Civic Federation offers financial proposals ahead of Gov. Pritzker’s 1st budget

The Civic Federation on Wednesday proposed a five-year plan of recommendations to help solve the state’s “severe financial challenges” while warning against short-term fixes.

The plan comes one week before Gov. J.B. Pritzker is set to deliver his first budget address, which he has vowed will set a “different direction” for the state.

The challenges laid out by the Civic Federation include the “staggering public employee pension costs,” a declining population, a deteriorating infrastructure and having the lowest credit rating in the country.

“More than ten years after the end of the Great Recession, the State of Illinois’ fiscal condition remains precarious,” the report reads.

The civic watchdog’s plan would aim to reduce the state’s backlog, which is projected to stand at $7.8 billion at the end the current fiscal year on June 30, 2019. Without policy changes, the backlog could rise to $10.6 billion by the middle of 2020 and $23.7 billion by July 2024, the report warned.

The most glaring problem for the state is its pension crisis, with its five retirement systems totaling $133.7 billion in unfunded liabilities at the start of July 2018, according to the civic watchdog group.

Despite a rise in pension contributions from $1.6 billion in 2008 to $7.1 billion in the current fiscal year, contributions alone are not expected to stop the liability from growing until fiscal year 2029.

The Civic Federation’s recommendations include limiting spending growth to 2.4 percent annually through at least the middle of 2024; eliminating the tax exclusion for all federally taxable retirement income; expanding the sales tax base to include the 14 services taxed by Wisconsin; and working toward establishing a rainy day fund equal to 10 percent of General Funds revenues.

The group also proposed lowering the state’s prison population; merging the Chicago and state teacher’s pension funds; and lowering the late payment interest penalty for overdue bills.

The Civic Federation did not take a position on the legalization of recreational marijuana or sports gambling, or the enactment of a graduated income tax, but it offered cautions if the state pursues the new sources of revenue.

The group urged state leaders to be cautious of budgeting revenues from marijuana and sports gambling taxes, warning of difficulties predicting how much revenue the taxes would generate in their first few years. Current estimates predict the state could see between $350 million to $700 million in revenue from taxes on legalized marijuana, and about $100 million for sports gambling.

On a graduated income tax, the Civic Federation said the state shouldn’t count on any help in the fiscal year starting in July, because the tax would not be implemented until voted on by the General Assembly and approved by voters in November 2020 at the earliest.