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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.

Budget Crisis Puts Early Intervention Services At Risk

Without a state budget, Early Intervention services for infants and toddlers with developmental delays or disabilities are at risk. Though the program is jointly funded by the state and federal governments, the lack of a state budget means that therapists face great uncertainty about when they will be paid. Many say they will have to stop providing services.

Interrupting Early Intervention services will ultimately increase costs to the state. When children who need services don’t receive them, they are far more likely to require much more expensive special education services.

For more on how the budget crisis is threatening children who benefit from Early Intervention services, watch the video below.

State Budget Crisis Shuts Down Federal WIC Program

Illinois’ budget crisis is about to claim another victim: low-income women and their children who rely on nutrition assistance from the federal Women, Infants, and Children (WIC) program.

Without a state budget, WIC funding from the federal government hasn’t been flowing to the Community Economic Development Association (CEDA). As a result, CEDA said it will have to close this week, suspending services to 50,000 women and children.

For more, watch the news segment from ABC-7.

Governor’s Child Care Cuts Harming Children and Families

On June 30, Governor Rauner filed severe new restrictions to child care eligibility that went into effect the next day. These extreme restrictions — which deem working families making only minimum wage too rich to receive assistance — have resulted in approximately 90% of children being denied access to child care since July 1.

These restrictions are not connected to Governor Rauner and lawmakers’ failure to enact a budget. Rather, pulling out this critical work support out from under families was a choice by the Governor.

Watch this ABC-7 report below on how the cuts are harming families at the Albany Park Community Center in Chicago. As Rodney Walker, executive director of the Center, told ABC-7 his “turnaround agenda is turning around the lives of families.”

Let’s Talk Revenue: Avoid Cuts to Essential Services by Reforming the Personal Exemption

Revenue Options Report-46

In May, we released a report outlining a broad range of revenue options policymakers can choose to avoid cutting essential services that are key to a stronger economy such as education, health care, and public safety. In the blog series, “Let’s Talk Revenue,” we discuss these options.

This post addresses adjusting Illinois’ personal exemption based on ability to pay as an efficient and fair way to raise much-needed revenue and avoid cuts to essential services.

$69 million

Taxpayers are allowed to deduct over $2,000 each for themselves, their spouse, and dependent children when calculating their Illinois state income tax.

This deduction is known as the personal exemption, and is designed to reduce tax liability based on the fact that, for most families, ability to pay taxes declines as family size increases. However, as income rises, so does ability to pay, thus diminishing the need and relative benefit of the personal exemption for higher-income families.

Recognizing this fact, thirteen states and the federal government adjust their personal exemptions based on ability to pay — offering higher exemptions at lower-income levels and phasing the exemptions out at higher levels.

Illinois’ personal exemption does not vary based on income, and as a result, it costs Illinois over $1 billion a year. By adjusting the exemption based on ability to pay, Illinois could avoid millions of dollars in cuts.

For example, Illinois could avoid $69 million in cuts by phasing out the personal exemption according to the following schedule:1

Adjusted Gross Income                    Exemption Amount

under $100,000                                $2,125

$100,000 – $200,000                        $1,875

$200,000 – $300,000                        $1,625

over $300,000                                  $0

While it may not seem very significant for a state with an annual budget in the tens of billions of dollars, $69 million dollars would be sufficient to save the following programs from elimination under Governor Rauner’s proposed fiscal year 2016 budget:

  • After school programs
  • Summer jobs for youth
  • Advanced placement, art and foreign language, and agricultural education
  • Violence and bullying prevention
  • College scholarships for former foster-youth transitioning to independence
  • Teacher training
  • Research and service funding for children’s mental health, sickle cell, multiple sclerosis, epilepsy, and autism
  • Funeral and burial grants for poor families
  • Services for immigrants and refugees
  • Teen parent, addiction prevention, emergency food, and supportive housing services
  • Transportation services for adults and students with disabilities

Raising the $69 million needed to maintain these vital services and investments would have a significant impact on children, families, and communities working to build stronger futures, while having a negligible effect on taxpayers. If Illinois adjusted its personal exemption based on the above schedule, taxpayers in the top 1 percent — those with average adjusted gross incomes of over $1.9 million — would see their state taxes increase by less than $300.

