A BUDGET STALEMATE BRINGS TAXES
…AND MORE TAXES
Every week, it seems as if some important constituency will have their funding cut or that bills will not be paid. Whether it’s federal pass-through funding to help the poor and elderly maintain access to groceries and prepared meals, employee salaries or child care subsidies for low-income families, everything has been in jeopardy at some point. And while the General Assembly has been in session every week since May 31st (the date by which session was originally scheduled to end) very few bills have passed, including the City of Chicago’s and Cook County’s pension reform bills.
The financial position of both local jurisdictions has had, and will continue to have, consequences for taxpayers. While the pension reform bills will help ease some of their burden, both units of government have deficits that exceed the reach of their legislative initiatives. Cook County Board President Toni Preckwinkle used the legislature’s inaction on her pension bill as an opportunity to pass a sales tax increase. This increase will give the city of Chicago the highest sales tax in the country starting January 1, 2016. After the tax increase was pushed through within two weeks of the measure being introduced, It was later revealed that President Preckwinkle plans to use over $100 million of that cash infusion to raise the salaries of county employees by as much as 6% in some cases. This bombshell has left the local and national businesses near the border of the county feeling increasingly unwelcome. Further salting the wound, it is questionable that the additional revenue could be used for pensions at all. There is a school of thought that the General Assembly would have to approve the additional revenue for the pension payment which President Preckwinkle’s office has not totally denied. It is very possible that all of the revenue could be used for purposes other than making pension payments. This is why the Cook County Board could have, and should have, waited before taking the vote. There are more questions than answers right now and the uncertainty will have a negative impact business and sales tax revenue.
While the retail and restaurant community prepares for that tax to go into effect, we are not out of the weeds yet. Mayor Rahm Emanuel’s budget address is set to be delivered in mid-September. If you believe the media reports, that address is likely to include a property tax increase. A recent lower court decision rejected the city’s attempt to decrease a current pension benefit in exchange for lower-cost, city-funded employee retirement plans. The city will appeal this decision, but considering that the Illinois Supreme Court just overturned the state’s similar pension reform bill, there is not much hope that the city will prevail. Add to that current proposed budget from the Chicago Public Schools that cuts spending by $200 million, relies on over $400 million in state aid (that may never come) and lays off over 400 teachers. If the school system fails to receive the money it is budgeting for from the state, its new chief, Forrest Claypool, has not yet said what he would do to balance the budget (cue the higher property taxes).
There’s no time like the present budget disaster at the state, county and city levels to change the way we think about who we tax, how we tax and why. Cook County would do well to reevaluate its property tax system that keeps residential rates artificially low and commercial rates higher than surrounding counties. If we want to help the local economy, increased development and job growth is the way to go. We should change the conversation from increasing property taxes to building the tax base. There are many ways to stimulate the economy, get people working and grow revenue to local units of government. Our broken property tax system should be fixed before taxpayers are again asked for more money.
CITY COUNCIL ORDINANCES AND RESOLUTIONS