A group of prominent businessmen issues a report saying the state has to increase taxes and slash costs to avert a "financial implosion."

Dozens of state lawmakers form a bi-partisan "education caucus" to figure out ways of improving Illinois' public schools, possibly including the long-sought solution to the state's broken system of paying for education.

All of these events occurred within the last three months, leading some to think pressure is mounting to raise Illinois taxes, either in conjunction with school funding reform or simply to cover existing state obligations.

"We are in a very different place than we were a year and a half ago," said Ralph Martire, executive director of the Center for Tax and Budget Accountability. "I think it will be done before 2010. I'm cautiously optimistic it can be done in 2007, but I'm not a wild-eyed optimist."

Others, though, don't share Martire's cautious optimism.

"I'll be awfully surprised if something happens," said former Gov. Jim Edgar, who believes a tax hike is necessary because of the state's financial problems. "The governor has said he is adamantly opposed to any tax increases. It's awfully difficult to get a major tax increase when the governor indicates he is opposed to it."

Martire's group, for years, has called for what it terms "tax restructuring." Their proposal includes an increase in the state income tax coupled with property tax relief and tax credits for the working poor. It also calls for expansion of the state sales tax base to cover services and other items not taxed.

The plan was embodied in a bill introduced in the General Assembly in 2005, but it never came to a vote.

Things began changing in September, when Hynes issued his warning about state finances. State tax collections generally go up every year because the economy expands to one degree or another. But Hynes said tax growth from economic expansion over the next three years will barely cover the cost of state pensions, bonds and health care for the poor. Very little money will be left over for all other state programs, including education. If the state's economy turned sour, Hynes warned, the result could be a serious crisis.

Hynes' warning could not be dismissed as simply a partisan attack in an election year since he, like Gov. Rod Blagojevich, is a Democrat.

Then the Civic Committee of the Commercial Club of Chicago issued its own warning earlier this month. Composed of executives from some of the largest companies in Illinois, the committee pegged the state's unfunded debt at $106 billion from backlogged Medicaid bills as well as pension obligations and health insurance for retired employees. It said state spending has to be slashed and taxes raised to avoid an impending "financial implosion."

Blagojevich's office has disputed some of the committee's numbers, but acknowledges the state continues to have financial problems.

"We certainly agree in principal with what the Civic Committee and others are saying," said Becky Carroll, spokeswoman for Blagojevich's budget office. "We have serious structural problems in respect to pensions and Medicaid and other areas that place tremendous spending pressure on state finances."

The Civic Committee said an income tax hike is needed as well as an expansion of the sales tax base. It did not, however, talk about property tax relief. Still, having businessmen talking about a tax hike struck some as extraordinary.

"It underscores just how bad things are financially when you have leading businessmen in the state coming out and saying we have to raise taxes," Edgar said. "It's the first time I can remember they've ever come out and said we have to do something."

"Even though they do not like the idea of a swap, the fact (the Civic Committee) said we have to increase the income tax and broaden the sales tax is an enormous step in what many of us think is the right direction," said former comptroller and gubernatorial candidate Dawn Clark Netsch. "It takes the onus off some members of the legislature."

Edgar is skeptical.

"I think it gives people cover, but I'm not convinced it will be widespread enough in Springfield to get it done," Edgar said. "I hope I'm wrong because I don't know how we keep going down the road we've been on."

There also is the issue of the governor. Blagojevich pledged that if re-elected, he would not raise the income or sales tax for the next four years. Carroll said that means no increase in the income or sales tax rate. Faced with the prospect that Blagojevich will veto a tax hike, few lawmakers would vote for it, even if they thought it necessary.

"You're going to have a lot of legislators say, 'Why should I stick my neck out on a tax increase if the governor is going to veto it?'" Netsch said. "He (Blagojevich) has the bully pulpit more than anyone else. He has got to be willing to be involved."

While Blagojevich flatly ruled out an increase in the income or sale tax rate, his position on expanding the sales tax is less clear-cut. Asked if the governor would consider an expansion of the sales tax to items not currently taxed, Carroll said, "It's too early in the budget process to talk specifically about any options that are on the table."

Adding to the mix is a renewed focus on education by state lawmakers. More than 60 legislators, including senators and representatives from both parties, have formed an Education Caucus to examine a wide range of education issues.

