This document discusses the fiscal challenges facing Illinois, including large budget deficits, unpaid bills, and underfunded pensions. It analyzes factors like declining tax revenues, high spending growth rates, and the state's debt obligations. Several reform proposals are presented, such as consolidating programs, reducing prison populations, privatizing higher education, and reengineering relationships between state and local governments. Overall, the document examines Illinois' budget shortfalls in detail and offers ideas for cutting costs and improving the state's fiscal situation.

1. Illinois – The State of Our State 4th Annual Elmhurst College Governmental Forum Elmhurst, Illinois January 26, 2011 J. Thomas Johnson, President Taxpayers’ Federation of Illinois (217) 522-6818 tom@iltaxwatch.org

2. 2 Per CapitaPersonal Income Source: U.S. Census Bureau

3. 3 Percentage of Growth in State GDP 1999-2009

4. 4 Percentage of Growth in Personal Income 1999-2008

5. 5 Percentage of Growth (Decline) in Employees on Nonfarm Payroll 1999-2009

6. 6 Percentage of Decline of Employees in Manufacturing 1999-2009

7. Barometer of Job Recovery 7 Source: Institute of Governmental and Public Affairs , Illinois Economic Review, December 2010.

8. 8 Impact of Job Loss Illinois Job Recovery 600,000 Average State Tax Impact/Job* $ 4,200 Annual Revenue Impact of Job Recovery $2.5 Billion *Projected by the Regional Economies Application Laboratories – University of Illinois

9. Big Three Taxes(Personal, Corporate Income Taxes & Sales Taxes) $ Billions 9 Actual or Historical Growth Projected Rate 2008 $19.4 $19.4 2009 17.7 20.2 2010 16.0 21.0 Projected 2011 16.5 21.9 $69.6 $82.5 Difference $12.9

10. 10 General Funds Cumulative Deficit$34 Billion Spending Base(Billions) Unpaid Bills $6.5 Corporate Income Tax Refund Backlog .9 State Group Insurance Backlog1.1 Total $8.5 2010 Pension Obligation Bonds $3.5 2011 Pension Notes $3.7 Federal Stimulus through 2011 $4.5

11. 11 Proposed Borrowing Plan($ Billions) Debt Consolidation Borrowing $ 8.75 2011 Pension Obligation Notes 4.1 Total 2011 Operating Borrowings $12.85 Annual Debt Service $1.5 Billion for 14 years

12. 12 2012 Structural Deficit($ Billions) Spending in Excess of Revenue $6.2 New Debt Service 1.5 Total Structural Deficit $7.7

13. 13 New Enacted Revenues($ Billions) Individual Income Tax $6.0 Corporate Income Tax 1.0 (Including NOL Suspensions) Estate Tax Reinstatement .3 $7.3

14. 14 Illinois Income Tax Rates Individual Corporate* 3.0 % 7.3 % - 2014 5.0 9.5 2015 - 2024 3.75 7.75 3.25 7.3 * Inclusive of Personal Property Replacement Tax

15. 15 Other Revenue Issues(not yet resolved) Gaming Expansion $1 -1.5 Billion One time Revenues 500 million Annual Recurring Cigarette Tax Increase from 98 cents to $1.99 per pack $330 million

16. Spending Limits(General Funds)Billions 16 2011 $34,285 36,818 37,554 38,305 2015 39,072

17. Current Tax Rates – 3.5% Growth Rates 17 *Net “Big Three” Revenue comprises Revenue available to the state after applicable adjustments resulting from the state corporate, personal income, and sales taxes.

18. Current Tax Rates – 2% Growth Rates 18 *Net “Big Three” Revenue comprises Revenue available to the state after applicable adjustments resulting from the state corporate, personal income, and sales taxes.

19. 19 What is Illinois’s Tax CapacityState and Local Taxes as a % of Gross State Product National Average 9.2% Illinois Pre-Tax (Rank 26th) 9.13% Illinois Post-Tax (Rank 8th ) 10.20% 16th Place State 9.77%

20. 20 State Government is Primarily a Purchaser of Goods & Services –Not a Provider

21. 21 State Government Purchases Services from: Human Services Providers Healthcare Providers Local Governments Higher Education Institutions

22. Where do we Start to Cut? 22 Base Spending (Billions) Pensions $ 4 Employee/Retiree Healthcare 2 Medicaid 15 K-12 Education 7 Higher Education 2 Human Services 5 Local Government Revenue Sharing 5 Corrections 1 Mass Transit Operating Subsidies .5

24. 24 Re-Engineering State and Local Government in Illinois

25. State Programs 25 Merge Human Services – Integrated Service Delivery De-Institutionalize Reduce Prison Population by 1/3 Privatize Higher Education Re-Evaluate the K-12 Funding Program

26. 26 $15 Billion of State Revenues go to Local GovernmentsThrough 230 different programsRepresenting 34% of Local Government Revenue

27. 27 DuPage County Taxing Bodies Countywide 4 Townships 9 Municipalities 29 School Districts 42 Community College 1 Fire Protection Districts 23 Park Districts 35 Others 19 162