Wednesday, January 17, 2007

Squeezing a Turnip: A Report on the State's Fiscal Condition

A recent report by the Center for Tax and Budget Accountability entitled "Private Sector Job Trends and The Illinois Structural Deficit: What Illinois' Changing Economy Means For The Demand for Public Services and The States Fiscal Capacity to Fund Them" offers a sobering reminder of the challenge the RTA, the Chicago Transit Authority, Metra, Pace and the other Moving Beyond Congestion proponents will face in trying to persuade the General Assembly to invest hundreds of million of extra operating dollars per year in the short term, and billions of additional capital dollars in the long-term to maintain and then expand the region's public transit system.

The report summarizes the situation as follows. Illinois' median income has dropped substantially (12.2 percent over past six years). Future job grow will be predominantly in low-paying sectors. Income inequality is growing. The flat rate income tax and the State's heavy reliance on property taxes means the tax system is increasingly regressive as income inequality increases. Tax receipts cannot keep up with the growth in current State programs, much less support an expansion in public services. Yet, the declining share of "good" jobs that include health care coverage means that demand for public services such as health care is increasing. The State thus faces a structural GAAP deficit of $3 billion in 2007 that will grow steadily to almost $8.5 billion in 2017 without any new State programs.

That's the good news. The bad news is the CTBA's solution to this structural deficit includes politically toxic measures such as swapping a reduction in property taxes for an increase in the income tax and expanding the sales tax to cover consumer services.

In this fiscal and political environment, the MBC proponents will have to do a masterful lobbying job to convince the General Assembly to prioritize expansion of the Chicago region's public transit system over items such as education and health care. Might the General Assembly more likely point to the State's already sizeable contribution to the region's public transit system, and send the MBC proponents back home to figure out a local/regional solution.

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