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© Center for Tax and Budget Accountability 2008 1 CENTER FOR TAX AND BUDGET ACCOUNTABILITY 70 E. Lake Street Suite 1700 Chicago, Illinois 60601 direct:

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1 © Center for Tax and Budget Accountability 2008 1 CENTER FOR TAX AND BUDGET ACCOUNTABILITY 70 E. Lake Street Suite 1700 Chicago, Illinois 60601 direct: 312.332.1049 Email: rmartire@ctbaonline.orgrmartire@ctbaonline.org 2008 Legal Aid Conference For: Thursday, November 13, 2008; 1:30 pm Renaissance Chicago Hotel 1 West Wacker Drive Chicago, IL Presented by: Ralph Martire Executive Director

2 © Center for Tax and Budget Accountability 2008 2 Fed Shapshot Pre-Meltdown TOTAL FED #’S 2007 Actual 2008 Estimated 2009 projected GDP$13.668 T$14.312 T (+5%) $15.027 T (+5%) 2007 Actual 2008 Enacted 2009 projected Total Fed Budget $2.730 T$2.931 T (+7%) $3.107 T (+6%) Disc Fed Budget $880 B$9.41.4 B (+7%) $987.6 B (+5%)

3 © Center for Tax and Budget Accountability 2008 3 Pre-Bailout/Meltdown 2007 Actual 2008 Projected 2009 Estimated Revenue2.568 T$2.521 T (-2%) $2.7T (+7%) Deficit (they report, that is) -$162 B-$410 B-$407 B Real, On- Budget Deficit -$343 B-$602 B-$611 B FED #’S How’s that Work……

4 © Center for Tax and Budget Accountability 2008 4 2007 Actual 2008 Enacted 2009 Requested/ projected Social Security Expenditures $581 B$610 B$644 B Social Security Revenue $869 B$910 B$949 B Social Security SURPLUS! +$288 B+$300 B+$305 B SOCIAL SECURITY !

5 © Center for Tax and Budget Accountability 2008 5 2007 Actual 2008 Enacted 2009 Requested Medicare$371 B$391 B$408 B Medicaid + SCHIP $197 B$211 B$224 B Interest on Fed Debt $237 B$244 B$260 B TOTAL FED DEBT $8.966 T$9.629 T$10.388 T OTHER MANDATORY BUDGET ITEMS OF NOTE

6 © Center for Tax and Budget Accountability 2008 6 2007 Actual 2008 Enacted2009 Requested TOTAL$880 B$941.4 B (+7%)$987.6 (+5%) Defense + HLS $441.4 B (50.2%) $514.4 B (+17%) (55%) $553 B (+8%) (56%) Education$54.4 B$57.2 B$59.2 B HHS$69.1 B$71.9 B$70.4 B HUD$33.6 B$37.4 B$38.5 B EPA$7.3 B$7.5 B$7.1 B Priorities?$164.4 B (18.6%) $174 B (+5%) (18.4%) $175.2 B (.6%) (17.7%) DISC. BREAKDOWN

7 © Center for Tax and Budget Accountability 2008 7 2007 Actual 2008 Enacted WOT$173 b$197.5 b Hurricane Relief $7.7 B$5.9 B Veterans$1.8 B$3.7 B Border Security $9.3 B$5.4 B NEW TOTAL$1.070 T$1.148 T Defense $$625.5 (58%) $721 (63%) SUPPLEMENTALS

8 © Center for Tax and Budget Accountability 2008 8 BIG ‘N RICH In 2007, Illinois ranked fifth nationally with a Gross State Product in excess of $609 billion. That would be the 27 th largest economy of any nation in the world- greater than Egypt, Saudi Arabia, Colombia, Belgium, Sweden, Greece, Ireland, Portugal, Norway and Nigeria, to name a few. ILLINOIS’ ECONOMY IS LARGE

9 © Center for Tax and Budget Accountability 2008 9 Illinois GDP Growth Lags THE ILLINOIS ECONOMY Source: Bureau of Economic Analysis, US Dept. of Commerce

10 © Center for Tax and Budget Accountability 2008 10 Between 1990 and 2008, Illinois lost 27% - 249,000 - of its manufacturing industry jobs. This loss was worse than both the Midwest (-23.2%) and the Nation (-23.9%). MANUFACTURING DECLINE

11 © Center for Tax and Budget Accountability 2008 11  All job growth in Illinois came in the service sector.  For the most part, service sector jobs that pay less than manufacturing  On average, most of these service jobs pay 29% less than the manufacturing jobs they replace LOW-END SERVICE JOBS GROW In Fact …

12 © Center for Tax and Budget Accountability 2008 12 This Transition has been Dramatic CHANGING EMPLOYMENT PATTERNS In 1990, Manufacturing in Illinois employed more workers than any other sector, 20.4%. By 2007, only 13.1% of the state’s workers were employed in Manufacturing ― while low wage service sectors accounted for over 31% of all jobs.

