U.S. Doomsday Preview? Illinois Going Broke Now

Monday, 01 Mar 2010 02:42 PM

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Laurence Msall, president of watchdog group the Civic Federation,
says "doomsday is here for the state of Illinois," referring to the state’s $12.8 billion deficit.

"Illinois' fiscal crisis has been many years in the making," Msall says.

"It was caused by more than 30 years of pension underfunding and many years of spending unfettered by the state’s shrinking revenue resources," Msall told the Sun-Times.

Msall’s group is calling for an increase in personal income tax, advocating an intervention that includes significant budget cuts and the largest tax increase package in Illinois history.

The group says it would support a state income tax increase from 3 percent to 5 percent, and recommends the state tax retirees’ pension and Social Security checks be taxed for the first time at the same rate as workers’ paychecks.

It also wants another $1 increase on a pack of cigarettes and the elimination of $181 million in corporate tax breaks, move the group says would alleviate the deficit by 2012.

If implemented, the Federation's recommendations could shave $8 billion off the state’s deficit. However, 
in order to implement those increases, the Civic Federation says unions should pay more toward their pensions and health care.

The unions aren't interested.

The state’s red ink has already caused a backlog of unpaid bills to public universities and schools, transit systems and social services.

The budget deficit in Illinois is almost as big as the one facing California, a financially beleaguered state that has triple Illinois' population, The Chicago Tribune reports, and the deficit is half as large as the core of the state budget.

© 2014 Moneynews. All rights reserved.

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