Choosing to invest in children, families, and communities is the best thing we can do to propel our state toward economic prosperity. Lawmakers and the governor can limit cuts to the services that make Illinois families, communities, and our economy stronger by adjusting its personal exemption based on ability to pay.

 


Note 1: Estimates by the Institute on Taxation and Economic Policy (ITEP), 2015.

 

Temporary Budget Not A Solution For Illinois Children, Families, and Communities

The Fiscal Policy Center at Voices for Illinois Children joins the Responsible Budget Coalition (RBC) in urging lawmakers to pass a fully funded, year-long budget and to raise the revenue needed to invest in children, families, and communities in our state.

The Responsible Budget Coalition issued the following statement today in response to the General Assembly’s anticipated passage of a one-month budget measure:

The Responsible Budget Coalition: Temporary Budget Fails to Fund Critical Services

The one-month budget measure fails to provide the stability that service providers, businesses, families, communities, and our economy need to prosper. 


The proposal fails to fund many services that are critical to families and communities, such as after-school programs for kids and services for people with HIV and those who may become homeless. It also neglects to fund vital state operations – like the Department of Revenue – which are necessary for daily government functions and services. 


Even if this measure is signed into law, service providers will have to close their doors and state agencies will be forced to cut vital services for families.

Our leaders need to recognize that families and communities are more than line items that they can pick and choose from. The only real choice to make is how to raise the revenue we need to invest in our future.

The Governor and the General Assembly need to immediately end this senseless crisis by passing a fully funded, year-long budget.

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The Responsible Budget Coalition (RBC) is a large and diverse coalition of approximately 200 organizations concerned about state budget and tax issues. It includes organizations that serve children, families, veterans, seniors and people with disabilities; education groups concerned about early learning, K-12 and higher education; labor unions; faith-based and civic organizations; and many others.

The individual organizations that belong to the RBC represent a diverse range of interests but are united by these three common principles:

Adequate revenue to support state priorities and make smart investments

No more cuts to vital programs and services

Fairness in raising revenue and making any cuts caused by failure to raise adequate revenue

Let’s Talk Revenue: Avoid Cuts to Essential Services By Capping the Property Tax Credit

Revenue Options Report-46

In May, we released a report outlining a broad range of revenue options policymakers can choose to avoid cutting essential services that are key to a stronger economy such as education, health care, and public safety. In the blog series, “Let’s Talk Revenue,” we discuss these options.

This post addresses capping Illinois’ property tax credit as a way to raise much-needed revenue and avoid cuts to essential services, while also better targeting tax relief to those that need it.

$95 million – $225 million

Illinois’ property tax credit allows homeowners to reduce the amount of income tax they owe by up to 5 percent of the property taxes paid on their homes. For example, if a homeowner owes $3,500 in property taxes, their credit is worth $175. If a homeowner owes $10,000 in property taxes, their credit is worth $500.

This is a very expensive form of tax relief since it is available to homeowners of all income levels, not just those in need of relief. In fact, Illinois’ property tax credit is the third-largest tax break in Illinois, costing the state $548 million in fiscal year 2013.

Illinois can avoid tens to hundreds of millions of dollars in cuts to essential services by capping the value of the property tax credit available to households at a flat amount and indexing this amount to inflation. This reform would also more effectively target the tax credit to low- and moderate-income households, ensuring that tax relief only goes to those that need it.

According to estimates by the Institute on Taxation and Economic Policy (ITEP), if the property tax credit is capped at $300 per household, Illinois could avoid $95 million in cuts to essential services this year. If the cap is set at $150, the savings would be $225 million.

Another way Illinois’ property tax credit could be improved while raising needed revenue for essential services is to extend the tax credit to renters while also capping the per household value of the credit.

