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Two different states, two different budgets

Posted by Kevin Fischer on Jan. 19, 2012

The following appears in the latest edition of the Wisconsin Conservative Digest and is re-printed here with permission of the publisher.

Two different states, two different budgets
By state Representative Dan Knodl
24th Assembly District

I noted with interest a recent Chicago Tribune article entitled, “Illinois budget deficit to hit $8 billion despite tax increase." As I read the article, I could not help but to think of the dramatically different way in which our two states addressed our budget deficits – and how the results can teach us lasting lessons in budgeting and public policy.

I’ve spoken at great length in recent months about the measures we took here in Wisconsin in order to balance a budget with a $3.6 billion deficit. We did it through controlling spending and setting priorities. In addition, we made important reforms that allow state and local units of government more flexibility in addressing budget crises–and we did it all without raising taxes. They were not easy decisions, but they were absolutely necessary in order to get our budget out of its perpetual state of chaos and imbalance.

Now, when I see how Illinois is handling its own budget crisis, I see a lot of similarities between what legislators and the governor are doing there and what we used to do here. As you may recall, our previousl, our previous administration raised taxes under the 2009-11 state budget by $2 billion, with much of that total coming down on job creators. Additional policies were enacted that some experts estimated would cost Wisconsin $1 billion in higher property taxes.

These tax hikes had two major consequences. First, they caused a great number of businesses and jobs to flee Wisconsin. Second, they did nothing to address our ongoing budget crisis. By listening to their rhetoric, you would have thought all of those tax increases would have solved all of our problems going forward, but they didn’t. Higher taxes made the problem worse–and from that came the $3.6 billion deficit we were forced to deal with earlier this year.

That is why I’m mystified at Illinois’ desire to continue down that same path. Earlier this year, that state raised taxes on both individuals and businesses. Lawmakers in the Land of Lincoln raised their individual income tax from three percent to five percent, a 66 percent overall increase. Similarly, they raised raised their corporate tax from 7.3 percent to 9.5 percent, now the fourth-highest state corporate income tax rate in America.

What was the result? Illinois’ state budget, just months after these new taxes were approved, is now in the red by $8.3 billion. According to the Chicago Tribune article, “The majority of that money, roughly $5.5 billion, will come in the form of unpaid bills from companies that provide everything from meals for the elderly to toilet paper for prisoners. Another $1.2 billion is composed of Medicaid payments the state will push off until the next budget year, while the remaining $1.6 billion is owed to companies for tax returns and health insurance bills for state workers.” Sound familiar?

Meanwhile, with a solvent state budget of our own, we continue to hear about local municipalities and school districts here in Wisconsin who are resolving budget crises. Because of our needed reforms, some are even reducing their property tax levies, providing needed relief to financially-strapped taxpayers.

The changes we’ve enacted in Wisconsin have, without a doubt, been controversial. But there is no question that they were needed and that they solved a large state problem. To confirm that we did the right things, all we need to do is look to our neighbors to the south.

To contact Knodl with questions or comments or to sign up for regular e-updates, send an e-mail:
Rep.Knodl@legis.wi.gov or call (608) 266-3796.

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