Thompson outlines the the bad, but not the ugly

By MICHAEL D. KLEMENS

Gov. James R. Thompson stood before Illinois lawmakers and the public for 41 minutes on February 1 telling them where Illinois is and where it is headed. His State of the State message outlined the good — the state's belated return to economic growth that parallels the country's. Thompson touched on the bad — the failure of the General Assembly to invest in education and human services. He avoided the ugly — a direct challenge to lawmakers to hike taxes.

Some heard in the softening of the Thompson's rhetoric the opportunity to break the two-year stalemate over an income tax increase. Others heard in the speech a governor running for reelection. Politically, Illinois remains a state uncertain whether it should move into the future with or without higher spending. It is a state divided.

Thompson's address had three parts. In the first he detailed why Illinois is a robust and healthy state:

• "Total employment climbed to 5,408,000 in 1988, a record high for the fourth consecutive year."
• "As the home to six of the top 50 U.S. exporters, our Illinois exports, increased by nearly 30 percent in 1988."
• "In the last fiscal year we've helped train and retrain nearly 200,000 Illinoisans, at the legendary giants like Deere, Case, Caterpillar, Ford, Chrysler and Motorola, and at hundreds of small businesses throughout the state."

The second part of Thompson's message detailed what might have been:

• "My optimism is tempered only by the knowledge that we could have done more by investing more in ourselves sooner, and we still should."
• "I still stand ready to sign a modest increase in the lowest income tax in the nation — the Illinois income tax. Without it we will see local property go through the roof or public education education pounded into the ground."
• "These issues cannot be resolved without a coming together of the leadership of this General Assembly. When that happens, we can move forward."

The third part of Thompson's address included drug, education and business development initiatives and the taxes to pay for them. Thompson proposed to increase the state tax on cigarettes from 20 to 38 cents per pack, generating $170 million next fiscal year. A 20 percent tax on cigars, chewing tobacco, snuff and smoking tobacco, would yield another $10 million.

In the first year some money would be divided between education and new initiatives. Public schools would get $65 million. Another $10 million would be spent to improve the math and science instruction in schools. Public colleges and universities would get $15 million and the state would cover the $5 million annula cost of administering a program of federal loans for college and university tuition.

Drug abuse comes in for $50 million in new spending. Thompson would spend $19 million on enforcement programs that include making teams of dogs available to sniff out drugs in schools, criminalizing possession and delivery of steroids for nonmedical purposes and developing standards for "drugged driving." For prevention Thompson would spend $14 million to run a "Drug-Free Illinois" campaign and to provide incentive money to communities for local programs. He would expand teacher training and the training given examiners at the Department of Financial Institutions to help them identify drug money laundering in banks, credit unions, currency exchanges, and

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savings and loan institutions.

Finally Thompson would spend an extra $17 million on treatment by expanding programs for intravenous drug users, creating programs for females and pregnant addicts, creating new outpatient programs and expanding mandatory treatment for drug related offenses.

The final third of Thompson's initiatives involved making state businesses more competitive in high tech fields. A key portion would pay $20 million a year into a challenge fund that would leverage private and federal research and development funds. Other programs would bolster spending in science, engineering and technology at Illinois universities and upgrade the teaching of mathematics and science in elementary and secondary schools.

Thompson selected the new tax carefully. The day before his speech some advisers anticipated that he would pay for his $180 million per year initiative with a combination of sin taxes. Instead, at the last minute he dropped the liquor tax increase in favor of a higher cigarette tax. One of those advising him to do so was Sen. Minority Leader James "Pate" Philip (R-23, Wood Dale), who recalled his counsel: "Those liquor guys are powerful and have a hell of a lot of influence. The tobacco guys quite frankly are not, and the combination of those two, you're going to lose them both.

Reaction by legislative leaders to the State of the State reflected their positions on a tax increase last year. The republicans who were pressed by the governor for support and pressured by their members to avoid a vote, found cause for relief. House Minority Leader Lee A. Daniels (R-46, Elmhurst) reacted favorably: "It would take off the pressure for an income tax increase, and I think consequently many people will be receptive to it." Across the rotunda Sen. Philip said that Thompson helped his cause by spending money for education, fighting drug abuse and helping business. "He's been smart enough to pick three areas to put it in that most guys would say we ought to do."

Senate President Philip J. Rock (D-8, Oak Park), Thompson's staunchest tax increase supporter for two years, predicted approval of the cigarette taxes — he compared them to user fees — but found the overall message bland: "I was a little

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underwhelmed." Rock says that support for a tax increase will have to build from the grass roots up, instead of from the governor down.

Nor was the chief opponent to a tax increase for two years overwhelmed. House Speaker Michael J. Madigan (D-30, Chicago) pledged only to consider the proposals and suggested that citizens be wary of an income tax increase: "Quite clearly Mr. Thompson is a tax and spend governor. He wants to approach all governmental problems in terms of imposing taxes."

