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Communities of Color Continue to Struggle in Illinois

Last week’s new Census data show that in Illinois and across the country, income and health insurance coverage increased while poverty went down between 2014 and 2015. Although this is positive news overall, Illinois’ poverty rates remain higher and incomes lower than before the Great Recession, and African Americans and Latinos continue to have lower incomes and have a harder time making ends meet than whites.

The success of Illinois depends on our state’s commitment to create jobs that pay workers enough to make ends meet, provide quality childcare for young children so parents can work, and the ability for all Illinoisans to afford to see a doctor and stay healthy—all of these things build economic security and thriving communities.

Below are key highlights of the report that show that although there’s much to celebrate in terms of increasing incomes and declining poverty, we must do more to address the continuing gaps for people of color in Illinois.

Highlights from the 2015 American Community Survey data release include:

  • The Illinois poverty rate was 13.6 percent in 2015 down from 14.4 percent in 2014. The federal poverty level for a family of four in 2015 was less than $24,250.
  • Even with slight improvements in the rate, there were more than 7 million Illinoisans living in poverty, an increase of more than 207,000 people in poverty since 2007.
  • Median household income rose from $57,475 in 2014 to $59,588 in 2015, a 3.7 percent increase.
  • While the number and percentage of Illinoisans living in deep poverty—below 50 percent of the federal poverty level— dropped between 2014 and 2015, there were still more than 784,000 Illinoisans (6.2%) living under such dire circumstances. In 2015, a family of four living below 50 percent of the federal poverty level lived on an income of less than $12,125 in 2015.
  • Illinois was among eight states with an increase in income inequality – the gap between the rich and everyone else – between 2014 and 2015.

 Children Most Likely to be Poor

  • Nearly 559,000 children still lived in poverty in 2015 despite a slight improvement in the child poverty rate from 20.2 percent in 2014 to 19.1 percent in 2015.
  • Children of color have higher poverty rates compared to white children. African American children are four times more likely to be poor than white children (39.0% vs. 10.0%).
  • Latino children are nearly three times more likely to be poor compared to white children (27.2%).
  • More than 246,000 (8.4%) of Illinois children were living in deep poverty in 2015. Although this is down slightly from 9 percent in 2014, the rate and number of children living in deep poverty is higher than before the recession.

Slower Improvements in Poverty and Income for African American and Latino households

Although poverty went down and income went up in Illinois between 2014 and 2015, the gains were not as strong for people of color, including African Americans and Latinos. And household incomes for people of color in Illinois are still well below pre-recession levels. Overall, African American household income is half that of white household income.

  • Median Household Income: African American and Latino households continued to earn considerably less than white and Asian households. African American median household income was $33,950 in 2015. It was $49,122 for Latino households, $66,237 for white households, and $80,076 for Asian households. African American and Latino household income increases were much lower than the state average.
  • After adjusting for inflation, African American household incomes declined by $4,894 or 12.6 percent from 2007, while Latino household incomes declined by $5,015 or 9.3 percent. Overall, Illinois incomes were down $2,283 or 3.7 percent in 2015 compared to 2007, showing that African Americans and Latinos were disproportionately harmed by the Great Recession.
  • Race and Poverty: African Americans are three times more likely to be poor compared to whites, with a poverty rate of 28.2 percent compared to just 8.7 percent for whites. Latinos are more than twice as likely to be poor compared to whites. The Latino poverty rate was 19.4 percent.

Low Educational Attainment Closely Tied to Poverty

Educational attainment continues to be an important factor in whether a person is living in poverty. Illinoisans without out a high school degree were twice as likely (23.4%) to live in poverty compared to just 10.1 percent of Illinoisans’ with some college and 4.1 percent of college graduates.

One in Six Illinoisans Struggle with Low Incomes

Many Illinoisans living above the federal poverty level are still struggling. Economic security, defined as the ability to afford basic needs, save for a rainy day, and plan for the future, is out of reach for many Illinoisans. Estimates of what it takes to be financially secure are usually at least twice the poverty line or 200 percent of the federal poverty level—$23,540 annual income for one person or $48,500 for a family of four. In 2015, one in six (16.7%) Illinoisans made less than this.