"It's not only funding, but the many reform issues, like accountability," said Rep. Robert Pritchard, R-Sycamore, one of the lawmakers who conceived the caucus. "The desire is there to address these issues and move forward as quickly as we can get agreement (but) it may take a couple of years to address some of these issues."

Martire, for one, thinks the large cross-section of lawmakers may help to finally push funding reform through the legislature.

"There's so much distrust pitting one region against another. Who are the winners and losers geographically," Martire said. "I think this new caucus is a good thing. It is a great way to get past those trust issues."

Martire noted that education funding reform already is a top priority for Senate President Emil Jones, D-Chicago.

"If (House Speaker Michael) Madigan becomes engaged it will become a priority to the state," Martire said.

And in that event, Martire said, even Blagojevich might be convinced to go along, no-tax-hike pledge or not, because education also is one of his top priorities.

"It's not a be all and end all for the governor," Martire said. "He may decide the school funding piece is so good and comports to his values. He can say both are parts of my platform, but schools are more important."

Doug Finke can be reached at 788-1527 or doug.finke@sj-r.com.

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Reader Comments - 34 comments

James wrote at 12/26/2006 7:47:05 AM

Why is it always raise taxes first then cut spending try and reverse that and see what happens if you dont spend you have no reason to raise taxes,if Jesse White,can send two employees to get carpet at $1700.00 compared to $600.00 we dont need a tax increase, My wife and I drove a semi for 20 years and we covered this country coast to coast in two days so dont tell me that the carpet wouldnt be here on time if by truck so lets try cutting spending instead of yelling tax increase by the way call us xpress trucking if you want something on time

fatboy wrote at 12/26/2006 7:50:12 AM

Perhaps we should take a look at our expenses and make sure they don't exceed our revenue. I can not figure out why government always tries to raise revenue to meet "expenses". We could start by cancelling the new carpet for Secretary of State White's new office.

What again? wrote at 12/26/2006 8:15:55 AM

How about giving pay raises when there's no money for it?

Just do it wrote at 12/26/2006 8:23:21 AM

So you're not willing to put out a piece of legislation to fix a system that is acknowledged to be broken because it will get shot down? You lost my vote. You were elected to make the state better, not duck and cover because a bill might get veto'd. Do it, and pass it in the legislature overwhemingly, then let the governor defend his veto in the court of public opinion. Maybe the only way to replace the person on the bully pulpit is to expose him as the fraud he is.

Cut wrote at 12/26/2006 8:34:31 AM

Instead of giving those big pay increases and monthly bonus's for doing the jobs they were hired to do put all this money aside and use it to cover some of the taxes. You know you tired of hearing lets raise this to cover that. If you ran the city or government the way you ran your home you just might have some money left over to pay for the expense carpet or whatever else came along without raising taxes.

oh my! wrote at 12/26/2006 8:41:25 AM

The Governor and legislature can't promote, introduce and sign into law all the new and great sounding programs that promise so much to so many within the current state's revenue/resources. Yet, they promote and legislate these programs anyway. Things cost what they cost is a great saying mostly heard from those who have no money to back up their ideas and pomotions. Figure it out folks, the people in charge (not the citizens of this state) can't balance a check book, otherwise they wouldn't be rolling out all these pie in the sky programs that the state can't afford. If the governor really wants to help any of us, stop spending money that we don't have on programs that can't and won't work! There are so many it's putrid.

Get Real wrote at 12/26/2006 8:47:00 AM

If the 1600 had not been spent, there would only be one or two billion more needed to balance the budget. Get Real. If the Guv and the legislature had any guts they would do the only thing which will solve the money crisis---raise the income tax!

taxmanrevolver wrote at 12/26/2006 9:12:08 AM

People believe all the political promises about spending cuts spewed during a campaign, elect the candidates who ignore the really important issues, get mad when the officials don't do anything valid about crises such as the state's financial situation, and then forget about what the politicians did or didn't do in the previous 3 years leading up to an election and re-elect them. It's a vicious cycle furthered by all the sheep who look for a political hand-out.

