Illinois – The State of Our State

J. Thomas Johnson, PresidentTaxpayers’ Federation of Illinois(217) 522-6818tom@iltaxwatch.org

4th Annual Elmhurst College

Governmental Forum Elmhurst, Illinois

January 26, 2011 

Per CapitaPersonal Income

US Illinois State Rank

1980 $10,114 $11,005 9th

1992 $20,114 $21,980 9th

2009 $39,138 $41,411 16th

2

Source: U.S. Census Bureau

Percentage of Growth in State GDP 1999-2009

3

Percentage of Growth in Personal Income 1999-2008

4

Percentage of Growth (Decline) in Employees

on Nonfarm Payroll 1999-2009

5

Percentage of Decline of Employees in Manufacturing 1999-2009

6

Barometer of Job Recovery7

Source: Institute of Governmental and Public Affairs , Illinois Economic Review, December 2010.

Illinois Job Recovery 600,000

Average State Tax Impact/Job* $ 4,200

Annual Revenue Impactof Job Recovery $2.5

Billion

*Projected by the Regional Economies Application Laboratories – University of Illinois

8

Impact of Job Loss

Big Three Taxes(Personal, Corporate Income Taxes & Sales Taxes)

$ Billions

Actual or Historical Growth Projected Rate

2008 $19.4 $19.4

2009 17.7 20.2

2010 16.0 21.0

Projected 2011 16.5 21.9

$69.6 $82.5

Difference $12.9

9

General Funds Cumulative Deficit

$34 Billion Spending Base(Billions)

Unpaid Bills $6.5 Corporate Income Tax Refund Backlog .9

State Group Insurance Backlog 1.1

Total $8.5

2010 Pension Obligation Bonds $3.5

2011 Pension Notes $3.7

Federal Stimulus through 2011 $4.5

10

Proposed Borrowing Plan

($ Billions)

Debt Consolidation Borrowing $ 8.75 2011 Pension Obligation Notes 4.1

Total 2011 Operating Borrowings $12.85

Annual Debt Service $1.5 Billion for 14 years

11

2012 Structural Deficit

($ Billions)

Spending in Excess of Revenue $6.2 New Debt Service 1.5

Total Structural Deficit $7.7

12

New Enacted Revenues

($ Billions)

Individual Income Tax $6.0 Corporate Income Tax 1.0

(Including NOL Suspensions)

Estate Tax Reinstatement .3

$7.3

13

Illinois Income Tax Rates

Individual Corporate*

2010 3.0 % 7.3 %

2011 - 2014 5.0 9.5

2015 - 2024 3.75 7.75

2025 3.25 7.3

* Inclusive of Personal Property Replacement Tax

14

Other Revenue Issues(not yet resolved)

Gaming Expansion

$1 -1.5 Billion One time Revenues

500 million Annual Recurring

Cigarette Tax

Increase from 98 cents to $1.99 per

pack

$330 million

15

Spending Limits(General Funds)

Billions

2011 $34,285

2012 36,818

2013 37,554

2014 38,305

2015 39,072

16

Current Tax Rates – 3.5% Growth Rates

16.3%

41.5%

48.1%

54.3%

60.3%

64.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2000 2010 2020 2030 2040 2045

% o

f Net

"Bi

g Th

ree"

Rev

enue

% of Net "Big Three" Revenue

Pension Bonds and Notes % of Net Revenue

General Obligation Debt Service % of NetRevenue

Retiree Health Care Costs % of Net Revenue

Pension Contribution % of Net Revenue

*Net “Big Three” Revenue comprises Revenue available to the state after applicable adjustments resulting from the state corporate, personal income, and sales taxes.

17

Current Tax Rates – 2% Growth Rates

16.3%

41.5%

54.2%

70.6%

91.1%

104.6%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2000 2010 2020 2030 2040 2045

% o

f Net

"Bi

g Th

ree"

Rev

enue

% of Net "Big Three" Revenue

Pension Bonds and Notes % of Net Revenue

General Obligation Debt Service % of Net Revenue

Retiree Health Care Costs % of Net Revenue

Pension Contribution % of Net Revenue

*Net “Big Three” Revenue comprises Revenue available to the state after applicable adjustments resulting from the state corporate, personal income, and sales taxes.

18

What is Illinois’s Tax CapacityState and Local Taxes as a % of Gross State Product

National Average9.2%

Illinois Pre-Tax (Rank 26th) 9.13%

Illinois Post-Tax (Rank 8th ) 10.20%

16th Place State 9.77%

19

State Government is Primarily a Purchaser of Goods &

Services –

Not a Provider

20

– Human Services Providers

– Healthcare Providers

– Local Governments

– Higher Education Institutions

21

State Government Purchases Services from:

Where do we Start to Cut?

Base Spending (Billions)

Pensions $ 4Employee/Retiree Healthcare 2Medicaid 15K-12 Education 7Higher Education 2Human Services 5Local Government Revenue Sharing 5Corrections 1Mass Transit Operating Subsidies .5

22

Re-Engineering State and Local

Government in

Illinois

24

State Programs

Merge Human Services – Integrated Service Delivery

De-Institutionalize

Reduce Prison Population by 1/3

Privatize Higher Education

Re-Evaluate the K-12 Funding

Program

25

$15 Billion of State Revenues go to

Local Governments

Through 230 different programs

Representing 34% of Local Government Revenue

26

DuPage County Taxing Bodies

Countywide 4Townships 9Municipalities 29School Districts 42Community College 1Fire Protection Districts 23Park Districts 35Others 19

162

27