between a promise to pay and a guarantee.

The state’s 44 regional superintendents learned the hard way that the state constitution does not automatically force Illinois to pay workers, vendors, Medicaid providers and even elected officials — particularly once “subject to appropriation” language is applied.

Gov. Pat Quinn used the “subject to appropriation” line when he vetoed money for the regional superintendents from the fiscal 2012 state budget and announced plans to close seven state facilities.

“The Legislature simply did not provide enough money to keep them open,” Quinn said of the state facilities.

Kent Redfield, a political science professor at University of Illinois at Springfield, said Illinois’ constitution does not include a requirement to pay its workers, because no one ever thought the state would run out of money.

Illinois has not yet run out of money, but is suffering. Tax increases in January helped close Illinois’ structural deficit, when the state does not have enough money to cover day-to-day expenses.

But the Civic Foundation, a Chicago-based nonpartisan policy watchdog organization, said Illinois will still be looking at an $8-billion deficit by the end of June 2012. The state also has a $3.5 billion backlog of unpaid bills, which is expected to grow by over $5 billion by the end of the current budget, according to state estimates.

“If the pension system goes broke, or the state can’t afford to pay anyone’s salary, that isn’t something that anybody at (the 1970 Illinois Constitutional Convention) anticipated,”  Redfield said. “It wasn’t even thought of, philosophically, when the U.S. Constitution was created.”

Unemployment insurance deal to save state millions

Lawmakers inked a deal that may save Illinois taxpayers $240 million and businesses $1.6 billion in federal taxes and fines over the course of the next decade.

The Legislature last week approved allowing the Illinois Department of Employment Security to sell bonds to pay off about $2.4 billion borrowed from the Federal Unemployment Account to keep unemployed Illinoisans’ benefits flowing during the Great Recession.

“It’s probably one of the biggest bills that passed (during the fall veto session),” said state Rep. Frank Mautino, D-Spring Valley, one of the lead architects of the deal negotiated over the summer and into the fall.Gov. 

Pat Quinn has said he will sign off on the deal.

Businesses’ usual contributions to the unemployment trust fund, administered by the Illinois Department of Employment Security, will pay for the interest on the bonds instead of money from the state’s general revenue fund.

Illinois’ unemployment trust fund went from black to red starting in 2009 as more people became unemployed. The state took out a $2.8 billion interest-free loan from the federal government to pay for unemployment benefits after it exhausted its unemployment trust fund. The state has paid back $400 million toward the debt so far.

If Illinois doesn’t pay back the remaining $2.4 billion by Jan. 1, it faces $82 million in interest alone for 2012.