The Rostrum

By STATE REPRESENTATIVE WOODS BOWMAN,
Democrat, 11th District

Where has all the money gone?

IT SEEMS like only yesterday that the state had a big cash surplus cushion. Now all is gloom and doom. Gov. James. R. Thompson blames the recession for our evaporating surplus and for the meager revenue growth ahead.

He is right about the state's finances being in trouble, but a couple of tax break deferrals and a lean budget are not the solution. They serve to balance the budget all right, but who pays? The consumer, the school children, the poor and the sick. The governor, "Calamity Jim," got us into financial trouble; it's up to him to get us out.

How did he get us into this mess?

•  He has frittered away our healthy cash surplus in election year giveaways.

•  He has raided the General Revenue Fund (GRF) in an effort to prop up a sagging Road Fund in order to avoid a tax increase before his own reelection bid, a gas tax increase which he must now face.

•  He has bled the GRF by signing an overly generous tax relief bill for business which was opposed by his own Department of Revenue.

Now he tells consumers they will just have to wait for any more food tax relief and he tells Medicaid recipients that they will have to do without and he tells school children that they will have to tighten their belts.

Good-bye surplus
In his State of the State message, the governor bemoaned the fact that he will have to draw $165.0 million from our surplus funds this year. He sounded surprised. He must have forgotten that he added the $155.0 million in extra GRF spending authorization to his budget bills by amendments and conference committee reports. His budget chief personally signed letters authorizing the necessary amendments to the appropriations bills for the majority of the added money. In other words, his "balanced" budget for the current fiscal year is a sham; it was not balanced when he signed the appropriations bills.

He says the recession made him do it. Yet, only $26.6 million of the added amount was tied to the recession for increased public aid case loads to handle more people on welfare. By contrast, $33.0 million was tacked on to fund pork barrel transportation and capital development projects.

He also says the revenues are surprisingly sluggish. I am surprised that he is surprised. What did he expect in the wake of massive tax cuts and diversion of GRF revenue to prop up a sagging road fund?

It appears, however, that the bulk of the surplus drawdown was the result of a conscious policy to unload surplus funds which were attracting the attention of numerous special interest groups. Everybody wanted a piece of the surplus pie, so he gave it to them — in an election year, what better time?

GRF diversions
Also in his State of the State address, the governor tried to weasel out of accepting responsibility for the transportation agreement he struck two years ago with Mayor Jane Byrne of Chicago. Now, he calls it a "get-over-the-hump compromise that produced no major new revenues for our road funds." With all the ballyhoo surrounding the new road projects of the Byrne-Thompson plan in 1979, little fanfare was given three financing features of their plan that are now emerging as critically important for the day-to-day operations of state government:

•  3 percent of gross sales tax collections are being diverted from the GRF to the Road Fund;

•  2 Vi percent of gross sales tax collections are being diverted from the GRF to the Motor Fuel Tax Fund (Together, these two diversions account for a $146 million drain on the GRF for fiscal 1982.);

•  millions of dollars of programs which were formerly funded through the Road Funds were shifted to the GRF.

This last shift was made in part to conform to recommendations from the auditor general who issued a report in 1978 detailing how the Road Fund was being used inappropriately to fund non-highway programs. Had subsequent changes in the law been limited to the auditor general's recommendations, the result would have been a loss to the GRF of about $50 million for this year for the Thompson-Byrne plan. Instead, a lot of highway-related programs were thrown into the GRF pot, draining the GRF of about $70 million this year. But if the phase-in continues for highway-related programs funded by the GRF, by fiscal year 1984 the drain will reach $123 million.

The bottom line for financing the Thompson-Byrne transportation deal in fiscal 1982 from GRF will be about $216 million. I, for one, am willing to accept the auditor general's recommendations and not complain about $50 million for roads from the GRF. But I will complain about the other $166 million of diversions from the GRF, especially since the amount will increase every year.

The only purpose of this drain on GRF was to prop up a sagging Road Fund which continues to sag. Calamity Jim probably thought the Mayor of Chicago had helped him escape any tax increase before his next reelection campaign. He apparently had not counted on continued

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rises in gas prices and consequent conservation efforts of motorists. Not too bright; everyone else knew that gas prices were going to keep climbing and that the state tax wouldn't generate more revenue since it wasn't based on price but on each gallon sold.

GRF giveaway
Calamity Jim's greatest folly came when he signed a bill giving a huge tax break to business against the advice of his own Department of Revenue. The General Assembly had enacted two pieces of legislation which gave sales tax exemptions to business. Proponents argued they were needed to improve the business climate in Illinois.

The first bill rather narrowly defined the exempt items as machinery and equipment used "directly and exclusively" in manufacturing. It was heavily supported by the media. The estimated value of this exemption for fiscal year 1982 is $61 million, with no roll back. Not too bad.

The second bill, passed under the guise of "clean up" legislation, virtually escaped media notice. It expanded the definition to include tools, dies, jigs, nuts and bolts. There must be a lot of nuts and bolts sold in this state because this bill could cost the state $242 million this year, again — with no roll back. When it is fully phased in, the drawdown on the state treasury is expected to be $480 million annually. When is enough enough?

An unnamed Thompson administration source was recently quoted in the Decatur Herald-Review: "Business has already received more of a tax break than was anticipated. Even if we roll it back to the December 31 [1980] level, it will still have received a real break."

If we are sincerely interested in improving our business climate, there are better and cheaper ways of getting the job done; $480 million is a lot of money, especially when you consider that it equals 90 percent of all corporate income tax collections for the current year.

Calamity Jim is trying to sweep his blunder under the rug by calling for an interruption of the schedule to phase in this particular giveaway to business. What is needed is outright repeal of the "clean up" legislation before we all get "cleaned out."

Looking ahead
And what has Calamity Jim done lately to help us out of this mess? Last year he went to Washington to push for restoration of federal revenue sharing. But, that was before Ronald Reagan became president. On February 10 Thompson had lunch with President Reagan and afterward announced he was abandoning his campaign to restore revenue sharing for states. According to the Copley News Service, "Thompson said the loss [of $113 million of revenue sharing] was a 'severe blow' but the state is adjusting to it." His State of the State and budget messages did not sound as upbeat.

Whether or not revenue sharing is restored, we can begin our way back on the road to fiscal health by:

•  repealing the business sales tax exemption of "nuts and bolts" to save $242 million;

•  approving a "bite-the-bullet" tax increase, referred to by Thompson in his State of the State message to put new revenue in the Road Fund to make it self-supporting and to save the GRF $166 million;

•  then the GRF diversions to the Road Fund could be stopped (except for the $50 million tied to the auditor general's recommendations).

Together these suggestions will save the GRF $408 million in the next fiscal year. Two years down the road the saving will exceed $724 million a year. The "bottom line" is not as the governor said in his budget message, "written by forces beyond our control." With resources like these within our control there is no excuse for starving basic programs or failing to completely eliminate the tax on food and medicine. □

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