The challenges facing Illinois are considerable, yet they are surmountable if the State acts urgently to stabilize its finances and make key reforms to improve Illinois’ business climate.
The recommended reforms to improve the jobs climate offer an opportunity to help turn around the State’s reputation and will make Illinois an even more attractive place to live, work, and do business. The Financial Framework developed by the Tax Policy Task Force should be implemented immediately and will put the State back on the path to fiscal solvency. Most importantly, adopting the recommendations in the report will provide businesses and individuals confidence and certainty about the direction of the State so that Illinois can achieve its potential as a great place to live, work, and do business.
Summary of Recommendations
Financial Planning and Transparency (p. 31-35)
- Implement reforms to the State’s financial planning processes to focus on the long-term and increase fiscal transparency.
Eliminate the Budget Deficit and Unpaid Bills, Establish a Reserve Fund, and Address Unfunded Pension Liabilities (p. 37-41)
Eliminate the structural budget deficit;
Pay down the approximately $7.8 billion bill backlog;
Establish a $4-5 billion reserve fund; and
Provide an additional $2 billion in pension contributions to implement a new pension funding plan.
Pension Reform (p. 42-54)
Adopt a new pension funding plan that is budget sustainable, reaches the tread water contribution level faster than the current schedule, and creates a plan to amortize the remaining unfunded liability after the pension plans reach 90% funded; and
Examine governance of State and local pension funds.
Expenditure Reductions (p. 55-61)
Reform healthcare plans for current State employees (estimated savings: up to $500 million);
Implement a new retiree healthcare plan;
Reduce State spending through operational improvements (estimated savings: $1 billion);
Implement “2+2” Plan (estimated savings: $500 million); and
Scrutinize Other State Funds for savings.
Tax System Changes (p. 63-70)
Increase the personal income tax rate to 5.95% (estimated revenue: $3.7 billion);
Increase the corporate income tax base rate to 8% (estimated revenue: $300 million);
Eliminate the retirement income exclusion; increase the 65 and over exemption to $15,000 (estimated revenue: $1.9 billion);
Expand the sales tax base to include a set of consumer services (estimated revenue: $500 million);
Eliminate the Franchise Tax (estimated revenue loss: $205 million);
Eliminate the Estate Tax (estimated revenue loss: $290 million); and
Reform administrative practices to make them less burdensome.
Establish Goals and Metrics to Measure Progress (p. 71-74)
- Implement a set of long- and short-term goals and metrics to measure the State’s progress.
Local Government Consolidation (p. 76-83)
Pursue reforms to improve local government financial data; and
Remove statutory barriers to local government consolidation.
P-12 School Funding Reform (p. 85-89)
- Monitor key components of the new funding formula to ensure they work as intended.
Workers’ Compensation Reforms (p. 91-96)
- Implement additional reforms to reduce costs and align with best practices of other states.