College Price Tag Growing in Illinois

With the lack of a state budget this year and no funding for tuition assistance grants through the state’s Monetary Award Program (MAP), Illinois lawmakers are putting more students and the state economy at risk of falling behind. Without the promise of financial aid and more affordable tuition, many low-income Illinoisans will not be able to pursue college, a pre-requisite for obtaining a family-supporting career and moving into the middle class.

Even before the current budget impasse, Illinois was not making the needed investments to keep college within reach for aspiring college students. Last week, the Center on Budget and Policy Priorities released data showing that as of 2014, Illinois’ investments in postsecondary education were still lagging 4 percent behind pre-recession levels. This decline in state investments shifts costs onto students and families in the form of higher tuition. Overall, in-state tuition at Illinois’ four-year public universities is up more than $2,300 since 2008.

These higher costs mean many low- and moderate-income students must rely on working full or part-time to pay for tuition and fees. While some work can be beneficial during school, too much work can delay completion and leave students at greater risk of dropping out. And those students choosing to take out loans to pay for college often leave school with large amounts of debt when they enter the job market. In Illinois, one in ten student loan borrowers default on their loan within three years of leaving school.

In the not too distant past, Illinois stood out among many states for its commitment to supporting low-income students to attend college because of MAP grants. But ongoing tuition hikes, coupled with the lack of funding for MAP grants, sends the wrong message to Illinois’ current and aspiring college students about the state’s commitment to postsecondary education.

With more jobs of the future requiring postsecondary education, it is more important than ever for Illinois to invest in the future workers of the state through postsecondary education and skills training.

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Press Statement on Failure to Suspend Governor Rauner’s Irresponsible Child Care Cuts

Voices for Illinois Children released the following statement in response to the failure of the Joint Committee on Administrative Rules (JCAR) to suspend Governor Rauner’s irresponsible child care cuts. In a complaint filed with JCAR, Voices and four other organizations assert that Governor Rauner improperly used emergency rulemaking to severely restrict access to the state’s Child Care Assistance Program.

Voices for Illinois Children is deeply disappointed by the decision not to suspend the Governor’s cuts to child care reached today by the Joint Committee on Administrative Rules (JCAR).

Voices continues to assert that on July 1, 2015, Governor Rauner improperly used emergency rulemaking to change the Child Care Assistance Program, or CCAP.  The purpose of CCAP is to ensure that low-income, working families have access so safe, quality early learning environments for their children.

“Lawmakers who did not vote to suspend the Governor’s cuts to child care are on the wrong side of this fight for the future of low- and middle-income families,” said Emily Miller, Director of Policy and Advocacy at Voices for Illinois Children. “Ensuring that parents can go to work and have a safe, enriching place to leave their children is not a partisan issue, and it’s unfortunate that some members of the committee chose politics over children and families.”

With the Governor’s cuts, 90 percent of new applicants who would have qualified are no longer eligible and will be denied child care services through CCAP. Only families that fall within one of four priority populations may now receive child care assistance:

  • families receiving TANF cash assistance
  • children with special needs
  • families earning below 50 percent of the federal poverty level (annual income of less than $10,045 for a family of three)
  • teen parents

Advocates will continue to ask lawmakers to examine the impact of the Governor’s cuts to child care. Members of JCAR have another opportunity to vote to suspend the Governor’s cuts to child care at their next hearing.

“Lawmakers on this panel will have another chance to make things right for children and families, and we hope they’ll take it,” said Miller.

Big Tax Cuts Don’t Boost States’ Economies

Governor Rauner’s repeated claims that a cut to state income tax rates was essential to spurring Illinois’ economy holds up poorly against the experience of other tax-cutting states.

In fact, new data shows that Illinois’ economy grew faster in 2014 — before the expiration of the income tax rates — than all bordering states. Illinois’ economy grew three times faster last year than Indiana, which some have held up as a model for Illinois to follow.

