By JOAN A. PARKER

The state of the State The only game in town

"IT'S A QUESTION of this or nothing." With these words, Gov. James R. Thompson emerged from the ninth day of summit talks and conceded what observers had been suspecting for days: His permanent income tax plan had been formally scrapped in favor of a lesser Republican alternative.

With two days left until June 30, the point of no return had been reached; there was general agreement that no other proposal had a reasonable chance of passage. The governor looked weary. He stood in his shirtsleeves, tie loosened, in the humid hallway outside his Statehouse office to face the gaggle of press that kept vigil in the second floor corridor. The summit talks had become a media event extraordinaire and the members of the Statehouse press corps, which throughout the days had gradually swelled to 50 reporters and a dozen camera crews, were a fickle lot. Latching on to one arriving or departing "summiteer," the reporters would instantly abandon him when the next one appeared. Somehow this political personality parade was a curiously fitting climax to what was essentially a human drama of leadership.

The muggy June evening contrasted sharply with the cold crisp day last February when Thompson formally began his quest for new state revenues. In his "State of the State" message he warned that "... we cannot meet our obligations next year, let alone consider restoring some prior budget cuts or preventing new and massive ones without some kind of tax increase

In his budget message a month later he outlined what came to be known as the "doomsday budget," which presupposed no new tax revenues and provided for massive cuts in education, mental health, public aid and local government revenue sharing. In that speech he also proclaimed an alternative plan for Illinois, which would incorporate new tax revenues but did not present a budget based on those revenues — a tactical judgment subjected later to lots of second-guessing by his critics.

His alternative plan called for, among other things, a permanent 60 percent increase in personal income tax (from 2 1/2 to 4 percent) and a 40 percent increase in corporate income tax (from 4 to 5.6 percent) and signaled Thompson's departure from his usual fiscally conservative stance. The plan would raise approximately $1.6 billion in annual new revenues.

The income tax had not been raised in 14 years. It was going to be a tough fight. But former prosecutor Thompson loves a tough fight, and he jumped into this one with the same gusto he usually reserves for his campaign stumping. Embarking on intensive statewide speechifying on behalf of the tax increase, he employed the technique of posing a series of rhetorical questions. "Why not a surtax?" (A: Permanent revenues needed.) "Won't the end of the recession make up for the shortfall?" (A: Illinois was last in, last out.) "Why not cut elsewhere?" (A: Where is elsewhere?) "Why not tax relief?" (A: We've given it for the last six years.)

From February through April Thompson traversed the length and breadth of the state hitting the major "media markets," talking to local editorial boards, appearing on talk shows, meeting local officials and speaking at civic and politcal dinners. He sent computer-personalized letters to educational leaders, local government officials, day care providers, arts councils and environmental groups.

Relentlessly, he struck the same themes: He warned them of the budget's dire consequences for their respective interests and urged them to contact their legislators to support the tax increase.

Meanwhile, back at the legislative ranch, the deadline for bill introduction (April 15) approached with no prospective sponsor stepping forward. It was no secret that Thompson preferred Sen. James "Pate" Philip (R-23, Elmhurst), the outspoken and conservative minority leader, as the most likely sponsor for the bill.

Senate President Philip J. Rock (D-8, Oak Park), who had himself been calling for a tax increase since January, grew impatient and in early April established the Senate Select Committee on Budget and Finance. Although the committee never formally adopted any resolutions or passed out any bill, it became a convenient classroom for senators (mostly Republicans regularly in attendance), the media and other interested observers.

On April 14 Thompson called a press conference to announce that Sen. Philip would indeed introduce his tax bill the next day. But there was another announcement. Calling it a reasonable compromise, Thompson declared that his proposed income tax would not be a permanent one — it would last for four years only. He referred to his two month trek throughout Illinois which had produced one consistent object from the citizenry: The adoption of a permanent increase will hurt the economy. Thompson said, "I don't call that giving up; I call that the legislative process at work."

On April 15, Sen. Philip, declaring "I won't vote for it yet," sponsored S.B. 1297, the Thompson four-year tax plan.

During Thompson's packaging, marketing and selling of the tax plan another series of events was occurring which ultimately was to have a profound effect on legislative passage of a tax hike. In Chicago, Harold Washington won an upset victory in the mayoral primary and subsequently gained the mayor's office by a narrow margin. He immediately was plunged into a series of squabbles — political and legal — with Alderman Edward Vrdolyak as head of a majority in the Chicago City Council. The Chicago bloc of legislators, conditioned to receiving clear signals from the mayor, became a disarrayed faction, and lent another enigmatic factor to the tax plan's eventual passage.

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Speaker Michael J. Madigan (D-30, Chicago) in late April broke his silence on the tax matter to decry the governor's lack of leadership on the tax issue and declared that all House appropriations bills, essential to fund state government for the next fiscal year, would be held in committee until the tax issue was resolved. This legislative tactic, dubbed outrageous by House Republicans, succeeded in bottling up expenditures until almost the end of the legislative session.

