“Here’s one conclusion — the Illinois Legislature either has no real grasp of the financial situation in this state or simply doesn’t care. It is our suspicion that too many legislators simply don’t understand the financial reality the state and city face.”
– “Champaign News Gazette Editorial, June 2, 2019
By: Mark Glennon*
When Governor Pritzker announced a $41.5 billion capital spending plan a couple weeks ago we thought it was surely just a pie-in-the-sky first offer – that economic realities and unpopular tax hikes needed to fund so massive a plan would chop it down to something reasonable.
Silly us. The plan has now increased to $45 billion.
To get a sense of the enormity of that number, consider that it’s over twice the state’s combined annual revenue from personal and corporate income taxes. It dwarfs all previous capital spending programs. The Illinois Jobs Now capital plan under Governor Pat Quinn was for $18.0 billion in new projects and $11 billion of reappropriations from previous years. Governor George Ryan’s Illinois FIRST was for $12 billion. The Build Illinois program under Governor Jim Thompson was $2.3 billion.
We understand the case for a capital program of some kind, but this is madness. A spending binge so massive, prepared by proven incompetents and dumped on the General Assembly along with thousands of pages of other budget and spending matters inevitably will be loaded with pork and waste.
Even on sensible projects, spending will be excessive thanks to the absurd “prevailing wage” rules that govern all of it. They drive costs far beyond what the private sector pays, which we’ve documented often. The average, total, full-time-equivalent compensation under our prevailing wage laws, including benefits, for all job categories over all counties is $119,000. Public unions effectively set those numbers. Their power is unchallenged in Springfield, which largely accounts for this capital bill.
How will Illinois pay for this? That’s not entirely clear since nobody has had a chance to fully digest the legislation and disclosures so far have been horrible – cherry-picked numbers given to reporters. The only good news is that the federal government apparently will reimburse Illinois for about $10 billion of the $45 billion (though Illinoisans pay part of that, too).
According to a Chicago Sun-Times summary, Illinoisans will see the state’s tax on gasoline doubled; higher vehicle registration fees; an increase in video gaming terminal taxes; charges on sports wagering revenue; license fees from casino and sports betting; a tax on parking garages and lots; removal of the sales tax exemption on traded-in property valued above $10,000; and an increase on the cigarette tax by $1 per pack. Cook County municipalities would be allowed to add a 3-cent tax on top of the state-issued motor fuel tax. However, the latest version of the bill apparently eliminated a real-estate transfer tax increase, a $1-a-ride fee for ride-sharing services and a tax on cable and streaming video services, which were in the initial proposal.
Much of it will also come out of the state’s general fund, putting more pressure the already desperate situation there. And, no, that won’t be fixed by a new progressive income tax. Revenue from that has already been spoken for elsewhere several times over.
One way or another, though the tax increases may not yet be clear, the bill will have to be paid.
Where will the money be spent? According to a Capitol Illinois News summary, the plan would allocate $33.2 billion for transportation projects including roads and bridges, $3.5 billion for education infrastructure projects, $4.3 billion for state facilities, $1.2 billion for environmental conservation projects, and $420 million for broadband expansion and $465 million for health care and human services facilities.
We will have much more to say on this, the budget and the rest of this legislative session as facts become available. It will take time for much of what was done to be exposed.
*Mark Glennon is founder of Wirepoints.