Data from only one year can prove only so much, but it reinforces the experiences of other states that failed to realize promised economic growth when they cut personal income taxes. As Michael Leachman of the Center on Budget and Policy Priorities recently pointed out, four of the five states that enacted large personal income tax cuts in recent years have grown more slowly than the national average since the state’s tax cut took effect (see chart) — and “none have seen a clear improvement in growth relative to the nation since the cuts took effect.”

Biggest Tax-Cutting States Not Seeing Boom

Proponents of the tax cuts, including consultants Art Laffer and Stephen Moore (who have a consulting business with Donna Arduin, Illinois’ new “CFO”), have pushed income tax cuts for their supposed “near immediate and permanent impact.” That the actual evidence undermines this claim really isn’t surprising, since there is no consensus among economists that state tax rates and economic growth are at all related.

Indeed, recent research from the Brookings Institution’s Tax Policy Center calls into question a previous study by Robert Reed that has been used to justify state tax cuts. When the Tax Policy Center took this study’s methods and extended it past the previous end date, it found that “state-level economic growth is not closely tied to state-level tax policy.”

The bottom line is that the state’s recent 25-percent income tax cut is far more likely to hurt, not help, Illinois’ economy. The more common-sense approach is to build the innovative classrooms and 21st century infrastructure that will produce a brighter future — for all of us.  The misguided belief in tax cutting as the key to economic growth makes that future impossible.

Property Tax Freeze Threatens Illinoisans; Fails to Address Root Causes

Freezing local property taxes at 2015 levels — proposed by Governor Rauner and in the General Assembly — would jeopardize the quality of education in Illinois and threaten to make the state’s communities less safe, desirable places to live.

The better way to solve the problem of high property taxes in Illinois is to get at the root causes — not slap on arbitrary limits that fail to take into account real public needs.

What’s at Stake?

Freezing property taxes would be especially harmful to Illinois school children, given the gross inadequacy of state General State Aid support for K-12 education. Illinois consistently ranks at the bottom in terms of the state’s share of support for public schools. Without the support they need from the state, local school districts in Illinois have little choice but to rely heavily on property taxes to cover their expenses and keep up with the rising costs of goods and services like utilities.

And there is no sign of state support becoming anywhere near adequate. The increase Governor Rauner proposes for the coming budget year wouldn’t even be enough to end the state’s practice of shorting school districts what they are due under state funding formulas. Without much larger increases to state aid, sustained over time, a property tax freeze — particularly if it were indefinite as in several of the proposals — would likely mean teacher layoffs, fewer course offerings and extracurricular activities, and other barriers to academic excellence.

It’s not just students who would be hurt by a local property tax freeze. Municipalities would likely be forced to reduce such vital services as police and fire protection. Add to the proposed property tax freeze Governor Rauner’s call for a $634 million cut to revenue sharing with local governments, and the picture grows even worse.

Proponents of freezing property taxes seem to be playing the “democracy” card to paper over the problems their proposal would cause. They claim they are empowering Illinoisans by allowing them to override the freeze at the ballot box. But instead of forcing communities to go through the burdensome process of having an election to approve even routine increases in operating costs, we should trust communities to elect local officials who will represent them; we don’t need Springfield to put up barriers to providing local services.

Plus, many Illinois counties — including all the counties in metro Chicago — already limit property tax increases to the level of inflation. And, residents in counties that don’t have these limits in place can vote into the state system to enact such limits. In fact, nine counties have previously rejected property tax limits, because voters recognized the harm they can cause.

Lessons from Other States

We don’t have to look far to get a sense for how damaging property tax freezes can be. Many states have put limits on how much property taxes can increase, a policy less stringent than the freeze Illinois is considering, that still led to major service reductions. For example, after Massachusetts arbitrarily limited annual local property tax revenue increases to 2.5 percent, communities laid off teachers, fire fighters, and police. Fire stations, libraries, and recreation and senior centers also had to close their doors or reduce hours.