Small Town wrote at 12/26/2006 9:30:34 AM

Seems the Illinois government is just like the power company. Taxes, taxes, more taxes. Maybe the Illinois population should start taxing the government and utility companies. Maybe get even. Enough is enough.

richard smith wrote at 12/26/2006 9:45:45 AM

We do NOT need any increase in Income or Sales Taxes. Just reduce spending and cut some programs. I praise the Gov. for opposing all increases in Sales and Income Taxes. We are taxed too much now. You can't spend improvements in Education, anyway.

Winners and losers wrote at 12/26/2006 9:55:21 AM

Martire wonders who are the *winners and losers* geographically? Why, Chicago! Of course! Check out Blago's press release of Dec 21, where he hands over another $9.6 million to certain Chicago churches, who were the developers of a pilot program to help 170 people leaving the foster care system. These religious groups are Interfaith Housing Development Corporation of Chicago and their service provider partners, Sankofa Safe Child Initiative and Coppin AME Church. What happened to separation of church and state that the liberals love to throw around when it's convenient to do so? More political paybacks for Chicago! Would somebody please stop this guy!

Road to implosion wrote at 12/26/2006 10:07:23 AM

If the State of Illinois does "implode," perhaps then Blago will pack up and move to another State! And to Dan Hynes, perhaps you should pick up the phone and tell Blago there is a serious financial crisis. You should know he doesn't read downstate newspapers.

Me wrote at 12/26/2006 10:22:06 AM

whats up with the lottery ? schools,education,etc.?

hmmmm wrote at 12/26/2006 10:30:14 AM

Well Blago can find money for all his pet projects, to give raises to all his buddies for whom he has given good paying jobs, why can't he find money to solve this dilemna? Oh because he caused it? You know Roddy, you can't blame Ryan for this one...

Lets See wrote at 12/26/2006 11:05:00 AM

They can't pay for medical care but they can get raises. They can't pay for education but they can find money for medical research. They want to tax us more now that they have raised minimum wage. No one wants to look like the bad guy for standing up and saying enough is enough. Tax cuts to the working poor is a laugh. We wouldn't be the working poor if the state would quit spending. We don't make enough for insurance but now they propose to fine us if we don't have it. Blago quit trying to look like the hero. It's a sure bet when things start to get cut it will be on the backs of the working poor. Start cutting at the top instead of the bottom. Lets see who gets to my checkbook first the governor with taxes or the utility companies. We're broke too!

Mark Observed wrote at 12/26/2006 11:12:21 AM

Doug, what rock did you find these chicago "businessmen" under. I belong to the Chamber of Commerce and I can tell you that they are not talking tax increases. I can suggest several ways to cut spending before anyone should consider raising taxes. The first thing on my list is "member initiatives" better known as pork. Eliminate those!!! Second would be to freeze all elected officials salries for the next ten years. Next, Close the governor's mansion and then sell it if the governor is not going to live there.

King Rod wrote at 12/26/2006 11:13:41 AM

Hey, I have a great idea. How about we raid the pension system again, lower retirees pensions, and make them pay a majority of their health care insurance. I'm quite sure they wouldn't mind. After all, they were so dumb they didn't even object to the last pension raid. Most of them didn't even know it happened and re-elected the one bankrupting their own retirement. So lets go for it!

To Richard Smith wrote at 12/26/2006 11:25:09 AM

Exactly what more should be "cut" from the State budget? For example: The State has a big employee shortage, in some departments, 1 employee is now expected to do the work of 6..as people retired, moved on, and the jobs were simply eliminated. One of the biggest understaffing issues is in Corrections, where it is just plain dangerous. I don't think reasonable people go to work in a prison and expect to be completely "safe" but an officer to inmate ratio of 1/145 (which is VERY common at many of the prisons) is just insane. All we hear from this Governor is denial of the fact that there are serious staffing problems in many of these State departments; I guess the more you "deny" and play dumb, the longer you can put off doing something productive to solve the problem. Forgive my rant, but Corrections is close to my heart...

To Everyone Again.. wrote at 12/26/2006 11:30:29 AM

Also, if you do a little research you'll find that Illinois has one of the lowest numbers of state employees of any state in the nation...and this was true even before that big early-retirement program 4 years ago. We are also one of the "overall" least taxed states. Obviously some of you don't believe this (and I would venture to guess that might have something do do with the inherent "inequity" of the way the entire tax structure is set up in this state). It's not an easy subject to wrap ones mind around because there are lots of factors that aggravate and mitigate these tax and budget issues. There are no easy answers and saying "cut, cut" tragically oversimplifies the issue(s) at hand.

