Cairo Association of Teachers - Newsletter

CAT Tracks for March 8, 2007 IL GOVERNOR'S BUDGET PROPOSAL

From the Southern Illinoisan...

Governor calls for tax changes, spending hikes

By Kurt Erickson, The Southern Springfield Bureau

SPRINGFIELD - Gov. Rod Blagojevich called Wednesday for a major overhaul of the state's business taxes to bankroll a massive expansion of state spending on health care and schools.

In his fifth budget address, the Chicago Democrat said it is his "moral imperative" to change a state tax structure that relies more on individual taxpayers than large corporations.

"The impact of this imbalance weakens our economy, burdens our families and holds our state back," Blagojevich said in his 34-minute speech.

The governor's $60 billion wish list - up from $56 billion in spending this year - also calls for the controversial sale of the state lottery, with the estimated $10 billion in proceeds shoring up the state's shaky pension system.

"I'm pro-business, but I'm also pro-reform," he said. "Doing what's right demands that the middle class not carry the entire burden of our schools, our healthcare and our pensions."

Republican and Democratic lawmakers were bracing for a fight.

Senate Minority Leader Frank Watson, R-Greenville, said the governor is "misleading" the public because businesses will pass along the higher taxes.

"Ultimately the consumer is the one who pays. And when they pander to the people like that and they use this populist attitude � it bothers me because it's not being honest with people," said Watson.

State Rep. Bob Flider, D-Mount Zion, said the proposal will likely change drastically in the coming months.

"My concern is one of raising taxes. I'd like to see us manage within our means for a period of time," Flider said. "It's going to be a long, difficult session."

Business groups also are girding for battle.

"I don't know how the governor can stand up there with a straight face and say he's pro-business," said Doug Whitley, president of the Illinois Chamber of Commerce.

Except for the expansions in schools and health care, the proposal calls for mostly level funding throughout much of state government. The state's public universities, for example, would see a 1.9 percent increase in funding over the current year.

University presidents say that funding level will drive up tuition costs by about 9.5 percent.

Unlike past years, Blagojevich isn't planning to close any prisons or other major state facilities, nor is he planning to open the vacant maximum-security portion of the Thomson Correctional Center in northwest Illinois. The shuttered Lincoln Developmental Center also remains in limbo.

Blagojevich also called for a statewide construction program, bankrolled by the proceeds of the new business taxes. If approved, $1.5 billion would go to school construction, while also financing scores of local building projects such as a new, $14 million Western Illinois University campus in the Quad-Cities.

The linchpin of the governor's budget is his proposed switch to a tax on goods and services, known as a gross receipts tax. He also wants businesses with 10 or more employees that don't provide employee health insurance to pay a 3 percent payroll tax.

The governor's initiative contains a number of exemptions aimed at making sure the tax doesn't drive businesses out of state. Insurers such as State Farm Insurance Cos. could be spared, as would major Illinois-based exporters such as Caterpillar and John Deere.

The Illinois Farm Bureau said the plan would hurt farmers who operate with narrow profit margins.

"It is unfair because it is not based on the ability to pay and the tax is imposed whether a business is profitable or not," said farm bureau President Philip Nelson of Seneca.

The move away from the current corporate income taxes would generate an estimated $2.6 billion in its first year and provide enough cash to launch a $2.1 billion expansion of the state's health insurance system aimed at giving coverage to at least 500,000 of the state's estimated 1.4 million uninsured adults.

Advocates for universal health care hailed the proposal.

"Many of the problems that the uninsured struggle with could have been prevented had they received the right care at the right time," said Illinois Hospital Association President Kenneth Robbins.

Senate President Emil Jones, D-Chicago, supports the plan even though he has long backed a boost in income and sales taxes as a way to beef up spending on schools.

"My role basically is just to get this piece of legislation passed," said Jones. "It infuses a lot of money into our education system."

Jones also pledged to continue pushing for more casinos as a way to fund a larger statewide construction program.

"That's still on the table," said Jones.

But not all Democrats are on board with the governor's proposal.

House Speaker Michael Madigan, D-Chicago, said he wants to see more details before signing on.

And state Sen. Mike Jacobs, D-East Moline, said he's opposed to selling the lottery.

"If a private company can come in and make more money running it then why don't we do that?" he asked.

The governor refused to respond to questions after the speech. He also wouldn't answer questions as he left the State Capitol Wednesday evening.

- Blackwell Thomas and Mike Riopell contributed to this story.