Illinois' path offers lesson

[muon2]

Let me offer a number of observations.

On the tax hike - The apparently low rate of 3% also has virtually no deductions. I checked a few years ago and I would have paid less income tax in MO at 6.5% than in IL at 3%. Deductions matter and are rarely factored into rate comparisons. On the corporate side the rate was raised to 9.5% making it one of the highest in the US. Also a number of routine deductions like R&D and net operating loss were eliminated with the hike, but were reinstated in Dec as their impact was showing up in a clear loss of business from the state.

On the spending - Last year there was a major bipartisan Medicaid reform act in IL, which addressed the fact that IL offers more optional services than almost any other state. However, the administration has implemented very little of the reform. Official estimates put the potential savings at 1-1.5 G$.

On the article - It has some problems. The FY 12 budget used a conservative revenue forecast, and should have been balanced, but there are other factors than what is reported in the OP link. The biggest change was that the state was no longer bound to the 30 Medicaid payment cycle that was a requirement of the federal stimulus package. That's why doctor's don't know when they'll be paid because they are now in line with all the other vendors of the state (which includes local governments like schools). By spending less on federally reimbursable programs like Medicaid, the federal revenue is down by 500 M$, and that is about the extent of this year's budget shortfall. In any case a balanced operating budget does not include liabilities. The 8 G$ carryover from FY 2011 is one such liability and it was to have been reduced by any extra revenue received, but the federal shortfall has eliminated that possibility.

However, I would agree with the article that IL is not the model to follow. Snowguy is right when he suggests a modified WI model that includes an up front invitation to the stakeholders would be much better.