CIVIC COMMITTEE PUBLISHES RECOMMENDED FINANCIAL FRAMEWORK, ADDITIONAL REFORMS
(May 18, 2017, Chicago, IL) – The Civic Committee of the Commercial Club of Chicago, one of Illinois' leading business organizations, is calling for a comprehensive plan to drive economic growth for the State and economic opportunity for its people. The plan includes long-term solutions to restore State government's fiscal integrity and its reputation among employers and investors, while ensuring the provision of critical public services to its communities and residents.
Entitled "Bringing Illinois Back: A Framework for our Future," the report was developed by the Civic Committee's Tax Policy Task Force. The Task Force completed an in-depth study of the fiscal challenges facing Illinois, including an evaluation of best practices from states that have achieved sustained economic growth and financial stability.
Illinois' performance on key economic measures underscores the urgency of improving State government's fiscal condition. Illinois has experienced consecutive annual population loss, resulting in a total population decline of approximately 78,000 people; employment growth ranks in the bottom half of all states; and the State's credit rating is the lowest in the nation.
Illinois' communities are bearing the costs of the current budget stalemate and the growing backlog of unpaid bills – estimated at more than $13 billion. This backlog already hampers the State's ability to provide public education, social services and infrastructure investments, and every month without a solution adds an estimated $500 million more to the pile of unpaid bills.
"The challenges facing Illinois are considerable and the passage of time only makes the task of bringing Illinois back to financial solvency increasingly difficult," said Task Force Chairman and Civic Committee member Jay Henderson. "The uncertainty surrounding the health of our State government has hurt Illinois for too long. We must take action now to address these problems."
The report's recommendations center on a Framework of five key elements, which require State government to:
- Implement enhanced long-term financial planning processes and increase fiscal transparency;
- Eliminate the State's structural budget deficit and unpaid bills, establish a reserve fund, and begin to address the almost $130 billion in unfunded liabilities of the State's pension funds;
- Reduce spending across the entire State budget;
- Reform the tax system to bring Illinois' tax policies more in line with other states and raise revenues, as needed; and
- Establish goals and metrics to measure the State's progress back to financial solvency.
To fully address the uncertainty surrounding the State's long-term financial health, the Framework calls for State government to implement a total of $10 billion in annual expenditure reductions/revenue increases for each of the years from FY2018-2022. The report identifies a potential set of interconnected proposals that achieve the $10 billion annual target through $2 billion in expenditure reductions and $8 billion in revenue increases.
These proposals include:
- Potential Expenditure Reductions ($2 Billion Annually)
- Modifying the group health insurance plan to reflect today's cost sharing arrangements
- Implementing further procurement reforms
- Reducing General Funds spending through operational improvements
- Implementing constitutional pension reforms
- Potential Revenue Increases ($8 Billion Annually, Net
- Increasing total corporate income tax rate to 9.5%
- Increasing personal income tax rate to 5%
- Including all federally taxable retirement income in taxable personal income
- Eliminating certain exemptions for taxpayers with annual income over $50,000
- Expanding sales tax to certain consumer services
- Increasing Earned Income Tax Credit for low-income taxpayers
- Eliminating estate tax
"We're aware that these efforts will require sacrifices and compromise from a wide range of people. We must all work together," explained Rick Waddell, Civic Committee Chairman. "The substantial nature of these recommendations reflects the seriousness of the issue and the importance of a long-term plan that is comprehensive and fiscally-sound."
The report also recommends additional reforms, noting that other aspects of Illinois' jobs climate should be improved by moving toward the practices of most other states. Reform recommendations focus on 3 key areas:
- Improving transparency and supporting coordination and consolidation among Illinois' local units of government;
- Reforming the school funding formula and substantially increasing State aid for education; and
- Aligning Illinois workers' compensation provisions with best practices from other states.
In developing this report, the Civic Committee observed that Illinois' current policies often make it an outlier compared to other states. This suggests that significant opportunity and improvement may result from aligning with best practices. The report recommendations are largely based on that principle, and incorporate reasonable, common-sense reforms that have a proven track record.
"We are confident that the full implementation of the Framework will provide for the long-term health of Illinois, its communities and its people," explained Kelly R. Welsh, President of the Civic Committee.
The Civic Committee's full report is available here.
About the Civic Committee
The Commercial Club of Chicago, founded in 1877, formed the Civic Committee in 1983 to examine various issues that were affecting the economic well-being of the metropolitan area and to devise a long-term strategic plan for addressing these problems. Today, the Civic Committee, which is comprised of senior executives of the Chicago region's leading businesses, is dedicated to improving Chicagoland as a place to live, work and conduct business. Among other efforts, the Civic Committee has successfully led the fight to expand O'Hare Airport and to improve the quality of education in Chicago by funding and creating charter schools in the City's low-income communities, and continues to recommend reforms that enhance the long-term sustainability of the State's finances.