The state of the State

BOB's margin for error

by DIANE ROSS

IT'S FIVE MONTHS into the election year, and Gov. James R. Thompson still isn't talking much about the fiscal state of the state, that is, the economy of state government. That's odd since that's where Thompson's record lies. Meanwhile, former U.S. Sen. Adlai Stevenson is taking Thompson to task for what Stevenson says Thompson should have done over the last six years to improve the economy of the state.

One reason that Thompson's not talking much about the fiscal state of state government, however, is that in state fiscal year 1983, unlike SFY 1982, his revenue and spending figures give the Democrats in the General Assembly plenty of room to argue his budget priorities.

To sum up the fiscal state of state government for SFY 1982: the recession has played havoc with Thompson's revenue projections ever since he unveiled his SFY 1982 budget back in March of 1981; Bob Mandeville, director of Thompson's Bureau of the Budget (BOB) had predicted as much. In contrast, when Thompson unveiled his SFY 1983 budget this spring, Mandeville immediately said he would unequivocably stand on his revenue projections, even in the general funds. That has been the extent of the Thompson administration's assessment of the fiscal state of state government.

SFY 1983 marks the second consecutive year the General Assembly's Economic and Fiscal Commission (EFC) is projecting revenues at lower levels than Thompson's BOB. For all funds, the EFC is projecting revenues at $303 million less than the BOB's $12.537 billion. For the general funds, the EFC shows $145 million less than the BOB's $8.814 billion.

Where do the BOB and EFC differ? They're the farthest apart on the individual state income tax and the state sales tax. The largest difference lies in the individual state income tax: the EFC is projecting $98 million less than the BOB's $2.618 billion. Why? Both base their projections on a number of economic indicators, including employment. The BOB assumes the economy will recover earlier than does the EFC, which leades Mandeville to presume a slight increase in state income tax revenue.

The BOB and the EFC also differ on the state sales tax, with the EFC $67 million below the BOB's $2.532 billion.

Neither agency assumes Illinois will "disconnect" from the new federal tax policy that allows business to write off the depreciation of equipment faster. Both have figured the losses from the state corporate income tax, due to this federal tax break, in their projections.

It was a different story last year. In SFY 1982, Thompson's revenue figures presumed, among other things, that the General Assembly would roll back the manufacturers' sales tax exemption and would not remove the third penny of the sales tax on food and non-prescription drugs. In SFY 1983 Thompson makes no such presumptions. Clearly, Illinois can no longer afford such erosions of its tax base.

Thompson apparently now sees the need for Illinois to expand its tax base to offset the ravages of three years of recession. But this is an election year. In his March Budget Message to the General Assembly Thompson came up with what he called two "modest proposals":

1. raising the state liquor tax by switching from a tax on volume of liquid to a tax on percentage of alcoholic content;

2. raising the revenue from the state insurance taxes by taxing Illinois-based firms at 2 percent of their gross receipts from premiums. (Out-of-state firms already pay such a tax.)

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Within a month, Thompson came up with a third: raising the state gas tax. Though the governor had long been on record for such a tax hike, he did not immediately spell out his current proposal.

These proposals, however, are only alternatives to what everyone except the two gubernatorial candidates is already talking about: raising the state income tax. Thompson stopped short of calling for such a major tax hike, shrewdly suggesting instead that a gubernatorial commission study reform of the state's entire tax structure.

In Thompson's budget, however, there is a presumption that federal aid to Illinois will rise $165 million or 5.7 percent in SFY 1983, reaching $3.059 billion.

Mandeville says he'll also stand on his revenue projections for federal aid, but the EFC's figures put him on shaky ground there too. The EFC shows federal aid will rise a mere $26 million or .8 percent.

The state government also has the Intergovernmental Cooperation Commission, which specializes in projecting federal aid. Although the commission has not yet announced its projections for SFY 1983, a spokesman said the commission is highly skeptical of Thompson's presumed $165 million increase.

Are the BOB's federal aid projections on target? Who knows? BOB's record clearly shows that federal aid receipts have come in under its projections, except for SFY 1981 when actual receipts were above the BOB's projection (see table).

Election year or no, there's little margin for error.

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