S.B. 1297 bypassed the normal legislative route and was given a full public hearing at an unusual Senate Committee of the Whole early in May. Gov. Thompson addressed the assembled Senate, for nearly an hour and a half. He was followed by an orchestrated parade of tax increase proponents representing education, day care, local government and law enforcement.

Several weeks of discussion and speculation followed. The respected Taxpayers' Federation of Illinois released an alternative to the Thompson plan which called for a permanent tax increase, albeit considerably lower than the governor's proposal. Speaker Madigan announced his support for some kind of new revenues. It looked close. The Senate leaders met with the governor and caucused with their own members to produce a scaled-down version of the income tax plan, which was duly amended (with no debate) to replace the original bill. This amended plan also included some income tax relief for property owners, an olive branch to collar county Republicans balking at the burden of having to vote for an increase with few goodies for suburban constituencies.

From the start there had been a muddied assumption concerning the number of Republican votes that should be donated to the votes needed for passage. Never was that more evident than on May 27, the last day for bills to leave their house of origin. After a day of intense lobbying and frenzied rumoring, S.B. 1297 (which never seemed to have had the required 30 Senate votes) was not called for a vote in the Senate and died a quiet legislative death. Philip said he had a "shaky" 10; Rock never quite promised 20.

The first of the summit meetings on the Daniels' tax plan was held in the Executive Mansion June 20. Seated at left is Gov. James R. Thompson, and clockwise around the table are: Senate Minority Leader James "Pate" Philip, House Speaker Michael J. Madigan, House Minority Leader Lee A. Daniels and Senate President Philip J. Rock.

The key Republican move came in mid-June. An abortive attempt was made to attach the tax plan to a House bill in the Senate, and that (according to Rock) "smoked out" Lee A. Daniels (R-46, Elmhurst), the sphinx-like leader of the House Republicans whose small number belied their determination. On the next day, June 16, Daniels, flanked by two of his fellow minority spokesmen, distributed copies of the House Republican Policy Committee Report, a detailed analysis calling for new revenues totaling $823 million which would be raised by imposing a temporary 18-month income tax increase. Incredibly, nearly five months after Thompson unveiled his tax plan, this was the first serious alternative proposed by a legislator. It was to thrust Lee Daniels onto centerstage.

Thompson immediately called the four legislative leaders to meet at a summit which began the following Monday. Daniels' plan was from the start the focus of the leaders' negotiating, and when the idea of a sales tax began surfacing around the fifth day, it was left to Daniels' staff to produce the supplemental report which outlined that idea and ultimately became part of the final product. Calling for an 18-month 20 percent increase in the income tax, the new plan permanently added (effective January 1, 1984) 1 cent to the sales tax and eliminated the 2 cents sales tax on food and drugs. Although it was a drastically reduced version of the original Thompson proposal, it became the best he was going to get. So, admitting that he was putting his "personal opinions aside," he announced June 28 that the Daniels' plan would be amended onto a convenient vehicle bill (H.B. 1407), which was almost used a few weeks earlier.

It remained for Speaker Madigan to negotiate with legislators loyal to Mayor Washington who opposed the plan (Rep. Carol Moseley Braun called it "a complete and total disaster for the people of the city of Chicago and for the poor of the state of Illinois.") and to give the city funds from a corporate tax credit delay. And business got its break in an exemption to the sales tax for machinery parts. But the core of the Daniels' plan remained; final price tag was set at $963 million. When the press descended upon him as he arrived for the final summit June 29, he was all smiles.

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It remained for the legislative leaders to guarantee enough votes for the tax bill and to negotiate a final package of appropriations. A few hastily called party caucuses provided a little suspense, but on the final evening, it was apparent that the leaders had done their dealing quite well. On the night of June 30, the vote was taken. In the House, it was 63-55 (23 Republicans and 40 Democrats voted "aye") and in the Senate, a razor margin 30-29 (11 Republicans and 19 Democrats voted "aye"). The bill was passed to become effective immediately with the governor's signature. Playing out the denouement, first in the House and then in the Senate, legislators had risen one by one to explain their votes on the tax bill. Some thought it was too much, some too little.

Ultimately, the pivotal votes came from those who were deeply committed to adequate funding and, in the words of Sen. Rock, the doomsday budget was the only alternative.

It will take months, maybe years, to assess the political fallout of the tax increase. The legislative leaders seem to have enhanced their careers. The governor's political future is harder to assess. After the increase was passed, he was asked the two questions which continue to dog him: "Why didn't you campaign for increases last fall? Why did you wait until after the election to announce a shortfall?" Thompson smiled patiently and gave his routine answer: The need for new revenues did not surface until late October. Perhaps he might have preferred to answer: "It was the only game in town."

On special assignment with Illinois Issues, Joan A. Parker of Sangarnon State University's Legislative Studies Center has followed the tax increase proposals throughout the legislative session. A complete report will be forthcoming.

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