Thompson says that the first week's reaction to his speech was favorable: "I've heard no real opposition to either the tax or the spending priorities." After two years of leading the charge for a higher income tax, Thompson has dropped back until he gets the commitment of the new mayor of Chicago and Madigan.

Some see retreat in Thompson's decision not to renew his drive for an income tax. Deputy Gov. James R. Reilly, an architect of the unsuccessful 1987 and 1988 efforts, disputes that. Reilly maintains that Thompson articulated the need for an income tax increase and offered to carry one forward. Reilly says the governor has already won the issue of convincing people that income taxes should be increased, but has been unable to convince lawmakers to hike them. "The political equation is the one we haven't been able to solve," he says.

In the past the solution to the political equation has involved a Democratic Chicago mayor working with a Republican governor to round up the votes. One scenario for breaking the current tax hike gridlock says that the mayor elected on April 4 must pressure Chicago legislators to push for the tax increase. But there is a new variable this year. Whoever wins the mayor's seat must move cautiously because he must run again in 1991.

Reilly acknowledges that difficulty but says that a new mayor faced with a need for cash who must choose between a property tax and a state income tax hike, could find the state tax boost preferable. In the interim, Reilly says that the cigarette tax alternative allows state government to move ahead with some new programs and not become fixated on the tax hike battle as it has for the last two years.

Thompson says that if there is a key to breaking the deadlock on the tax issue, it is the mayor of Chicago. Meanwhile, the governor calls it "foolish to string out Republicans" on the tax increase given Madigan's intransigence. And he says those who advocate human service programs must come forward: "We're just not going to take any more hypocrisy from these liberals, who won't stand up to Madigan."

Four days after his State of the State address Thompson outlined how, with $100 million in new money from the cigarette tax increase, he would increase spending for education by 8.2 percent. That is a bigger increase than schools and universities have seen for the last two years, but is less than half of what they requested for next year. Publicly, educators praised the governor but also called attention to unmet needs. "The downward spiral in state funding for higher education will be halted, but the major state investment in education required for the future of Illinois will not have been made," Richard D. Wagner, executive director of the Illinois Board of Higher Education, said afterwards. Privately, educators fretted that Thompson had set the ceiling for state spending for education and that lawmakers would now work to construct a budget to provide that much money for schools and universities, with or without any tax increase.

More money for schools and universities enjoys at least some public support, but lawmakers have rebuffed educators' pleas for higher taxes. Madigan's allies have labeled them a special interest that has been ineffective in rallying substantial public support. On the other hand, one Republican insider suggests that the teachers' unions are largely responsible for the Democratic majorities in the General Assembly: "They elected the Democratic majorities, let them pass the tax."

Some view Thompson's speech as an accommodation to the political standoff. His political adversaries see it as a campaign speech. Gary J. LaPaille, Speaker Madigan's chief of staff, believes that Thompson's political handlers and media consultants had warned him to cleanse his tax increase image if he wanted to run again. "I think the Thompson Governor's Office is now in the campaign mode," LaPaille says.

LaPaille maintains that despite newspaper and special interest group support, most citizens oppose a tax increase. He points to the presidential election results as proof of the underlying sentiments. And LaPaille believes that Thompson is just coming to recognize that Madigan's antitax position was the correct one. LaPaille predicts that between now and when he must decide whether to seek reelection, Thompson will monitor job approval ratings.

As for Thompson's proposals, LaPaille says that he expects plenty of questions from House Democrats. He suggests that new money should first go to existing programs that are unfunded or underfunded. LaPaille anticipates close scrutiny of proposed increases in the Department of Commerce and Community Affairs spending, because he says the key people there are from the political not the business world.

The obvious hurdle to a tax increase is Democratic reluctance to provide Thompson the money to start programs and hire people, particularly when they think he may run for reelection again. It takes lawmakers and the governor to raise taxes. But the governor has the bigger say in how the money is spent.

For rank-and-file lawmakers the dilemma is real, not simply a showdown between political heavyweights Thompson and Madigan. Two downstate lawmakers illustrate legislative wariness in hiking taxes. A Democrat with state facilities in his district sees in a tax increase more workers at those facilities. On one hand that is more jobs and employment for his district. On the other it is more political workers for and contributions to his challenger. A Republican who survived a campaign where the Democratic challenger tied him to Thompson's tax plan knows that his school districts need help but says that he must move cautiously on the tax increase question.

The two-year deadlock on taxes has been significant, but not historic. Lt. Gov. George H. Ryan says it pales before the confrontations between Gov. Dan Walker and the General Assembly. But Ryan quickly adds that the issue has been a good one for Madigan and his members: "They sound like Republicans. If Dukakis sounded more like a Republican, maybe he would have been elected."

Thompson told part of the story on February 1 when he described a state on the mend economically. Politically Illinois remains a state divided.

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