Breaking down partisan talking points on state budget
We are living in a time when bipartisanship is passe, and dissonance between Democrats and Republicans over every meaningful piece of public policy is the norm. For instance, consider the state’s FY 2025 General Fund budget that passed on a purely partisan basis and was signed this week by Gov. J.B. Pritzker. No Republicans supported the $53.1 billion spending plan.
Predictably, Democrats who voted in favor of the budget extolled its 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 Party’s 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? Let’s start with the Republican contention that the newly minted budget wastes money on misplaced priorities. Of the $53.1 billion in total expenditures 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 in the budget irrespective of the party in power.
The remaining $38 billion funds current services for the year. In FY 2025, 94% of current service expenditures are targeted to the four core areas of education, health care, social services and public safety. Those priorities seem right, especially when you consider that Illinois has historically devoted a similar percentage of current service expenditures to those same four core areas, whether Republicans or Democrats controlled Springfield. This doesn’t mean there aren’t legitimate differences of opinion between — and even within — the parties about specific lines in the budget, but rather highlights the fact that the data show there’s broad consensus across ideological lines about what the priorities should be.
Next consider the Democrats’ contention that the budget is balanced and responsible, versus the Republican claims of irresponsible overspending supported by unnecessary tax hikes. Whether a budget is balanced is a question of simple math. After accounting for the tax increases included in the budget, revenue for FY 2025 is projected to be nearly $53.3 billion, or enough to cover all $51.1 billion appropriated for the year. So yes, the budget is in balance.
OK, there’s balance, but what about the GOP complaint that
Dems are irresponsibly overspending? Once again according to the data, the answer is absolutely not. In nominal, non-inflation adjusted dollars, the FY 2025 budget Democrats passed spends $1.85 billion, or 3.6%. more than the current year. However, inflation was 3.4% last year. So the ginormous real increase in spending the Democrats enacted beat inflation by a measly 0.2% — effectively next to nothing.
Tax policy needs reform
Finally, was it responsible for Democrats to increase revenue so spending on services can simply keep pace with inflation? The databased answer is a resounding yes.
That’s because the long-term fiscal problems in the General Fund have been caused by a “structural deficit.” A structural deficit exists when tax revenue growth is consistently insufficient to cover the costs of maintaining the same level of public services from year-to-year. And no, this structural deficit wasn’t caused by overspending. Indeed, at the end of FY 2025, spending on the four core services will still be about 10% less in real, inflation-adjusted terms than it was almost a quarter-century earlier in FY 2000 — under Republican Governor George Ryan.
In fact, no matter how you slice the data, the cause of Illinois’ longterm structural deficit is clear: The state’s tax policy doesn’t work in the modern economy, so state tax revenue doesn’t grow with the modern economy. And if tax policy flaws caused the problem, then the only intellectually consistent, fiscally responsible, and ultimately sustainable way to fix it is to reform tax policy.
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 the state.
So, contrary rhetoric notwithstanding, the fundamental takeaway is clear. If our shared priorities truly encompass giving every child a quality public education; ensuring everyone, rich or poor, has access to health care; providing vulnerable populations with services they need to lead decent lives; and having communities that are safe and clean; then our state budget needs the recurring tax revenue necessary to make those investments.
That in turn means the FY 2025 General Fund budget accurately reflects statewide priorities, is balanced, and is funded responsibly.