In 2012, New York State capped increases to annual levies at 2 percent or the rate of inflation. As a result, over 60 percent of towns and villages and 80 percent of cities and counties reported the cap was making it more difficult to provide services for their residents, according to a Cornell University survey. There is other evidence that, when state governments impose arbitrary limitations on the ability of local communities to raise the resources they need, communities have to cut back on investments to improve roads and bridges, parks, and schools that help drive future economic growth.

Address the Underlying Causes

Rather than choke funding for education and core local services that increase quality of life and improve economic prospects, Illinois should take the common-sense approach of reducing reliance on local property taxes. Sound steps in that direction include:

  • Increase state aid to localities for public schools and for such other vital public services as parks, sanitation, and public safety. Such increased aid, particularly for public schools, could significantly lessen upwards pressure on property taxes, while also providing low-property wealth communities with the resources they need to create economic opportunities for children and families.
  • End the ban on localities assessing income taxes. Other states with relatively low property taxes, such as Indiana, allow this form of taxation, which is more closely tied to residents’ ability to pay.
  • Enact structural reforms like reducing the number of municipalities and school districts in Illinois. Our state has nearly 7,000 units of local government, by far the highest in the nation. This causes costly, inefficient duplication of services, higher administrative costs, and reduced bargaining power with suppliers, insurance companies, and others who do business with public entities.

Another good policy used in many states is to give homeowners a state tax credit if their local property tax exceeds a certain share of their income. This helps those who need it most, while maintaining local governments’ ability to raise the resources they need for the services on which people rely.

If we want Illinois to be a competitive state, we need to invest in strong schools and other services that make our communities safe and attract and retain a skilled workforce. A property tax freeze will not get us there. What we need are comprehensive, long-lasting solutions.

Report: Gutting Public Services to Balance the Budget Will Hurt, Not Help Illinois’ Economy

For the past several months, we’ve been speaking out about how children, families, and communities would be hurt by budget cuts proposed by both the Governor and the General Assembly. As advocates for children and families, we know that the state will be worse off if it cuts services for babies and toddlers with development delays, funding for our schools and universities, affordable child care for parents struggling to work and make ends meet, and families on the brink of homelessness.

In addition to immediately hurting Illinois children, families, and communities, proposed budget cuts are also harmful for our economy, hindering investments that really create jobs and build the foundations of economic prosperity. Today we released a new report explaining why.

Counter to what many people may believe, the economic literature shows that tax cuts have at best a negligible effect on stimulating economic activity or creating jobs. In fact, the evidence suggests that raising additional revenue to invest in improved public services like education, health care and infrastructure is one of the best ways we can spur our economy.

Why tax cuts aren’t effective stimulants for economic growth:

  • Businesses expand and create jobs when there is increased demand for their products, not when they receive tax cuts or incentives.
  • Tax cuts don’t boost employment among small businesses because so few are in a position to create jobs and those that are don’t earn enough for the tax cut to make a significant difference. Small businesses with any employees other than the owners make up only 11 percent of all businesses reporting income and tax cuts for the others wouldn’t come close to paying a full-time employee’s salary.
  • Tax cuts have very little power to influence business decisions because state taxes are not a significant cost of doing business. On average, state corporate income taxes make up only a quarter of one percent of corporate expenses—cuts to these taxes are incredibly unlikely to encourage businesses to add jobs.
  • Tax cuts reduce in-state spending, which is bad for the state’s economy. Dollars spent on public services go right back into local communities, creating ripple effects for the state, whereas portions of these dollars are kept in savings or “leak” out of the Illinois economy when individuals and businesses purchase out of state goods and services and pay higher federal taxes.
  • Tax cuts often lead to job losses. Reduced public spending often results in layoffs of public employees and the elimination of contracts with private-sector employers, resulting in fewer jobs overall.

