Legislative Action

House Revenue Committee: the gatekeeper

By MICHAEL D. KLEMENS

On March 18 Rep. Richard J. Mautino (D-74, Spring Valley) brought the House Revenue Committee a bill to eliminate state taxes on energy used in manufacturing. Mautino used all the "right" arguments. He said the bill was needed to keep Illinois manufacturers "competitive" with those in other states. "You can put us on the same playing field as those states that are trying to raid us," Mautino said. Business groups called it a "jobs bill." Witnesses from steel mills and food processors told the utility tax subcommittee that the bill would eliminate double taxation, since their final products were again taxed.

Mautino's bill is not unlike a host of other recent tax relief measures handed out by state government and themselves open to debate. House Speaker Michael J. Madigan (D-30, Chicago) is complaining about $4.3 billion in lost state revenues since 1983, while Gov. James R. Thompson is touting $3.7 billion in tax relief given during his administration. Although the numbers do not agree, both legislators and the governor agreed when the breaks were passed. In the 84th General Assembly Rep. James F. Keane's (D-28, Chicago) House Revenue Committee moved to slow such breaks, and in the first months of the 85th it has been downright stingy. The issue of revenue loss and Thompson's $1.1 billion tax increase has even spurred talk of establishing a state tax policy.

Mautino's bill carried a hefty price tag. Keane called estimates of a $140 million annual loss in state utility and sales tax revenues a "big hit." Mautino got Republican votes in subcommittee, but got none from his fellow Democrats. On a two-to-two vote the measure was held in subcommittee. Mautino suggested the measure may have passed had a third Democrat been present. Not so, Keane assured him. The committees have premeetings to prevent such surprises, he said later.

But Mautino praised the committee, before and after his reversal. The independent western Illinois Democrat described Keane as "knowledgeable, conscientious and fair." Mautino said afterwards he was satsified to have gotten nearly all the subcommittee's 45 minutes. The panel agreed to continue to post his bill so he can try again to move it out later. Mautino, who said he understood the committee's reluctance to reduce state revenues, insisted the issue is not lost. "The bill is not dead for this session."

Keane says Mautino's bill is one that in earlier years would have cleared the Revenue Committee, sailed through the General Assembly and been signed into law by the governor. Once a bill leaves the committee it is apt to get approved whether or not the state can afford it, Keane says. If you get a bill on the floor to help little old ladies with hepatitis, it is going to pass, Keane says. Last year's sales tax exemption for coal mining equipment, a $4 million drain on state revenues, illustrates the phenomenon, he says.

Actually the title Revenue Committee is something of a misnomer, because the panel considers far more revenue reductions than increases. Keane traces the precedent to the pre-recession period in the late 1970s when economic growth was healthy and Illinois had more revenues than it needed. "Everybody came in and got a lot of tax breaks. That was fine. That was fitting. But that started a process," Keane says.

When he took over the chairmanship two years ago, Keane began to put the brakes on the breaks. The committee has passed out fewer bills, put them out later and guarded those it puts out to limit floor amendments. Keane now asks sponsors to pledge to resist amendments that could allow bills to be used for other tax relief purposes. To limit the number of bills floating around, ripe for amendment, the committee gathers procedural questions into one or two committee bills.

When a bill arrives at the committee it is first assigned to one of four standing subcommittees: income, property, bingo/ lottery and sales/utility/excise taxes. It must pass both the subcommittee and the full committee. The subcommittees allow members to develop expertise, Keane says, and they work. "We do kill bills. We're trying to get some sense to what we do put out."

Such use of subcommittees is not universally applauded. Rep. David Harris (R-53, Arlington Heights) says to properly use subcommittees the General Assembly needs more staff and legislators require more time. "I think from a partisan point of view, it's much too easy to kill a bill in subcommittee.

Douglas L. Whitley, president of the Taxpayers' Federation of Illinois, has heard such criticism, but he thinks the committee should be tight fisted with revenue reductions and believes Keane's panel does a good job. "It's easy to give away tax breaks and later take the heat for having to raise taxes." he says. "The committee has been used quite successfully to bottle up a lot of bills."

This year it will be event tougher to get out of committee bills like Mautino's that deplete state revenues. As of March 27 legislation that would have trimmed state revenues a whopping $2.5 billion remained in committee. The mere introduction of the bills was cited by one observer as evidence of "legislators' irresponsibility." And most if not all the bills stay in committee. "It's basically stupid to give tax relief when you're talking about having to increase taxes," Keane says. If needed, he suggests, adjustments can be made next year. "If some miracle occurs and the governor is able to pass an income tax increase and Illinois is awash in money, we can make adjustments then."

