Recent comments by House Speaker Michael Madigan that Democrat leaders may take advantage of some lawmakers’ lame-duck status to advance pension and cost-shift changes without Republican support, following the November election, should be sounding alarm bells for Illinois citizens.
The Democrats’ 2011 tax increase, passed in the waning hours of a lame-duck January session, have sparked concerns that without a bipartisan solution, Democrats will rely on a massive property tax increase to shore up the state’s dismally underfunded state employee retirement systems.
The state’s leaders agree that comprehensive pension reform is necessary to ensure the solvency of Illinois’ five state retirement systems; however, reform negotiations hit a roadblock late in the spring when Governor Pat Quinn, Speaker Madigan and Senate President John Cullerton introduced a proposal that would shift the responsibility of pension payouts for teachers and university employees from the state to local school districts and universities.
I oppose the idea because the shift is not true “savings.” It simply moves the pension burden to local taxing bodies, which is expected to drive up suburban and downstate property taxes.
Illinois can no longer continue “throwing new revenue” at the state’s problems at taxpayers’ expense. A better solution is bipartisan cooperation in negotiating a comprehensive pension reform plan that would not rely on another burdensome tax increase.
ILLINOIS HAS MOST UNITS OF LOCAL GOVERNMENT
The U.S. Census Bureau’s 2012 Census of Governments is reporting that Illinois has more units of government than any other state in the country.
The census considers five basic types of local governments: counties, municipalities, townships, special districts, and school districts. Illinois has 6,968 local governments, 2,000 more units than Pennsylvania, which came in at number two on the list. With 21 local governments, Hawaii has the fewest of any state.
The increase in local government units over the years is attributed to the changes made to the Illinois Constitution in 1970, when debt limits were placed on units of local governments. As a result, new units have been created as a way to circumvent those limitations. Since the Census Bureau’s last count in 2007, only 26 units of government in Illinois have ceased to operate—a less than one-half percent decline over the last five years.
These entities provide services, but at a cost to taxpayers. At a time when Illinois faces severe financial troubles, a number of public officials and others have called for a leaner, more streamlined, more efficient government.
A bipartisan, bicameral Local Government Consolidation Commission is currently reviewing units of local government throughout the state and exploring ways to consolidate. A report is expected next year.
A CLOSER LOOK AT GAS PRICES
Illinois motorists who wonder at the variations in gas prices across the state might be surprised to learn that local, state and federal taxes account for some of the differences.
According to a 2011 report by the state Commission on Government Forecasting and Accountability, Illinois has many different taxes on the sale of motor fuel including various federal, state, and local motor fuel taxes, as well as various sales taxes. The state taxes include the flat 19 cents per gallon motor fuel tax on gasoline/gasohol (21 cents for diesel), the 1.1 cents per gallon in environmental fees, and the state sales tax of 5% of motor fuel sales (imposed on the price before the inclusion of the state motor fuel tax). By state law, only 80% of the price of gasohol is subject to the state sales tax.
The state’s sales tax on motor fuel sales is bad public policy because, the way the tax is calculated, it’s actually a tax on a tax. The price of a gallon of fuel includes the price of the product plus a separate motor fuel tax. The sales tax is figured on that total price.
The state’s share of the sales tax is 5 percent, while local governments receive 1.25 percent. Some municipalities pile their own sales taxes on fuel in addition – ranging from 0.25 percent in some small communities to 3.5 percent in the city of Chicago.
In terms of the state motor fuel tax, Illinois has the 31st highest rate in the nation at 20.1 cents per gallon (including environmental fees). In comparison to neighboring states, Illinois’ rate is lower than the tax rates of Wisconsin (32.9 cents per gallon), Kentucky (25.9 cents) and Iowa (22.0 cents), but is higher than Michigan (19.0 cents), Indiana (18.0 cents), and Missouri (17.3 cents).
In its latest report (July 2012), the American Petroleum Institute shows Illinois having the fifth highest gasoline tax total (including all state, federal, and local taxes) in the nation at 58.1 cents per gallon. Only California (67.7 cents), New York (67.7 cents), Hawaii (66.7 cents) and Connecticut (63.4 cents) had higher rates.
Neighboring states Indiana (56.5 cents) and Michigan (57.9 cents) were close behind Illinois. Not surprisingly, all of the highest-ranked states also imposed some sort of sales tax on motor fuel in addition to their standard motor fuel tax. However, some other states adjacent to Illinois have notably lower taxes, with Wisconsin at 51.3 cents, Iowa at 40.4 cents and Missouri at 35.7 cents.
AROUND THE DISTRICT
I was pleased to join with several of my legislative colleagues from the area Sept. 7 to participate in the Advocate BroMenn/Eureka Legislative Forum.
We each were able to give our views about the fiscal situation in Springfield and its impact on healthcare.
It was good to talk with the front-line workers in the healthcare industry and get their opinions and concerns about important issues that affect us all.