Why raising the revenue needed to invest in public services is so important:

  • Businesses depend on public investments to succeed. Businesses require access to a skilled workforce, fire and police protection, court systems, well-maintained roads, highways, and bridges, sewage systems, snow removal, and flood control. Businesses rely on governments to make these long-term investments.
  • Investments in education are necessary to create a strong labor force that attracts employers with more high-skilled jobs. Workforce quality is one of the most important factors in businesses location and expansion decisions. Investing in quality early childhood education, top-notch schools, and strong colleges and universities is one of the best things states can do to grow their economies in the long run.
  • Public investments that improve quality of life are necessary to retain and attract high-skilled, high-demand workers. States that are committed to providing and able to pay for high-quality schools, cultural amenities, efficient public transportation, and recreational facilities better retain and attract skilled workers.
  • Poverty and inequality are economically costly. Poverty holds back our economy because of lost productivity, higher crime rates, and costs associated with poor adult health.

Budget and tax decisions lawmakers and the Governor make now will impact not only the immediate well-being of children, families, and communities across our state, but also our economic well-being for years to come.

We can’t strengthen our economy while cutting the very investments needed for a stronger economic future, like education, roads and bridges, health care, and public safety. Rather, we should raise the revenue needed to maintain and improve these vital investments.

Increasing Illinois’ EITC Would Reduce Income Inequality

To counteract growth in income inequality, Illinois should double the state’s Earned Income Tax Credit, or EITC. This is a key takeaway from new research done by Federal Reserve economists that found that state EITCs can “significantly increase the extent to which state tax systems reduce income inequality.”

The research found that the higher a state’s EITC, the more powerful the effect. For example, between 2003-2007, when Illinois’ EITC was 5% of the federal EITC, it decreased income inequality by 0.4% (measured by comparing the 10th and 90th percentiles of income). In contrast, the study showed that Maryland’s EITC, which was 20% of the federal EITC, reduced income inequality in Maryland by 2.2%. While these numbers may seem small, the study found that state EITCs can “meaningfully reduce income inequality.”

The research also notes that there is strong evidence that the EITC increases employment rates by rewarding work. Thus, increasing the EITC not only gives low- and moderate-income working families more of what they pay in taxes back, it also results in higher wage income.

Illinois’ EITC is currently 10% of the federal EITC. If Illinois were to double its EITC, more than 900,000 low- and moderate-income working families would see a boost to their income by an average of about $300 annually — an important boost for families trying to make ends meet. While the EITC will not undo the huge growth in income inequality over recent decades, it’s an important step in the right direction.

Winning on Merits, Not on Bribes

Joe Cahill, a Crain’s Chicago Business columnist, says that Mead Johnson Nutrition’s move to downtown Chicago without tax “incentives” shows that “Chicago can attract corporate headquarters without paying bribes.”

The CEO of the company, which makes baby formula, indicated that they wanted “access to resources, employee and visitor amenities,” as well as improving its “ability to attract and retain the very best talent.” 

According to Cahill:

Mead Johnson’s move confirms we can win on the merits alone. Unlike the carnival barkers over in Indiana and down in Texas, we don’t have to pay companies to come here. Those states have to pay because they can’t match our economic assets.

The reasons for the move, even without tax breaks, were numerous, according to a Mead Johnson spokesperson:

…attractive, world-class amenities for employees and global visitors; the availability of a wide range of public transportation options, including direct, efficient airport access; and [Chicago’s] deep and diverse talent pool.

Cahill is glad Chicago seems to have moved beyond offering tax breaks to induce companies to relocate. He points out that “taxpayers shouldn’t have to subsidize business activity that would occur naturally on its own.” He further argued that tax handouts in an attempt to lure corporate headquarters are a bad idea when mergers and acquisitions mean headquarter locations can shift quickly.  

