Civic Federation: Higher Taxes, Spending Limits Needed To Fix State Budget

CHICAGO (CBS) -- A research group has offered a laundry list of suggestions to help pull Illinois government out of its financial mess.

More than seven months into a budget stalemate, Civic Federation President Laurence Msall said "there are no more politically popular solutions left."

The budget watchdog group's Institute for Illinois' Fiscal Sustainability has released an analysis recommending lawmakers and the governor reinstate the personal and corporate income tax hikes that expired last year, and eliminate the tax exemption on retirement income for those who earn more than $50,000 a year. Currently, the state does not tax any retirement income.

"The Civic Federation's plan is painful, but it does provide a comprehensive solution; and does show that, with fiscal discipline and reasonable attacking of the revenue and expenditure problem, you can close the $4.6 billion budget shortfall this year, and pay down the unpaid bills within three years," Civic Federation president Laurence Msall said.

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The Civic Federation's budget analysis for Illinois found the state's backlog of unpaid bills could swell to $26 million in three years.

"The state of Illinois is really in an extraordinarily difficult place. It has dug the hole financially so deep because, for years, it has not dealt with its financial reality. For years, the state of Illinois has spent more money than it's taken in," Msall said.

In addition to higher income taxes, the group recommended limiting state spending to pay down the backlog of unpaid bills, expand the Earned Income Tax Credit to help soften the blow of higher taxes on low-income taxpayers, consolidate the pension funds for Chicago teachers and teachers from the rest of the state, temporarily suspend the sales tax exemption for food and medicine, and expand the sales tax to services.

The plan also calls for an amendment to the Illinois Constitution to allow for changes in public employee pension benefits.

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