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Where do your tax dollars go?

 tax dollars

Where the money goes

Where does Illinois spend its money? The biggest piece of our spending goes to pre-school to high school education. That’s $7.4 billion. This is the only part of the budget that was actually passed by the general assembly and signed by the governor.

Next is Medicaid at $7.2 billion to match federal funding.

$6.9 billion is spent on pensions for teachers outside Chicago, university employees and state workers. The overwhelming majority of that is catching up on decades of underfunding.

Then there’s the rest of state government.

All the state salaries combined cost $3.2 billion. We have the second lowest ratio of state workers to population in the country. This means you could fire every state employee and still not solve our budget problems. You would, however, create some major problems when all the prison guards and state police no longer have jobs.

Second, you see higher education on here at $700 million. That’s the total the state provided last year for all of our public universities and community colleges combined. That money ran out Jan. 1.

Filling in the rest of the pie are things like: debt service and the all-important revenue sharing with local governments.

Add up all those slices, you’re at $34.4 billion in spending.

Where the money comes from

Where does Illinois get its money? In the current budget year, Illinois will collect a little more than $31 billion to support state spending.

The biggest chunk comes from the state personal income tax.

Our current income tax rate, is 3.75 percent. It is a flat tax. You all remember that the tax rate temporarily increased to 5 percent from January 1, 2011, through December 31, 2014. It then dropped to 3.75 percent at the start of 2015.

The second biggest source of funding is the state sales. The state sales tax rate is 6.25 percent, though, local governments can and do add on to that.

The sales tax in Illinois is applied to things, not services. In other words, if you get a new muffler, you pay sales tax on the new muffler but not the service to install it. That makes us unique. All of our neighboring states tax services.

Combined, the state income and sales tax provide nearly 70 percent of the money for the state budget.

Other sources include …

-- the corporate income tax, which is at 5 percent.

-- federal funding to match state Medicaid spending

-- and the “other” is things like casino taxes and public utility taxes.

Ok, undoubtedly, many of you have done the math and figured out there’s a $3 billion gap between revenues and spending.

Here’s a key point to remember.

Out of all this spending, the only part of it that lawmakers and the governor agreed on was the budget to keep public schools open. All this other spending is legally required regardless of lawmakers and the governor have agreed to a budget.

Right now, the judiciary has authorized more state spending than the governor.

This is the result of past lawsuits over whether the state is respecting and protecting the rights and needs of people with disabilities, children who are wards of the state and so on.

To settle those cases, the state agreed to maintain certain levels of service. That requires certain levels of spending.

This autopilot spending has prevented a full-blown government shutdown even as the state has gone nearly two years without a full budget.

But it has also resulted in the state spending far more money than it actually has. Billions of dollars in overspending, all of which sends the backlog of overdue bills soaring.

Our budget problems, however, don’t end there.

Total spending pressures for FY17

As mentioned previously, the state provided $700 million and it ran out January 1. The problem is the budget for higher education is usually around $1.8 billion a year. So, they realistically need roughly $1.1 million, and that’s just to hold the line on what higher education spending was three years ago.

Schools are already cutting degrees and laying off staff.

You see added pressures from group insurance. That’s the health care costs for state workers and their families. The budget contains zero dollars for that. Employees are paying their premiums. The state is incurring the debts from doctors and hospitals.

The state simply stopped contributing to the insurance fund. We know the cost. It’s about $1.8 billion a year. We have a legal responsibility to pay it. But there’s no budget, so that all gets dumped into the backlog of bills to be paid later.

Human Services. These are things like domestic violence shelters and cancer screenings for low-income women. These vital services, so far, haven’t been covered by court orders.

Gov. Bruce Rauner’s administration continues to sign contracts with human service providers even though there’s no legal authority to pay the bills, and even if there were, the state doesn’t have enough money.

All this pushes the deficit in our current budget closer to $7.3 billion and ultimately sends the backlog of bills soaring.

The stack recently hit an all-time high: 13 billion, 154 thousand, 828 dollars and 91 cents.

Unpaid bill backlog (2016 - 2022 est.)The $13 billion backlog of overdue bills will keep growing. By Election Day next year, the backlog will likely top $24 billion and continue rising. And by Election Day next year, we’ll probably have been downgraded to junk status and it will be nearly impossible to borrow money and politically impossible to raise the taxes needed to fill the gap.

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Where your tax dollars go