All of this points to lessons for the state as well. We previously showed why giving tax breaks to large corporations is often a fool’s errand. We highlighted five primary reasons:

  1. Location decisions are almost never really about taxes. As with Mead Johnson, business leaders say they want a high-quality workforce, proximity to markets, and access to high-quality infrastructure such as roads, airports, and public transportation. 
  2. Tax breaks are small potatoes for large corporations. Even large tax handouts are worth very little to most large corporations, often fractions of a percentage point of annual revenue. Though, if a city or state is giving away money, companies certainly won’t turn it down. 
  3. Illinois can’t afford to give away money. Our state already chronically underinvests in vital priorities such as K-12 schools, universities, and transportation infrastructure. With the loss of billions of dollars in revenue due to the recent income tax cut, policymakers will have to cut these investments more deeply to offset additional giveaways.
  4. Companies have every incentive to mislead states. Companies have every incentive to appear undecided about whether they will stay or leave. After all, if politicians knew that executives had already made up their minds about where to locate, they wouldn’t support giving away money.
  5. Giving away money is counterproductive and unfair. Only a small subset of businesses get handouts. All those companies who get no handouts end up receiving lower-quality public services, paying higher taxes — or both.

It’s time for Illinois to focus on bread-and-butter issues that really matter most for businesses and hold the key to broad prosperity: creating a high-quality workforce through world-class schools, improving transportation and other critical infrastructure so businesses can efficiently reach markets, and creating livable communities that attract people from around the world. These are the things Illinois needs to compete, and win. 

What’s Wrong with the New Minimum Wage Bill

bill to raise the state minimum wage that quickly passed the Senate last week contains needless giveaways to businesses at a time when Illinois can ill-afford further revenue losses. The bill (SB 11) also could deter employers from paying more than the minimum wage and guts a significant component of Chicago’s minimum wage increase — automatic cost-of-living adjustments to the minimum wage after 2019. While the Fiscal Policy Center and Voices strongly support increasing the state minimum wage to $11 an hour by 2019, we believe the two provisions are bad ideas.

Minimum Wage Tax Credit for Small Businesses

The bill creates a tax credit for employers with 50 or fewer employees.  It would give the employer a maximum 75-cent credit per worker per hour, applied to most workers at least 18 years old who do not get tips as part of their pay. Starting this July, when the new Chicago minimum wage is set to begin increasing and when Illinois’ minimum wage would increase under SB 11, an employer that paid exactly the local minimum wage would receive the maximum credit. The credit program would expire at the end of fiscal year 2018 (June 30, 2018).

IL and Chicago Minimum Wages by date

The credit quickly phases out, though, when employees are paid more than the minimum wage. For every cent increase in hourly pay, the employer would lose a cent of credit. This structure leads to the first major problem with this proposal.

Problem 1: Employers Have a Disincentive to Increase Wages Above the Minimum Wage

Because the credit phases out, employers are encouraged to pay exactly the minimum wage. If, for example, an employer wanted to give a worker paid the minimum wage a 25-cent raise, it would actually cost the employer 50 cents an hour due to the additional loss of 25 cents worth of tax credit. It seems perverse to encourage employers to pay the lowest legal wage and to discourage pay raises.

Problem 2: Employers Have an Incentive to Decrease Workers’ Pay to Receive Credit

Another perverse incentive is that the wage credit would reward businesses that decrease worker pay to get closer to the minimum wage in order to get a higher credit. Within the credit range, for every 1 cent a business decreased pay, it would receive 1 cent from the state in the form of a tax credit. So a 10-cent-per-hour pay cut would result in 10 cents per hour in tax credit — doubling the savings to the employer.

Problem 3: Giving Away Money to Businesses Who Haven’t Given Any Raises

Under the legislation, employers who already pay at or above the new minimum wage would get the tax credit. In other words, they wouldn’t have to raise their workers’ wages to take advantage of the credit. And even if a business increases pay, the credit can be worth far more than the added cost to the business (see chart below).

In the most extreme case, a business would get $1,500 a year in tax credits for a full-time worker, even though the business would not be incurring any extra costs since it was already paying that worker $9 an hour before the minimum wage hike. Even in cases where employees were previously making below the minimum wage, the employer still sees a net gain in all but one case — where the employee was making exactly the prior minimum wage, in which case the state pays for the entire wage increase.

