Real Wealth Society

Wednesday, February 28, 2007

I’ve been thinking about breakfasts By Fred Cederholm

Column for on/after Feb 25th

I’ve been thinking about breakfasts. Actually I’ve been thinking about Illinois State Rep. Robert Pritchard, feedback, legislative updates, bait and switches, who pays what, gaming, sales taxes on services, and the “State of our State.” As the Illinois legislature convened the 95th General Assembly on January 10th, I began looking ahead to the coming legislative sessions in Springfield with trepidations at best. Will this finally be the year when our State government honestly addresses the financial crises facing the funding of pensions, education, and healthcare in this “Land of Lincoln?”

You see, yesterday morning at 7:30 AM, Bob Pritchard (Illinois State Representative 70th District) held his annual legislative update breakfast. This gathering is usually most informative and leaves those attending feeling, well, somewhat upbeat that Illinois will finally face up to the demons lurking on the horizon for the Prairie State. Government is as much about providing services to its citizenry and fostering a competitive business environment as it is about passing and enforcing legislation – all cost money and the big questions are who will pay, when will they pay, and how much will they pay?

Normally, this breakfast occurs after the Governor has tendered his budget and has delivered his “State of the State” address. Illinois is in financial disarray – having met the Illinois Constitution’s “requirement of a balanced budget” by deferring costs well into the future, robbing Peter to pay Paul by raiding designated fund “surpluses and pre-payments” for general disbursements, or even delaying the payment of current obligations altogether. Because in the last fiscal year, the Democratic majorities in the State House (and Senate) and Chief Executive Blagojevich had orchestrated the (mis-)appropriation of the remaining “surpluses” of the largest funds – road and retirement pensions, the so-called fixing of these ongoing shortfalls between revenues and promised expenditures won’t be as easy to massage into temporary oblivion. As a consequence, the Governor got an extension to deliver his annual message of smoke, lights and mirrors until March 7th. Bob was candid and honest about what lies ahead in this session, and one could only sense his frustration being in the Republican minority in Springfield.

Bob opened with comments about the importance of local government – county, township, and municipal. These are the core units in providing services to the populace. While they are the most efficient in providing those services, all are strapped for cash and frequently look to the state for help. In recent years there has been a media flurry of “sizzle” about this new state program and that new state program; but… “where’s the beef” when there is little, if any, funding provided. Later, Bob held up a soon-to-be-available booklet which summarized the grants and awards “available” to local government units – then, he wished the attendees good luck, because few if any had been actually funded.

The Illinois “budget” was pushing $28 Billion. $7.2 Billion came from sales’ taxes, $8.8 came from individual income taxes, $1.4 Billion more from gaming, and another $1.7 Billion from corporation taxes. Do the math and remember that the last of the so-called biggie “surpluses” were raided and pillaged last year. Now we as a state are looking to incur further promised obligations for the new and recently mega-hyped programs of All-kids, veterans, day-care, pre-school… none of which came with a matching plan of how to pay for them. These programs may be needed/ wanted, but how can the state deliver on these promises now (or down the road); when Illinois is already facing unfunded/ under-funded obligations for Medicaid, retirement pensions, and elementary/secondary education. The state had covered about 50% of education costs; now well over 70% of local educational funding comes from property taxes. Note how at least 3 of 4 Illinois schools districts are now facing deficits.

On the “new” revenue side of fixing the unbalanced equation, Bob shared with the group what has been put in the pipeline since January 10th and what “rabbits” are rumored to be lurking in the hat for the Governor’s March 7th speech. There are several bills introduced which propose upwards to 4 more casino licenses and an expansion of slot machine gambling to the state’s race tracks. Gaming generates a huge amount of cash for the state each year, but despite what we were told about the lottery, the lotto, the multitude of scratch-and sniff instant games, the riverboats…, what was truly solved?

We should brace ourselves for more slight of hand by coming proposals of a new “gross receipts” tax on intangible goods and services. Think of it as a sales tax on grooming, any professional services, counseling, or advice. Then too, we could sell off our highways, parks, or the Governor’s Mansion - Blagojevich doesn’t live there. I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

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