Illinois Chamber of Commerce

Policy Position:  2009 Proposed General Tax Increase

The Illinois Chamber of Commerce recognizes that Governor Quinn and the members of the Illinois General Assembly are facing critical decisions this spring as they attempt to address the economic quagmire in which Illinois finds itself.  Governor Quinn has proposed a substantial tax increase as the answer to our fiscal dilemma.  We believe that increasing taxes on job providers as they face the worst economic downturn in decades is an action that should be taken with grave concern for its economic impact and only if all specific avenues to reduce unnecessary government spending are implemented as part of such a tax increase package.  Governor Quinn should be applauded for the pension reforms he has included in his budget proposal, but we encourage him to go further and address each of the largest government spending programs before he seeks to increase taxes.   It is past time for serious government reform in Illinois.  The Illinois Chamber will oppose a general tax increase if Illinois fails to take immediate and meaningful measures to get its fiscal house in order. 

The following measure must be taken:

• Pension Reform.  Governor Quinn should be applauded for his recommended pension reforms.  But more can be done.  Pension benefits available to state employees should be aligned with those generally available to the taxpayers who pay the state's bills.  For new employees, state pension benefits and employee contributions should be aligned with private sector standards.  We encourage the Governor to pursue these necessary reforms.  However, these reforms should not be used as an excuse to reduce scheduled payments to the pension funds. 

• Reforms in Government Funded Health

• State Employee/Retiree Healthcare Reform.  Employee/retiree healthcare benefits should also be aligned with those benefits generally available to the taxpayers who pay the state's bills.  In particular, employees/retirees should be encouraged to participate in HMO plans or similarly priced PPO plans, and employee/retiree premiums should be aligned to private sector charges. 

• Medicaid Reform.  The State's Medicaid program has expanded 50% in just the past 5 years from 1.6 million participants in FY 03 to 2.4 million in FY 08.  The system is already over-burdened and the State does not pay its bills on time, with the result that more healthcare providers do not accept Medicaid patients.  A serious remodeling of the Medicaid program is in order, including review and revisions to the reimbursement rates for providers, rate structures, and improvement in payment processing and timeliness of payments.  Medicaid participants should be re-qualified and be required to provide proof of income, and a reasonable asset test.  The Medicaid program should not be expanded at this time of fiscal crisis. 

• Strengthening the Illinois Business Environment.   Identifying ways to reduce government spending, without jumpstarting the economic engines that drive this state will only leave the job half done.  We need to stimulate the Illinois economy to create jobs. We need to reduce costs of doing business and increase business productivity.  We can only do that by making it easier to do business in Illinois--not harder.  Specifics include:

• The General Assembly should pass the Chamber’s Energy to Jobs Act.

• We need meaningful reform of our onerous worker's compensation system.

• Expand the Employer Training Investment (ETIP) Program and the Research and Development credit.

• Extend the sunset provision on the MPC, Graphic Arts Credit, and Replacement Tax investment credit to encourage capital investment. 

• Illinois should improve its toolbox of economic development incentives, including making EDGE tax credits transferable.

• Repeal the archaic and onerous franchise tax that penalizes corporations on invested Illinois business capital and allow Illinois to be more competitive with its neighboring and most other states for future corporate capital investments. 

• Postpone the scheduled July 1, 2009 increase in the minimum wage.

• Seek new sources for venture capital

• Invest in the State’s Infrastructure Needs.  Modern and efficient transportation resources are crucial, not only to reviving the Illinois’ economy, but also to maintaining and enhancing the economic vitality of the state.  Illinois, however, has grossly underfunded our basic transportation infrastructure needs to the point where our backlog of these investment needs has reached crisis levels.  The Legislature has already taken steps this session to secure the state’s first capital spending plan in more than 10 years, but that plan still faces political barriers to implementation.  The Governor and the General Assembly must take immediate action to implement the capital spending plan so that our state’s transportation infrastructure needs and economic activity do not continue to languish.   

The Chamber is also a strong proponent of the following reforms:

• Education Funding Reform.     More money is not always the answer.  We should be using current funds to determine the best way to improve our educational system.  For instance, Illinois recently joined the American Diploma Project.  The focus of this effort is to internationally benchmark our graduation standards; align our graduation standards to college and work readiness; and back map our academic standards in the lower grades to the graduation standards.  This should lead to the development of a core curriculum for all high school students.  We have also begun to implement a longitudinal data system for education, kindergarten through college, linking student performance to teachers and curriculum to assessment results. In these ways, we can determine best practices in education.  We should also expand the number of charter schools allowed and allow for universities to authorize charter schools independent of the school districts, and conscientiously review all state mandates on schools. 

• Streamlining State Government Operations.  Again, Governor Quinn is to be commended for implementing a task force to review state agency budgets and programs and to make recommendations that will result in more streamlined and efficient government operations.  If no  immediate action is taken on the recommendations made, this task force will have wasted their time and effort.   We must be willing to act on their recommendations for savings.    

• Budget Process Reforms.  We need a true picture of Illinois spending and revenues.  The Illinois Constitution calls for a balanced budget, but the reality is anything but balanced.  Before we increase taxes, we need to restore taxpayer trust in the Illinois budget process.  We need transparency and accountability--a budget that accurately reflects the true cost of state government programs and that is based on generally accepted accounting principles. 

Rather than attack a few economic competitive equalizers for Illinois businesses --so called "tax loopholes"--we are asking the Governor and members  of the Illinois General Assembly to reach out to the Illinois business community, the job providers, and work with them to address the very serious economic issues and challenges that now face the State of Illinois and its citizens.