Article Week of March 12th, 2007
Last week, Governor Blagojevich delivered a combined “State of the State” speech and Budget Address. This week, I will concentrate on providing you with information regarding the Budget proposal and try to update you on where the electric rate issue stands. There are many other issues rapidly moving forward, including measures dealing with restrictions on 2nd Amendment rights, parental notification, drivers education laws and others too numerous to mention. Things are going to move very quickly during the next two weeks. Don’t forget that you can track legislation at www.ilga.gov
The spending numbers in the governor’s proposal are almost mind boggling. He proposes that almost $3.3 billion more dollars be spent next year by the State of Illinois than in the previous fiscal year. In the general-funds budget, proposed spending increases are estimated at about a 12% increase. The two largest proposed increases in spending are for education and healthcare. Under this proposal, state education spending would increase by about $1.5 billion and, in the first year phase-in of a state mandated health insurance for all program, the Department of Healthcare and Family Services budget would get just a little over a one billion dollar increase.
The increased funding for education would benefit schools that rely on the foundation formula for funding. The “foundation level” per pupil spending support would be bumped by $866 per pupil. This increase would substantially help rural school districts and also help close the gap in per pupil spending between those districts that have great property wealth and those districts that do not enjoy property wealth. It is clear to me that all schools in the 109th legislative district would benefit from the foundation level increase in a huge way.
There is also a substantial increase in reimbursement to school districts
for special education personnel costs. In 1985, the rate of reimbursement to
Illinois schools for a certified special education teacher was set at $8,000.
Over twenty years later, the reimbursement level remains the same as in 1985.
Under this proposal, schools would get around $13,000 per certified special
education teacher. In addition the reimbursement for a special education aide
would also increase substantially from the current $2,800 level.
The education increase also includes additional support for a variety of
other initiatives including continued preschool expansion, targeted programs
to improve student performance, teacher induction and mentoring, technology,
textbooks and ensuring additional money for transporting students to and from
school. However, over $1 billion of the total increase of $1.5 billion is targeted
in areas that would certainly funnel funds to schools in our area of the state.
The major missing component is any property tax relief. There is a suggestion that schools would rely less on property taxes and perhaps even reduce levies on local property taxes for schools due to the additional aide from the State. However, there is nothing that would mandate any relief.
The other major spending increase in the budget proposal is for Healthcare. Essentially, the proposal creates a new State administered insurance product. The program would be phased in over two years starting in January of 2008 with an expansion of public healthcare and in 2009 a new public-private insurance program would be implemented. The public-private insurance plan would be called Illinois Covered Choice.
The rules for eligibility are extensive and complicated. The goal is to provide an affordable option for the 1.4 million Illinois citizens who do not have health insurance coverage. When fully implemented, the cost is estimated to be about $2.5 billion (although critics assert the cost could rise to as much as $4-5 billion).
There are other increases in budget line items as well. The Department of Human Services increase is estimated at $182 million, Higher Education would get an additional $41 million and Corrections $79 million.
So, where does all the revenue come from? That is always the difficult part. The Governor proposes that the additional revenue (about $6 billion when fully implemented) come from a new gross receipts tax. A gross receipts tax, like a sales tax, is paid when someone sells something. However, there are major differences between a sales tax and a gross receipts tax. First of all, sales tax is paid by the buyer, so it is an open tax that is printed out on the receipt given to the buyer. A gross receipts tax is paid by the seller. It is a hidden tax. A sales tax is paid only at the point of retail sale (once). A gross receipts tax is paid repeatedly whenever a taxable good or service changes hands on its way to the final buyer.
Let’s use cheese as an example. As you know, the final finished product cheese comes from milk. When a gross receipts tax is implemented, the following transactions are subject to the tax: farmer sells to dairy – GR tax, dairy sells to cheese processor - GR tax, cheese producer sells to wholesaler - GR tax, wholesaler sells to retailer - GR tax, retailer sells to consumer - GR tax. The final price of the product at the consumer stage is driven up by five different GR taxes. That is why this is called a pyramid tax.
Costs of doing business like this are passed along to consumers. When the governor says he is taxing business and punishing corporations for not paying their fair share of taxes…well, that is simply not going to happen. Consumers are going to pay this pyramid style tax at the end of the day. Plus, remember a business is paying this tax on how much they sell, not on profit. If the governor is going after corporate profits, this entirely misses the target.
You will be reading lots more about this new tax proposal in the coming weeks. This is a major change in the Illinois tax structure designed to bring in billions of dollars to pay for more government spending. This is dangerous and could cost Illinois business investment and jobs. Business development and jobs drive our economy and this is a terribly dangerous way for our state to gather revenue.
Even if you think the governor’s proposals to spend more money are warranted, think about the net effect of this proposal.
As far as the electric rate issue, this past week, legislation passed from the House and Senate designed to freeze AMERENS rates. Now, pressure needs to be applied to the two leaders (Madigan and Jones) to call the bills in the other’s chamber. If they do not, the new rates will be allowed. If they act, this nightmare can end and pressure can be applied to allow for a reasonable rate increase phase-in.
Let me know what you think about any of these issues or any issue of importance to you. E-mail me (reddyunit1@aol.com); write to me at Box 125, Hutsonville, IL 62433 or call us at 618-563-4128. You can also keep up with important issues at my web site: www.peopleforeddy.com