Actually the title Revenue Committee is
something of a misnomer, because the panel considers
far more revenue reductions than increases

It is not that the bills bottled up have no sympathetic ears on the committee. Rep. William "Bill" Shaw (D-34, Chicago) wants to remove from state tax rolls low-income persons who under federal tax reform no longer have to file federal income tax returns. The measure would trim state revenues $70 million to $75 million, and Rep. Anthony L. Young (D-17, Chicago), chairman of the income tax subcommittee, sees both merit in Shaw's idea and a need to hold the line on revenue reductions. "I guess the idea is to try not to grant any new exemptions," he says. Keane sees benefit, too. Shaw's proposal would ease enforcement problems and prevent persons from unknowingly violating the law. Still, the best the state can hope to do, Keane and Yound say, is to phase in the breaks, "I don't think we can do it right off, Keanne adds.

24/May 1987/Illinois Issues

Besides playing gatekeeper to tax reductions, the committee this year gets to tangle with Gov. James R. Thompson's tax increase package. Rep. Barbara Flynn Currie (D-26, Chicago) a veteran and former Revenue Committee vice chairman. says any input is complicated by Illinois politics and the notion that support from both parties is needed to raise taxes. "The political jockeying for place tends to be a much more important part. That undercuts the value of a hardworking committee looking at this issue in a nonpartisan way," she says

'Clearly revenues are not the problem.
Clearly we're spending more than anybody's estimates of
revenues,' Mandeville says

Keane would like to change that this year, and Speaker Michael J. Madigan has given initial indications that he will rely more on his committees. Hours before Thompson delivered his budget message, Madigan criticized the tax hike proposal as "the second failure of the administration's existing system of budget making and revenue forecasting." The speaker charged the committee to work with the two appropriations committees to determine how the state had gotten where it stands today. "Assume the repeal of tax breaks is just as viable as any tax increases that may be proposed," Madigan said.

Robert L. Mandeville, director of the Bureau of the Budget, says his revenue estimates require no defense. "Clearly revenues are not the problem. Clearly we're spending more than anybody's estimates of revenues." Mandeville says. He notes that spending must be approved by lawmakers, but adds. "I would even defend the higher spending. The education increases were important."

To fulfill Madigan's charge the Revenue Committee has held hearings on issues like erosion of the tax base. And the committee is meeting jointly with the Appropriations and Transportation committees to review the state's fiscal situation.

By June, when legislative leaders will begin meeting to hammer out a tax increase package, Keane would like to have developed position papers indicating where Illinois stands. "Right know I think a lot of people have different views of where the state is on revenue and spending," Keane says. His example: Business feels overburdened and wants low rates to encourage expansion, while bureaucrats want to spend money to move Illinois to the cutting edge with new programs.

That review should allow the committee to determine whether the state can get by without a tax increase, as the Democratic legislature gets set to confront the Republican governor's second consecutive post-election tax hike. "The only two songs Thompson can sing are education and mental health, especially after he just pulled his second flimflam," Keane says. And the committee review should give Madigan the information he needs to conduct year-end tax increase negotiations. "I think he wants to go into the meetings armed with information, so that he's not at the mercy of the Bureau of the Budget's allegations. It's very difficult to be confident of the governor's projections or revenue and spending because of his track record. I don't think their product is very believable and they're becoming less believable," Keane says.

The review is not something Keane believes can be completed this spring but will have to extend into the fall and next year. One issue Keane would like the committee to tackle is revision of the state sales tax. He would like his committee to consider recommendations by Whitley's Revenue Review Committee to enact a statewide sales tax on a common base. Such a tax would be collected by the state and returned to local governments under a revenue sharing formula.

A yet longer range goal is establishment of a state tax policy. "We've never really looked at the whole tax structure. We need to get a handle on what we're doing and why we're doing it," Keane says. The closest thing to an overall policy is a sense that the individual income tax return should be kep simple. "Quite often taxes are levied on those that are least likely to scream."

The policy, to which future tax revisions could be held up, would address things like who should pay taxes and why, what types of fiscal growth the state should encourage, what segments of the state deserve preferential tax treatment and what the tax burden should be. "It's a dream, but hopefully that's something we could begin to address now. I've never heard a bill killed here because someone said, 'That's not good tax policy.' "

Rep. Robert W. Churchill (R-62, Antioch), a minority whip and Revenue Committee veteran, sees the move into policy issues as a reflection of the maturation of both Keane and his committee. "If we can operate as a policy committee, we ought to try and accomplish that," he says. To do so will require some independence from Madigan, something Churchill says he is not convinced exists.

Keane and his committee have sidetracked tax reductions. They may have something to say about a tax increase this year. But is Illinois ready for good tax policy? Keane insists the state is a $22-billion-a-year operation and has to be.

May 1987/Illinois Issues/25