PEORIA -- Economist Ralph Martire of the Chicago-based Center for Tax and Budget Accountability crunches the math to reveal the reality behind the finances of the state of Illinois.
"The state budget is entertaining if you like Steven King" he said, to begin a Sept. 27 talk to the Peoria Area League of Women Voters.
Martire said that in January 2011, the state's revenue shortfall for the 2012 fiscal year (that began on June 1, 2011) would be $16 billion. Only $26 billion was expected in revenue, but $42 billion was needed to meet the state's many obligations.
So what can be cut? "You can't solve it by cutting education, and there's not that much waste, fraud and abuse in the state budget," he said. Illinois is spending 5 percent less than it spent a decade ago.
Illinois is the fifth largest state but 49th in the number of state workers per population, down from 72,000 in 1980 to 55,000 now.
Without enough revenue to meet the needs of a growing population and inflation, the state has a structural deficit, he said, and "revenue won't grow at levels to maintain serices."
Politicians have reacted to the lack of revenue by underfunding pensions for years, he said, made worse when the stock market collapsed in 2008. Now the shortfall is $85 million.
Medicaid cannot and should not be cut, he said, because it generates matching federal dollars, more than the state spends. "This is good fiscal policy," he said. "If we cut Medicaid we lose the federal match."
So in the spring, the General Assembly increased taxes, he said. "I drafted the bill. It was modified" but "did generate more revenue."
Was it a 'job killing' tax bill? he asked. No, he said. Illinois still a low tax state compared with its Midwestern neighbors and the other states, such as New Jersey, that tried to lure Illinois businesses shortly after the tax increase.
"If you raise taxes progressively (taxing the higher earners) there's no negative impacts on the economy," he said, because it relies on consumer spending. The well off go right on spending, though they may save or invest less, he said.
Raising taxes does not kill jobs, he said. "It just doesn't fly with the data."
"Our low tax states have not produced any economic growth," he said.
"We just do the math," he said which is peer reviewed by independent economists.
"To tax and spend is neither liberal or conservative. To borrow is irresponsible," he said.
So now, thanks to the tax increase, Illinois has an $8 billion deficit. Human services are taking the brunt of the cuts, but public education needs more, not fewer, dollars. It really needs $3 billion more to adequately fund all the schools, he said.
"When you have a problem do you solve it by taking resources away?" he asked. Educational levels impact wages, he said. "Without a (strong) foundation (from school) you are destined to have a low pay, little or no benefit job."
Tax polices are the key, he said. Illinois is a "low tax but high property tax" state, but there are limits to property taxes.
So what should Illinois do? Martire suggested raising revenue by taxing services, as other states do. "All neighboring states tax services" including Iowa and Wisconsin.
"We can't solve our problems without thoughtful reform of tax policy for a modern economy."
Within three years, Illinois could have a surplus with enough money to properly fund education, he said. "People are looking for quality schools. Business looks for skilled workers."
"We need new revenue raised the right way." Illinois is one of only five or six states with a flat income tax. Most states have progressive income taxes, where the rich pay more.
Will state officials reform tax policies in Illinois?
Unfortunately politics is "a sound bite game," he said, and people are busy and lack adequate information on the complexities of taxation.But people do change their minds when exposed to facts, he said.
A video of Martire's talk was made by the Peoria Citizens Committee for Economic Opportunity, and will play on cable TV in October. His slides will be available on the League of Women Voters website.
-- Elaine Hopkins
Martire's speech will be televised on Comcast cable channel 22 on Sunday Oct. 16 at 5 p.m. and on Wed. Oct. 19 at 7 p.m. and midnight. The telecasts will be available in Peoria County, East Peoria, Washington and Creve Coeur, Il. It will be on YouTube and FaceBook by Oct. 19.