McCarter: State's fiscal woes could improve if lawmakers were to lead by example

Andrew Burger Aug. 8, 2016, 9:20am


SPRINGFIELD -- Illinois will spend an estimated $8 billion more than it takes in as a result of the $39.6 billion stopgap budget deal enacted by General Assembly members and Governor Bruce Rauner at the end of June, according to analysis conducted by the Illinois Policy Institute. 

While lawmakers on both sides of the aisle may agree that action is required to stem the state budget deficit, they just can't agree on the means to do so.

In fiscal year 2016, the state wound up spending $4 billion more than it took in. A state government analysis forecasts that will double in fiscal 2017 even with the 12 percent, $4 billion increase set out in the stopgap spending bill. 

"In essence, we've backed ourselves into a tax increase by passing this budget bill,¨ Sen. Kyle McCarter (R-Lebanon) told the Record.

As it stands, Illinois is likely to experience another exodus as a result, McCarter said.

¨We've seen a huge migration of people leaving Illinois – working people that pay their taxes – and that's something we have been trying to prevent from happening again.

¨The pressure of property taxes [the highest in the nation] and a potential income tax increase is going to push more people out of the state, which will worsen the situation,¨ McCarter said.

Illinois Policy Institute's research reveals the degree to which spending on state government pensions and insurance plans, along with Medicaid payments, has soared and come to crowd out spending on things like education, human services and public safety.

The analysis further shows that state employee pension benefits increased 586 percent from 2000-2016, rising sharply to account for 24.8 percent of the state budget in fiscal 2016. Spending on state employee insurance increased 166 percent over the 15-year period.

And, state revenues rose 57 percent over the same time frame. Spending on K-12 education rose 35 percent, public safety 12 percent and spending on human services 10 percent. Spending on higher education fell 8 percent and that for culture and environment plummeted 59 percent.

¨If you don't deal with the big ticket items there's no way of fixing this,¨ McCarter said.

Also numbering among these is the new labor contract with AFSCME (the state employees union) which union leaders have refused to sign, McCarter added.

¨Herein lies the problem of politics," McCarter said. "You want to tell people you love them them and give them good things, but there comes a point when you find that you have dug a big hole. We have been making promises we can't keep without increasing taxes.

¨Everybody else has cut back and the government needs to do so as well. Just as in a family or a small business, we have a fiduciary responsibility to our children or employees to live within our means. Sometimes that means making tough decisions and saying no.¨

McCarter offered up several prospective solutions.

¨First of all, we need to stop the bleeding, draw the line and as of today say that we're going to offer new state employees defined contribution 401(k) plans and discontinue use of defined benefit plans," he said. "In addition, we need to quit adding sweeteners, such as compound COLA (cost of living) increases.¨

McCarter also proposes shifting the burden of public school pension liabilities and budget decisions from the state to local school districts. The shift could be phased in over a seven to 10-year period so as to give sufficient time for all stakeholders to adjust, he explained. To help things along, the state also should free local school districts from the growing burden of unfunded regulatory mandates.

¨It's not only about pensions,¨ McCarter said. ¨We need to keep our word, but when it comes to benefits like insurance, which are very costly today, I think it's only fair that all state employees be asked to share the burden.¨

A breakthrough on the state pensions issue might result if General Assembly members were to lead the way and voluntarily convert their defined benefit pension plans to 401(k) defined contribution plans, according to McCarter.

¨Ironically I can't get out of my state pension plan," he said. "I'd convert to a 401(k) immediately, but I'm prevented from doing so.¨

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