Currently, the property tax credit cannot be claimed by renters, even though they pay property taxes in the form of higher rent. If the property tax credit was extended to renters — who would be able to consider 10 percent of their rent as property tax — and capped at $150 for all taxpayers, Illinois could generate $68 million a year in revenue while also improving the fairness of the credit.

Choosing to invest in children, families, and communities is the best thing we can do to propel our state toward economic prosperity. Lawmakers and the governor can limit cuts to the services that make Illinois families, communities, and our economy stronger by capping its property tax credit, thereby decreasing its overall cost and more effectively targeting tax relief to those who really need it.

Let’s Talk Revenue: Avoid Cuts to Essential Services By Taxing Some Portion of Retirement Income

Revenue Options Report-46

In May, we released a report outlining a broad range of revenue options policymakers can choose to avoid cutting essential services that are key to a stronger economy such as education, health care, and public safety. In the blog series, “Let’s Talk Revenue,” we discuss these options.

This post addresses ending the blanket exemption of retirement income from the personal income tax as a way to raise much-needed revenue.

$500 million – $2 billion

Illinois is the only state in the U.S. besides Mississippi that excludes all retirement income from the personal income tax; and it is the only state in the Midwest that doesn’t tax some portion of retirement income.

This exclusion is the largest tax break in Illinois, costing the state over $2 billion in fiscal year 2013. With the rapid growth of the aging population, these costs will quickly increase.

Cuts to vital services could be avoided this year and beyond by asking income earners of all ages to pay a fair share of taxes.

By completely eliminating the retirement exemption,1 the Institute on Taxation and Economic Policy (ITEP) estimates that Illinois would raise about $1.875 billion at the current income tax rate (3.75 percent). Millions of dollars in cuts can be avoided while also providing tax relief for seniors living on fixed incomes by capping (instead of eliminating) the retirement exemption.

The table below lays out revenue estimates from capping the retirement exclusion at $25,000 increments and at different tax rates. These estimates exclude Social Security and IRA income and grant the exclusion to all taxpayers 65 and over (per spouse).

Retirement Exclusion Table

Choosing to invest in children, families, and communities is the best thing we can do to propel our state toward economic prosperity. Lawmakers and the governor can limit cuts to the services that make Illinois families, communities, and our economy stronger by asking all taxpayers to pay a fair share, including retirees.

 


Note 1: Social Security income would be taxed as it is for purposes of federal income taxes.

Pass a Fair, Adequate, and Fully-Funded Budget

Along with more than 300 non-profit organizations and the Responsible Budget Coalition, Voices for Illinois Children urges Governor Rauner, Speaker Madigan, President Cullerton, Leader Durkin, Leader Radogno, and many other legislative and administrative leaders to pass a fair, adequate, and fully-funded budget for fiscal year 2016.

The following letter was hand delivered yesterday to legislative and administrative leaders. It highlights the devastating impact budgetary inaction has and will continue to have on children, families, and communities across Illinois as nonprofits that deliver essential state services struggle to plan for the future in the face of financial uncertainty.

Download (PDF, 63KB)

Let’s Talk Revenue: Avoiding Cuts to Essential Services By Restoring Income Tax Rates

Revenue Options Report-46

In May, we released a report outlining a broad range of revenue options policymakers can choose to avoid cutting essential services that are key to a stronger economy such as education, health care, and public safety. In the blog series, “Let’s Talk Revenue,” we discuss these options.

This post addresses the root cause of the roughly $6 billion budget hole for fiscal year 2016  — the 25-percent cut to corporate and individual income tax rates that took affect on January 1 — and shows why lawmakers and Governor Rauner should choose to restore at least some portion of the income tax rates to avoid billions of dollars in cuts to services that make Illinois families, communities, and our economy strong.

