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More than 200 people crowded into the Evanston Civic Center Tuesday night for a panel discussion at which a business professor told them uncertainty about state spending is hurting the Illinois economy.

Therese McGuire of Northwestern University’s Kellogg School of Management says researchers at Kellogg, Stanford and the University of Chicago have developed an Economic Policy Uncertainty Index based on studies that show tax and spending uncertainty can deter economic growth.

Therese McGuire.

Evidence is growing that Illinois is shooting itself in the foot when it’s unable to pass a budget, McGuire said. Uncertainty makes consumers reduce spending, it makes businesses cautious about investing and raises the cost of borrowing.

In addition, she said, her own research and that of others has shown little evidence of a link between the level of taxation in a state and that state’s rate of economic growth.

Mark Weiner.

Mark Weiner, CEO of CJE Senior Life, said that the state’s failure to adequately pay non-profit social service providers is driving them out of business.

“You’re going to lose faith-based not-for-profit providers,” Weiner said, suggesting that residents would be left with an environment of social service Walmarts.

He noted that Lutheran Social Services laid off half its staff a few months ago and said his board is juggling 20-plus different budget scenarios as it tries to come up with a balanced budget for its new fiscal year that starts in just two months.

Illinois nursing homes receive among the lowest state rembursement rates in the nation, Weiner said, and the transition to managed care has been fraught with problems — with a huge lack of communication and accountability that’s added stress for clients.

CJE bills the state $900,000 a month, and the state is now nearly $2.5 million behind on payments, “and there’s no certainty we’ll ever be paid,” Weiner added.

Bill Stafford.

Bill Stafford, a board member at Oakton Community College and CFO at Evanston Township High School, said “the carnage goes on” from the state’s lack of a budget, with 10,000 community college students forced to drop out of school in January because of the state’s failure to fund its Monetary Award Program grants.

The legislature recently approved emergency funding for that program — but at only one-third its previous level.

Oakton, Stafford said, has raised tuition by 10 percent and is considering another similar increase, because “I believe that in the long run the state is not going to fund us.”

Stafford said at ETHS the uncertainty is leading advisors to caution students that if they choose to go to college in Illinois, the financial aid they’re counting on may not be available.

And he said it severely hampers efforts to reduce the gap between educational attainment levels in Illinois and the skills required by available jobs.

Daniel Biss.

The panel was organized by State Sen. Daniel Biss (D-Evanston), who said that to reach a budget agreement that fully funded existing programs would require a return to a state income tax rate of roughly 5 percent.

Biss said Illinois is one of only four states in the nation that has a flat, rather than a graduated income tax. But he said that while he believes there are the votes in the state Senate to put a constitutional amendment on the fall ballot to permit a graduated tax, it’s unclear whether there are sufficient votes in the House for it.

McGuire suggested that there are other ways to make the income tax progressive without a constitutional amendment — for examle, by increasing the earned income tax credit and standard deduction. 

Bill Smith is the editor and publisher of Evanston Now.

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1 Comment

  1. Biss should tell his fellow Democrats to override the guv’s veto

    This is another roundabout effort by Biss to blame the other party and claim a progressive tax is the answer to a huge deficit in the billions, an unsustainable goverment union pension system and chronic job loss in Illinois due to businesses fleeing or not relocating to the state.

    The veto proof Democrat controlled General Assembly wants to raise taxes to solve Illinois' fiscal crisis that was in place years BEFORE the budget impasse and before voters elected Rauner. 

    Rauner proposed a budget containing heavy cuts and no tax increases to end FY 2016 with surplus of $505 million. Democrats passed a budget that ended the year with a deficit the administration estimated at $4 billion.

    Rauner wants a plan that would include anti-union measurements and more benefits for businesses. The Democrat majority just wants to keep raising taxes as if that will eventually solve Illinois huge deficit and the oncoming financial tsunami from the unsustainable goverment pension system.

    The Illinois Constitution says state government can’t spend money unless there is a balanced budget to authorize that spending. But they are spending money, causing this longstanding impasse. Interestingly, the state goverment ignores the Constitution as it spends money without a balanced budget but follows the Constitution when it comes to changing the jackpot goverment pension benefits and control runaway costs..

    The Democrats have a veto proof majority. Folks, what that means is if they want to they can raise the taxes RIGHT NOW and go around Rauner's veto!!!!!!! They did try last year but guess what – some Democrats didn't want to take another hit by raising taxes. So king Madigan was unable to muster enough Demcorat votes. Instead, the Democrats seem content to blame the Republican governor for all the pain caused by this impasse. Why doesn't Biss demand his own party pass this progressive tax plan and override Rauner's veto? 

    The Democratic party has had almost full control of state goverment for decades. And this is their mess. Remember, almost 90 percent of all goverment union campaign donations go to Democrats.

    Biss wants a constitutional amendment to let voters decide on a graduated tax system. Say Biss, how about a constitutional amendment to let voters decide on goverment union pension benefits?.

    Two years ago, almost a million Illinois residents signed two petitions to put on the 2014 ballot voter referendums to reform term limits and gerrymandering. The number of signatures were twice what was needed. But the Democratic party sent their lawyers in to sue the grassroots organizations that collected the signatures. A state judge, Mary Mikva, threw out the petitions, ruling they were unconstitutional. Mary Mikva is the daughter of Democrat politician Abner Mikva who served in the Clinton administration and mentored President Obama.

    When one political party rules with impunity and nepotism abounds, it leaves behind a long trail of stinking sludge, marked by corruption and fraud..

    If the Democrats don't want to clean up the sludge they made perhaps another political party should have a chance to do it.

    The Democrats prevented us from voting on term limits and gerrymandering but they can't stop us from voting this November.

     

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