Quinn signs tax, Democrats point to spending caps
By CHRISTOPHER WILLS Associated Press January 13, 2011 6:00PM
Illinois Speaker of the House Michael Madigan (D-Chicago, left) talks with state Rep. Jack D. Franks (D-Woodstock) on Thursday, Jan. 13, 2011, in Springfield. | AP photo
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Updated: March 21, 2011 11:49AM
SPRINGFIELD, Ill. (AP) — Illinois taxpayers will have to fork over a lot more money now that Gov. Pat Quinn has signed a major tax increase, but Democratic leaders want them to take comfort in knowing that new spending limits will ensure their dollars are handled carefully.
Not so fast, say Republicans. They see potential loopholes that Democrats could exploit to avoid any real fiscal discipline.
The most vocal advocate for the spending limits, Senate President John Cullerton, seems almost hurt that anyone would suggest deception.
“Please believe these spending caps are real,” the Chicago Democrat said during debate in the chamber over the legislation. “It’s the first time it’s ever been done here, and it’s literally turning over power to the minority.”
The Republican minority will have the ability to block spending bills that would violate the caps. An independent official will rule on any violations. And if spending exceeds the caps, the new income tax will be reversed automatically.
Quinn signed the tax increase into law Thursday afternoon without any ceremony or comment. It is meant to generate about $6.8 billion annually for four years to close a budget deficit that could hit $15 billion in coming months.
Republicans say the budget should have been cut more before any tax increase was considered. They fear the additional money will just be used to continue policies that dug Illinois’ budget hole in the first place.
Here’s how the limits on spending growth are supposed to work.
The law raising the personal income tax from 3 percent to 5 percent also spells out exactly how much money the state can spend from general funds in the next four budgets.
The first year allows a spending jump of 10 percent so that the new tax money can be used for its intended purposes. For instance, the state will replace money that had been raided from special-purpose funds and pay long-delayed health insurance bills.
After those costs are accounted for, spending could climb by only 2 percent each of the following three years — from $36.8 billion to $39.1 billion.
Auditor General William Holland will review each budget and rule on whether it meets the spending limits. Any violation, and taxes automatically go back to the current level.
Those budget totals would include everything from multi-billion contributions to retirement systems to paperclips. That means increased expenses in a couple of big programs could well eat up all the space under the caps, requiring cuts in other areas of government.
For instance, the caps allow the budget to grow by about $700 million between fiscal 2012 and 2013. If Medicaid and pension costs climb at their typical rate, their growth alone will require something like $1.1 billion in additional money, so other spending would have to be slashed.
“You’re talking about a shoe that is definitely going to pinch,” said House Majority Leader Barbara Flynn Currie, D-Chicago.
The law would allow the state to exceed the spending limits only if the governor declared an emergency and both the state treasurer and comptroller — who are Republicans — agreed with him.
Even then, the actual budget legislation approving higher spending would need approval from three-fifths of lawmakers. That would mean rounding up some Republican votes.
Senate Minority Leader Christine Radogno, R-Lemont, said the spending limits are “a sincere effort to begin to address this problem, but I think it’s an inadequate effort.”
Republicans say the new tax law creates special funds — the Fund for the Advancement of Education, for instance — that are exempt from the spending caps. They maintain that more such exempt funds could be created at any time, allowing Democrats to circumvent the caps.
Democrats deny that. They say the new education fund won’t take effect until after the spending caps expire. Moreover, they say, creating any new fund would require a three-fifths vote, giving Republicans veto power.
David Merriman, associate director of the University of Illinois’ Institute of Government and Public Affairs, said spending limits tend to encourage budget gimmicks that disguise the true costs of government. He also said it will be difficult to keep money from being diverted to special funds that aren’t subject to the caps.
But if that can be done, he said, the caps could be a useful tool for making sure Illinois officials don’t dig another huge budget hole.
“It’s looking more interesting,” Merriman said. “It could be that the devil is in the details.”