$1 billion for every 0.25%

$330 million for every 0.75%

Restore the Personal Income Tax Rate

On New Year’s Day, Illinois began losing billions of dollars a year due to the automatic decrease of the personal income tax rate from 5% to 3.75%. While that might seem like a small difference, that change alone will mean Illinois has about $4.8 billion less in tax revenue to fund in services for children, families, and communities than it would have had if lawmakers had maintained the 5% rate.

The personal income tax rate is an essential component to solving our state’s revenue problem because small changes can raise significant resources. For every quarter of a percentage point the personal income tax is increased, the state raises about $1 billion in new revenue.

After the personal income tax cut, Illinois residents, on average, now pay the lowest percentage of their income in state and local personal income taxes in the Midwest.1

State-and-Local-Taxes-Below-U.S.-Average

Restore the Corporate Income Tax Rate

The decrease in the corporate income tax will account for over 15% of the revenue lost next fiscal year (about $800 million). Rather than cut services like education and health care that help Illinois families and strengthen our economy, corporations should pay their fair share. For example, raising the rate to 6% would raise $330 million, 6.5% would raise $550 million, and 7% would raise about $770 million.

Such a small increase to avoid cutting critical services is very unlikely to alter corporate decision-making. After all, state corporate taxes make up only about one quarter of one percent of all corporate expenses.

In fact, stabilizing our state’s finances and maintaining investments in our future are critically important to Illinois becoming more “business friendly.” Businesses rely on healthy, well-educated workers; strong communities; and a safe and efficient transportation system to succeed. Further, high-skilled, high-demand workers want to live and work in communities that invest in high-quality schools, cultural amenities, efficient public transportation, and recreational facilities that improve quality of life.3 Cutting services that business rely on and that attract workers weakens the building blocks of economic prosperity and long-term profitability.

It is highly unlikely that cutting corporate taxes leads to even short-run economic gain. This is in part because money from reduced corporate income taxes often flows to shareholders, suppliers, and employees out of state.4 Had these dollars continued to fund state services, they would have stayed mostly in Illinois. The net result is an outflow of dollars.

How Illinois calculates corporate income tax liability also means that cutting the rate also does very little to incentivize the creation of jobs in Illinois. Illinois calculates corporate income tax based on sales in the state. Because a corporation’s Illinois income tax liability is not tied to the location of its headquarters, offices, distribution facilities, or factories, cutting corporate income taxes does virtually nothing to encourage job creation in the state.

With next year’s budget shortfall caused almost entirely by the rollback of the individual and corporate income tax rate, lawmakers and Governor Rauner should choose to restore at least a portion of prior rates. Particularly when combined with other reforms of our state’s antiquated tax system, such as broadening our sales tax to cover more services and ending the blanket exemption for retirement income regardless of wealth, Illinois can build a sustainable tax system to make critical investments in our future.

 


Note 1: Illinois, unlike a number of other states such as Indiana, prohibits localities from assessing local income taxes. Though Indiana’s state income tax rate is slightly lower than Illinois’ rate, the local income tax rates that Indiana residents pay mean that, on average, they pay more in state and local income taxes than Illinois residents. Illinois’ prohibition of local income taxes also contributes to local governments’ increased reliance on property taxes to fund local services.

Note 2: Estimate based on Internal Revenue Service data. Michael Mazerov, “Cutting State Corporate Income Taxes Unlikely to Create Many Jobs” (Center on Budget and Policy Priorities, September 14, 2010).

Note 3: Richard Florida, The Rise of the Creative Class (Basic Books, 2002); Timothy R. Wojan and David A. McGranahan, “Ambient Returns: Creative Capital’s Contribution to Local Manufacturing Competitiveness,” Agricultural and Resource Economic Review (April 2007).

Note 4: Economist Timothy Bartik argues that business tax cuts at the state level flow to out-of-state owners. Timothy Bartik, “Taking Preschool Education Seriously as an Economic Development Program, Effect on Jobs and Earnings of State Residents Compared to Traditional Economic Development Programs” (W.E. Upjohn Institute for Employment Research, March 30, 2006).