Problem 4: Unknown Cost to State

Given Illinois’ deep financial problems, which were just made much worse by a 25 percent decrease to income tax rates, lawmakers should be very careful to not worsen an already dire situation with giveaways. However, this is exactly what the wage credit would do. And, so far, lawmakers seem to have little interest in finding out how much this provision would cost. Since lawmakers have requested no official estimate, or “fiscal note,” it is very difficult to know what the cost would be. At the very least, lawmakers should not enact a minimum wage credit without a fiscal note.

The cost of the credit is also likely to increase as the minimum wage increases in Chicago and the state. With higher minimum wage levels, more workers will likely be paid within the credit range. This also suggests that eligible businesses with employees in Chicago will receive a greater wage credit because of the higher minimum wage in the city. 

Preempting Chicago’s Cost-of-Living Adjustment Harms Chicago Workers

Another problematic provision in the legislation would undo one of the most important aspects of Chicago’s recently enacted minimum wage ordinance: automatic increases after 2019 to the city’s minimum wage to reflect rising costs of living. Particularly due to Chicago’s higher cost of living, this cancellation will likely cause significant harm to low-paid workers in Chicago after 2019.

Part of the reason is that the General Assembly is unlikely to raise the state minimum wage past $11 an hour for a number of years after the state minimum wage plateaus at that level in 2019. Low-wage workers in Chicago could wait perhaps a decade or more for the state minimum wage to exceed $13 an hour. As rising living costs erode the value of the Chicago minimum wage, the benefits of the Chicago minimum-wage increase will essentially be undone over time.

The following graph demonstrates why this is. The top two lines represent the Chicago minimum wage by year after 2019 given two levels of annual inflation — 1.5% and 2%. Under these scenarios, Chicago low-wage workers are able to keep pace with increases to the cost of living. The light red line shows Chicago’s minimum wage stuck at $13 an hour after 2019, waiting for state lawmakers to increase the minimum wage above that level. The dotted line represents the state minimum wage and assumes that lawmakers wait five years between state minimum wage increases and then raise the minimum wage by $2 over a 4-year period (equivalent to the phase-in under SB 11).

 

As is evident, Chicago workers fall further and further behind where they otherwise would have been with annual adjustments that the legislation would preempt. So while the legislation helps low-wage workers outside Chicago, it will almost certainly harm low-wage workers in Chicago after 2019 by preempting existing Chicago law.

Posted to Blog, Economy, Jobs, Workforce

Revenue Falls Sharply in January Due to Tax Cut

As expected, income tax revenue dropped sharply in January ($135 million) versus a year ago because of the 25 percent cut to the individual and corporate income tax rates that took effect on New Year’s Day. The new numbers come from the latest monthly report of the Commission on Governmental Forecasting and Accountability (CGFA).

Revenue losses from the income tax cut will continue to mount as the year progresses. And, the year-over-year losses do not even reflect the true revenue losses, because had the tax cut not occurred, income tax revenue would likely have increased over last year’s levels. Absent new sources of revenue, the revenue collapse will exact its toll across an expanding swath of investments in children, families, and communities.

Already, the tax cut is having its predictable effect. Child care assistance, which was underfunded due to inadequate revenue, is short nearly $300 million. As a result, some combination of delayed payments to providers (which would just kick the can further down the road) and tens of thousands of families simply losing access to affordable child care appears inevitable.  

Cuts are also now impacting services for youth. The Rauner Administration has notified more than 30 Chicago area social service agencies that they must “cease any and all operations” associated with previously awarded contracts for afterschool, job training, and other programs for youth. One service provider that had its contract cancelled is Communities United, which operates the Bikes N’ Roses program. Bikes N’ Roses employs youth throughout the year, teaching them valuable technical skills (bike repair) and general job skills (such as interacting with customers and coworkers, and meeting deadlines).

Governor Rauner’s spokesperson understandably pointed to the unbalanced budget passed by the General Assembly last year (due largely to the then-pending tax cut) and urged lawmakers to work together to “find responsible solutions.” The Fiscal Policy Center believes any responsible solutions must include significant new sources of revenue; otherwise, more service providers like Bikes N’ Roses, which help prepare our youth to be productive members of the workforce, will be left out in the cold.

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