Illinois' Quinn Pressured To Roll Back Tax Increase

Last year this time, Illinois Gov. Pat Quinn was pushing a big income tax increase to help balance the state's budget. This year, Quinn is being pressured to roll part of that increase back. But the state is still months behind in paying its bills, with a pension shortfall looming.

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This month, we've been examining state budgets. And when it comes to balancing the budget, few states are struggling more than Illinois.

NPR's David Schaper reports on the impact of that's having.

JONAS GINSBERG: Good morning.

(SOUNDBITE OF A CHICKEN)

UNIDENTIFIED MAN #1: (Foreign language spoken)

DAVID SCHAPER, BYLINE: Counselor and team leader Jonas Ginsberg is leading a session of about a dozen Asian immigrants suffering from mental illness. They're working on education and social skills in a program run by Asian Human Services in Chicago.

GINSBERG: So today is the - today's a special day, actually.

UNIDENTIFIED MAN #1: (Foreign language spoken)

SCHAPER: With the help of a translator, the group is discussing the Chinese New Year.

GINSBERG: So today is the Chinese...

GROUP: New Year.

UNIDENTIFIED MAN #2: Today is the lunar New Year.

UNIDENTIFIED MAN #3: (Foreign language spoken)

SCHAPER: In addition to mental health counseling, Asian Human Services provide health care at a clinic, educational programs, and job skills training - all in 25 different languages.

Abha Pandya is the social service organization's CEO. And she says most of these programs are funded by the state of Illinois, or at least they're supposed to be funded by the state. But Illinois is a little bit behind in paying its bills.

DR. ABHA PANDYA: And actually, the state, we are owed 1.2 million.

SCHAPER: And that's an improvement. Pandya says just last month, the state finally caught up on all its bills from last fiscal year, which ended June 30th.

PANDYA: We've been bankrolling the state. The providers are bankrolling the state when we have no money. And I think it's completely, it's the most ridiculous situation that one should be in.

SCHAPER: And her organization is not alone, the state is up to four to six months behind in paying its bills to scores of service providers, including doctors, hospitals and nursing homes, as well as vendors providing everything from office furniture to vehicles.

The Illinois Comptroller's Office estimates the backlog of unpaid bills is near $8 billion right now, and that is after majority Democrats in the legislature and Democratic Governor Pat Quinn, last year, significantly raised Illinois' personal and corporate income tax rates to reduce a $15 billion deficit and to catch up on bills.

LAURENCE MSALL: We are in a horrible situation.

SCHAPER: Laurence Msall is president of the Chicago-based Civic Federation, a non-partisan government budget watchdog group.

MSALL: The current budget is not balanced. The current budget for fiscal year 2012 has an operating built-in deficit of about $500 million.

SCHAPER: And Msall says that doesn't even include the billions in unpaid bills. Illinois did make its scheduled payments into its employee and teacher pension funds this year. But Msall says Illinois' future pension costs are skyrocketing.

MSALL: There needs to be a very significant effort to reduce the pension liability. Right now, the state of Illinois owes over $80 billion in unfunded promises to its retirees and to its employees.

SCHAPER: The constant fiscal uncertainty and the higher tax rates have led some companies to threaten to leave Illinois and take thousands of jobs with them. That hasn't really happened though, in part, because the state has given away some tax breaks and incentives to corporate giants such as Sears, the CME Group and others.

But Republicans in the Illinois legislature say the mere threats and the continued financial mess show that last year's tax increase was a failure and should be repealed.

Kelly Kraft, assistant budget director for Governor Quinn, disagrees.

KELLY KRAFT: So that tax increase did bring in an extra $7 billion to our state and that's helping to stabilize our budget. Really, the tax increase helped us from falling off of a cliff. That cliff, that was there because of the decades of fiscal mismanagement that had existed in the past.

SCHAPER: Kraft says the budget that the governor will present to Illinois lawmakers next month projects a small surplus for the first time in years. And she says the governor is looking for ways to reduce pension costs. But the big pile of unpaid bills remains. And Abha Pandya, of Asian Human Services, wonders how long social service providers and their clients can hold on.

PANDYA: We are just totally frustrated and upset and angry and disheartened, actually. Really disheartened, because on a daily basis we see people with enormous needs coming here. And oftentimes, lately, we've had to turn them away.

SCHAPER: Pandya says she tries to keep hope. But after years of broken promises from Illinois politicians, she doesn't have too much hope left.

David Schaper, NPR News, Chicago.

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