Baa Baa Little Sheep wrote at 12/26/2006 11:31:59 AM

Baa Baa, you voted these old so wise leaders in, because they promised it would be OK to spend money like crazy, run the mean old busniess men out of the state. bad busniess men what you can't expect to keep any profits for your your risk mandate higher wages to poorly taught kids because union teachers don't have to compete for their jobs. Why is it you people can't relize that all taxes are bad if the money raised is wasted? Goverment is not a welfare provider expect in emrgencies or wars. Take care of your own. Welfare moms don't need to be choosy on father selection. why would the choose stabile reliable guys to father their children when the state will raise their kids for them?

Veteran wrote at 12/26/2006 11:50:35 AM

Cut the pork barrel projects and stop spending money we don't have in Il. I feel sorry for those on a fix income that keep getting more taxes and a mere 3.3% raise on their social security. Maybe that is why Illinois and Michigan are the top two states in the middle of this country for loosing population and Nevada and Arizona are the top gainers and then Fl.

New State Diet wrote at 12/26/2006 12:29:41 PM

We need a pork-free diet in Springfield and Chicago! Make sure Blago, Emil, Michael, and the entire Cook County gang are on the plan. State government will only implode if they (Chicago Democrats) allow it to happen. Can't point the finger at anyone else from now on!

new state diet? wrote at 12/26/2006 1:55:17 PM

We've had a pork-free diet in Springfield for the past four years, haven't you noticed? In fact, Springfield and downstate counties are starving. Perhaps the fat cats in Cook County will send some of their pork to feed the third world counties downstate. Bless you, Blago.

taxmanrevolver wrote at 12/26/2006 2:04:44 PM

You wouldn't think there is a financial crisis with the way the politicians are spending our money. The democrats have the power to straighten out this mess but are no better than the republicans were. More carpeting and more raises for all!

to: new state diet? wrote at 12/26/2006 4:03:57 PM

Nope, you guys have been on the pork diet for practically 30 years. It's time for Chicago to spend some of the money we earn instead of pass it to Springfield.

Heidi wrote at 12/26/2006 4:10:35 PM

Hot Rod saying he hasn't raised taxes is just semantics. He has raised nearly every fee in the State. I wanted to turn in a personalized plate and just get a regular one - Whoops! $29 to do that. He has driven so many business out of state or just out of business it's unbelievable. My property taxes are just too high. Something needs to be done about them. The so called middle class citizens are being squeezed to death. The "poor" get government benefits and medical care. Tim Davin is also a master manipulator of fees and taxes. If he gets re-elected the citizens of Springfield who vote for him deserve to pay more in taxes and fees. Heck, let's put a Casino on Lake Springfield and make some income for the State (whoops - the politicians will skim that too!).

Property taxes.... wrote at 12/26/2006 5:43:17 PM

....are set to go even higher. Blago has promised a bigger and better educational reform program.

sam wrote at 12/26/2006 6:44:49 PM

Why don't we just STOP supporting people that do not contribute to a better society? Let's put salt on the leaches.

to sam wrote at 12/26/2006 6:53:34 PM

I'll meet you at the State House with my supersized Morton's!

its me again wrote at 12/26/2006 7:11:13 PM

look at naveda and take a lesson, open up gaming in the state and watch your revenew's grow. even if it's just poker casinos, just keep the sticky fingered polito out of it and everything would be fine. I think Illinois is prime for the next Las Vegas.

re open gaming wrote at 12/26/2006 7:17:20 PM

Be careful what you wish for.....

anon wrote at 12/26/2006 10:05:37 PM

I say thank you Blago for not raising taxes - To raise cash lease the lottery, sell the tollways, and put a casino in Chicago. Thanks also Blago for cutting back on state gov't employees. These long-locked in overpaid state supervisors and higher management finally getting paid close to what they are actually worth.

Ian wrote at 12/27/2006 9:44:33 AM

I hope they know that being broke doesn't mean you can continue to spend.

anonymous wrote at 12/29/2006 12:42:24 PM

The governor could vote to allow cities to raise their sales taxes without breaking his promise to not raise taxes because it would be up to each city or county. Then he could cut some programs better run at the local level and use the savings to fund more equitable education for all the children in the state.

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