FY2015

Center for Tax and Budget Accountability Releases New Report on the Cost of Disinvestment in Higher Education

CHICAGO – Between 2000 and 2015, Illinois cut nearly $1.4 billion from General Fund appropriations to Higher Education—even before the ongoing budget crisis, which has cost Illinois colleges and universities over a billion addition dollars. That is one finding from Illinois’ Significant Disinvestment in Higher Education, a new report released today by the Center for Tax and Budget Accountability (CTBA).

“Investing in higher education has always been important,” said Ralph Martire, Executive Director of CTBA. “But in today’s economy, the strong correlations between post-secondary education and economic viability make it more important than ever.”

The study details the drastic cuts to Higher Education in Illinois both during the current budget crisis, with General Fund appropriations falling from $1.95 billion in fiscal year (FY) 2015 to $755 million in FY2016 and $843 million in FY2017, as well as over the longer term.

“Between 2008 and 2015, Illinois cut per-student Higher Education funding by 54 percent—more than every state but Arizona,” said Danielle Stanley, CTBA Research Associate.

The report also underlines the cost of these cuts in human terms, including:

• Chicago State University laying off 40 percent of its non-faculty workforce and nearly shutting its doors last April
• The University of Illinois eliminating 484 staff positions
• Severe declines in enrollment in the last year, such as 1,100 students or 13 percent at Eastern Illinois University and 1,300 students or 7.5 percent at South Illinois University-Carbondale

Finally, the report describes how each dollar of funding cuts to institutions of Higher Education results in $2.29 lost to the state economy, as fewer students, and reduced worker wages, mean less economic activity generated by, for example, purchases at local stores.

Because the Illinois legislature failed to act during the spring 2014 legislative session, both of the temporary state income tax increases that became law under the Taxpayer Accountability and Budget Stabilization Act of 2011 (TABSA) will begin to phase down halfway through Fiscal Year (FY) 2015, which begins on July 1, 2014. Under TABSA, the personal income tax rate will decline from 5 percent to 3.75 percent, and the corporate income tax rate will drop from 7 percent to 5.25 percent beginning on January 1, 2015. This Fact Sheet provides an overview of the FY2015 General Fund budget passed by the General Assembly, and demonstrates that in this case there is a very high cost of doing nothing. 

Why, on March 26, 2014, did Governor Pat Quinn make the unusual move of introducing two different proposals for the fiscal year (FY) 2015 General Fund budget? The answer is simple. The Governor proposed two very different spending plans because the state faces two very different potential fiscal realities in FY2015. That is because both of the temporary state income tax increases that became law under the Taxpayer Accountability and Budget Stabilization Act of 2011 (TABSA)  are scheduled to begin phasing down this coming fiscal year. Under TABSA, the personal income tax rate will decline from 5 percent to 3.75 percent, and the corporate income tax rate will drop from 7 percent to 5.25 percent on January 1, 2015, halfway through the fiscal year. Collectively, those rate reductions will cause the state to realize a loss of $2 billion in revenue from FY2014 levels.  

Given Illinois’ already shaky fiscal condition, that loss of revenue will be impossible for the state’s General Fund to absorb without significantly reducing FY2015 spending on core services from FY2014 levels. Here is why: before losing the revenue from the phase down of the temporary tax increases, Illinois already has an accumulated deficit of $6.8 billion. That is roughly 27.8 percent of total FY2014 spending on the core services of education, healthcare, human services, and public safety, which collectively account for 90 percent of all FY2014 General Fund appropriations. Illinois has that significant accumulated deficit despite the new revenue generated by the temporary tax increases (personal and corporate) that passed under TABSA, and the $4.7 billion in service cuts made over the last five years.  So if the temporary tax increases are in fact allowed to phase out, the Governor will have no choice but to implement significant spending cuts.

That somber fiscal reality led the Governor to introduce two different spending proposals for FY2015. The first, which is the Governor’s “Recommended Budget,” is built on the assumption that rather than be allowed to phase down, the income tax rate increases passed under TABSA are either extended or made permanent. The second is a “Doomsday Budget” in which the Governor identifies the type of significant cuts—particularly funding for education and human services—that would have to be made if the temporary tax increases are allowed to phase down as currently provided in TABSA. 

Presentation on the FY2015 budget proposals given at the National Associatioin of Social Workers Advocacy Day in Springfield, Illinois.

Governor's FY2015 Proposed General Fund Appropriations ($ Millions)