Saying the state needs a “comprehensive plan for achieving long-term fiscal sustainability,” the Civic Federation released a new report that it says is a path to a balanced budget in Illinois.
The plan relies on a mix of new taxes, spending cuts and completely paying down Illinois’ $5.4 billion backlog of bills. The five-year plan also calls for building a “rainy day” fund and restoring municipalities’ full share of revenue generated by taxes.
However, the most controversial—and politically difficult—parts of the plan are likely to be a proposal to start taxing pensions and Social Security income and extending the temporary income tax increase set to expire in January 2015. The plan calls for extending the increase for one additional year.
“This comprehensive approach, combined with the implementation of major pension reform legislation, would finally allow the State to move beyond what has become a perpetual fiscal crisis,” said Laurence Msall, president of the Civic Federation, in a statement. “Revenue enhancements alone are not enough to provide long-term stability for the State’s finances while over-reliance on expenditure reductions could cripple essential services.”
The Civic Federation looked at three other potential scenarios for balancing the budget, including a “spending reductions only” proposal before releasing their recommendations.
The groups says its plan would “fully pay down the State’s $5.4 billion backlog of unpaid bills while gradually reducing income tax rates by 20%, broadening the tax base and building a reserve fund as protection against future economic downturns.