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June 7, 2024

Illinois’ FY 2025 General Fund budget passed last week on a purely partisan basis. No Republicans supported the $53.1 billion spending plan.

Predictably, Democrats extolled the budget’s virtues, describing it as balanced, and a responsible approach to making needed investments in children, infrastructure, and vulnerable populations. Just as predictably, Republicans ripped the legislation, complaining it wasted money on misplaced priorities, and demonstrated the Democratic proclivity to raise taxes unnecessarily, just to support irresponsibly spending more money every year.

So do either of these diametrically opposed, partisan characterizations align with the facts? Start with the Republican contention that the newly minted budget wastes money on misplaced priorities. Of the $53.1 billion in total expenditures appropriated for FY 2025, roughly $15.1 billion, or 28.4%, cover “hard costs” the state has to pay, because they’re either required by law, such as debt service owed to bondholders, or contractual obligations, like health insurance for state workers. Since these expenditures are legally required, they’d be funded irrespective of the party in power.

The remaining $38 billion funds current services, 94% of which are targeted to the core areas of education, health care, social services and public safety. Those priorities seem right, especially when you consider Illinois has historically devoted a similar percentage of all current service expenditures to those same four areas, whether Republicans or Democrats controlled Springfield. Of course there remain legitimate differences of opinion between — and within — the parties about specific lines in the budget. But the data confirm there’s broad consensus across ideological lines about what the big priorities should be.

Next consider the Democrats’ contention that the budget is balanced and responsible, versus Republican claims of irresponsible overspending supported by unnecessary tax hikes. Whether a budget is balanced is a question of simple math. Total revenue for FY 2025 is projected at $53.3 billion, or enough to cover the $53.1 billion in appropriated spending.

OK there’s balance, but are Dems irresponsibly over-spending? According to the data, absolutely not. The FY 2025 budget Democrats passed does spend more than the current year, by some $1.85 billion, or 3.6%. However, inflation was 3.4% last year, so the real increase in spending the Democrats enacted tops inflation by a measly 0.2% — which is next to nothing. In fact, spending on the four core services will be about 10% less at the end of FY 2025 than it was a quarter century earlier in FY 2000 — under Republican Gov. George Ryan.

Finally, was it responsible for Democrats to increase revenue so spending on services can simply keep pace with inflation? Here, the data-based answer is a resounding yes.

That’s because a long-term “structural deficit” in the state’s General Fund is the reason core service expenditures have been cut in real terms for generations. A structural deficit exists when tax revenue growth is consistently insufficient to cover the cost of maintaining the same level of public services from year-to-year, after adjusting for inflation.

In Illinois, all the data clearly show that flaws in the state’s tax policy have been the primary driver of this structural deficit. Given the long-standing ideological consensus about which core services Illinois should provide, the intellectually consistent, and fiscally responsible way to redress the structural deficit is by funding core services with adequate recurring revenue.

To that end, the FY 2025 budget raises around $900 million of new revenue, primarily by increasing taxes on the highly profitable sportsbooks industry, limiting the amount of losses a business can carry forward from one tax year to offset profits earned in the next tax year, and instituting a cap of $1,000 per month on the amount of sales tax revenue a retailer can keep as an administrative fee for collecting that tax for Illinois.

The bottom line: the FY 2025 General Fund budget accurately reflects statewide priorities, is balanced and is funded responsibly.

Source: Daily Herald