Madigan's tax increase for education, local government

By MICHAEL D. KLEMENS

For two years House Speaker Michael J. Madigan (D-30, Chicago) had stood in opposition to Gov. James R.Thompson's efforts to boost income taxes. Countless summit meetings with Thompson and the other legislative leaders had left Madigan unmoved. He endured withering editorial criticism without changing his refrain: "I am unconvinced of the need for a tax increase."

All that changed dramatically in six hours on May 17. Madigan proposed a $781 million income tax increase (18.4 percent) at 9:30 a.m., amended it to an existing bill and, with 60 Democratic votes, passed it out of the House at 3:30 p.m. "It was a piece of work," a shell-shocked House Republican said afterwards.

The Madigan plan would close the Chicago city budget gap and give Chicago schools money for teacher negotiations. The plan would ease pressure on Madigan's members from hard-pressed down-state public schools and public universities. But Madigan's plan overlooked most Republican concerns. It ignored Senate GOP conditions for a tax hike — school aid formula overhaul, property tax relief and business climate improvements. Most significantly, it gave Thompson and his Republican allies no new money to spend.

The Madigan plan provides a two-year income tax increase — he called it a surcharge — of .46 percent in the personal income tax rate and of .736 percent in the corporate income tax rate, raising the rates, respectively, to 2.96 percent and 4.736 percent. When the increase expires on July 1, 1991, lawmakers should review its effectiveness, Madigan said. Nonrenewal, as happened with the 1983 temporary income tax, would create a hole in school and local government budgets.

The higher tax will raise $781 million in new money next year, of which $55 million will be spent to pay refunds. The remaining $726 million would be evenly divided between education and local governments. Elementary and secondary education would get $257 million, and higher education would get $106 million. Local governments would get $363 million, twice what they now receive.

By design, the money for local governments would largely close Chicago's $100 million budget gap. Programs that help only Chicago garner little support from downstate legislators, but the per capita distribution formula would automatically provide more money to every city, village and county government. At just over $31 per resident, yields from those increases would include: $1.3 million to Quincy, $2.5 million to Naperville, $538,000 to Mount Vernon and $1.7 million to East St. Louis. County governments get money for residents living in unincorporated areas. That would yield $3.8 million for Cook County, $3.1 for DuPage County and $78,000 for Putnam County.

On the education side the plan provides $75 million in new money for Chicago public schools. Again, the initiative does not stop at Chicago; every district gets more money. Total elementary and secondary education funding will increase $257 million on top of the $215 million increase proposed by Thompson, for a $472 million total increase. The Madigan plan would boost higher education funding by $106 million. As in the case of public schools this is on top of a $129 million increase proposed by Thompson.

Madigan introduced the plan as a way to deal with pressing needs of schools and local governments, while holding the line on state operations. "I am not changing my position over the last two years that there is no need for a general state tax increase for general state government," Madigan declared. The money going to local governments could be used by them for mental health, transportation, infrastructure, human services, or for property tax relief, Madigan suggested.

Madigan's plan was crafted to deny Thompson the ability to spend new money. "I don't trust the Thompson administration . . . .

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I've had too much experience with them in terms of misrepresentations, inadequacies and inefficiencies," Madigan said.

Senate President Philip J. Rock (D-8, Oak Park), who had endorsed Thompson's call for a 40 percent tax increase, embraced the Madigan proposal. "It's been a little lonely out there on the limb.'' He pledged to work for passage but said he thought it would need Republican votes. When the vote was called in the House, Minority Leader Lee A. Daniels (R-46, Elmhurst) attacked Madigan and counseled delay: "How was the Speaker converted? Who will stand and say I was a witness to his conversion and I know he will remain among his new brethren. There are too many questions. We should not be stampeded by this convert."

But Daniels was the only Republican to speak; his members sat silent. That prompted Rep. John Matijevich (D-61, Waukegan) to charge, "It's silent because you know we're right." But at least some of Madigan's support was lukewarm. Rep. Arthur L. Turner (D-18, Chicago) questioned the $94 million Chicago windfall: "I can't help but think in the back of my mind that it was a change in administration that brings this before us today."

Gov. Thompson, after meeting with Madigan, Rock, Daniels and Senate Minority Leader James "Pate" Philip (R-23, Wood Dale), declined to endorse Madigan's plan. Thompson questioned the temporary nature of the increase, the failure to include property tax relief and the lack of new human service funding.

The question then moved to the Senate where it can percolate until the Revenue Committee meets on the question May 30. In the meantime senators got to listen to their hometown mayors and school officials back home, who had been supplied, by Madigan, with their shares of the Madigan plan. Rock predicted passage because, "It's the right thing to do." Senate Minority Leaders Philip characterized it as a "Chicago bailout," but acknowledged he could lose at least one Republican.

Madigan's May 17 effort was breathtaking. Rock may be able to pass the measure with little Republican support. But it won't become law until Thompson signs it, and when he does he gets a crack with the amendatory veto pen. Could a temporary 18.4 percent increase become a permanent 40 percent hike?

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