13 © Center for Tax and Budget Accountability 2008 13 EMPLOYER-PROVIDED BENEFITS  Employer-provided health insurance benefits have been steadily declining in Illinois since 1980.  By 2006, over 40% of the workforce didn’t have employer provided insurance  Hispanics especially hard hit–over 57% do not have employer- provided insurance  TODAY, 27% of the Illinois population is either on Medicaid or uninsured

14 © Center for Tax and Budget Accountability 2008 14 In 1981, 55.6% of the state’s workers were covered by private sector employer-provided pension plans. By 2007, only 43.8% of the workforce had private retirement benefits. PENSION EROSION

15 © Center for Tax and Budget Accountability 2008 15 Why the Economic Problems? –NOT TAX BURDEN OR WASTEFUL SPENDING Illinois ’ total state AND local tax burden, as a percentage of personal income ranks only 45 th in the nation. The second lowest tax burden in the Midwest to Missouri (Missouri is all of one-tenth of one percent lower). Illinois also ranks only 42 nd in spending among the states ILLINOIS IS LOW TAX OVERALL

16 © Center for Tax and Budget Accountability 2008 16 Education now matters more than ever to economic prosperity:  unemployment rates are highest for those with the least education.  Wages are also tied to education levels. EXHIBIT “A” IS EDUCATION

17 © Center for Tax and Budget Accountability 2008 17 Impact of Education on Wages In real (2006) dollars, between 1980 and 2006, only those with at least a college degree experienced any gain in hourly income, with growth of 14.3%  Real median hourly wages for all other education categories declined  Less than a high school diploma fell by 28.7%  Only a high school education declined 8.7%  Some college but no degree declined 4.3%  You gotta learn to earn! WAGE DIFFERENCES

18 © Center for Tax and Budget Accountability 2008 18 Wages for Minorities lag Whites Real wages for Whites increased modestly between 1980 and 2007, but :  The White-Hispanic wage gap is larger in amount, but increased by a smaller percentage, growing from $3.82 in 1980 to $5.34 in 2007, an increase of 39.7% over 1980  Real wages for African-Americans declined. The hourly wage gap between Whites and African- Americans grew from $1.52 in 1980 to $3.44 in 2007, an increase of 126.3% over 1980 WAGE DIFFERENCES

19 © Center for Tax and Budget Accountability 2008 19 Still Separate....  Illinois is the third most segregated state in K-12 education for blacks  82% of black children attend majority/minority schools  90% of white children attend virtually all white schools (*Source: 2006 Education Trust study on segregation) SEGREGATION

20 © Center for Tax and Budget Accountability 2008 20.... Still Unequal  Minority school districts start out with $1,154 less per child to spend on education  That’s the second worst gap in the nation (*Source: 2006 Education Trust study on segregation) SEGREGATION

21 © Center for Tax and Budget Accountability 2008 21 Current Basis for Foundation Level The Illinois state “Foundation Level” is the minimum per child guaranteed expenditure for K-12 Does NOT include: poverty, special ed, transportation, etc. Currently $5,734 – but not tied to any measurable standard K-12 FUNDING

22 © Center for Tax and Budget Accountability 2008 22 Education Funding Advisory Board (“EFAB”) Change basis to a measurable outcome standard, predicated on costs and test results Foundation Level should be at least $7,191 (after adjusting for inflation) Total cost: $1.8 billion EFAB

23 © Center for Tax and Budget Accountability 2008 23 Based upon the ability to pay Foundation Level with property tax revenue, school districts are divided into three groups. Flat Grant: districts whose property tax revenue exceeds 175% of the Foundation level of funding. Just over four percent of all Illinois districts, educating about 4.5% of all students, fall into this funding category. Alternative: districts whose property tax revenue funds between 93 and 175% of the Foundation level of funding. Fifteen percent of all districts, or 18% of all students, fall into this funding system. Foundation: Districts whose property tax revenue is able to fund 93% or less of the Foundation Level. Eighty-one percent of all districts, or 77% of all students, fall into this funding category. FUNDING SYSTEM DEFINITIONS

24 © Center for Tax and Budget Accountability 2008 24 THE BURDEN IS TOUGH All data inflation adjusted to 2008 Income Data: US Department of Census Property Tax Data: IL Department of Revenue

25 © Center for Tax and Budget Accountability 2008 25 Foundation formula districts receive significantly less than the amount received by flat grant and alternative formula districts in property tax revenue, meaning they rely far more heavily on state support. http://www.isbe.nethttp://www.isbe.net – “2007 IL Report Card” PROPERTY TAXES

26 © Center for Tax and Budget Accountability 2008 26 Equalized Assessed Valuation (EAV) is a proxy for a school district’s local property wealth available to be taxed. The average EAV of flat grant districts is more than 5 times greater than foundation-formula districts. SCHOOL DISTRICT TYPE http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card”

27 © Center for Tax and Budget Accountability 2008 27 MONEY MATTERS http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card”

28 © Center for Tax and Budget Accountability 2008 28 MONEY MATTERS http://www.isbe.nethttp://www.isbe.net “2006 Illinois Report Card”

29 © Center for Tax and Budget Accountability 2008 29 MONEY MATTERS http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card”

30 © Center for Tax and Budget Accountability 2008 30 Total and Instructional Spending Differentials  On average, Flat Grant districts spend $4186 more in total per pupil spending than Foundation Formula school districts.  When it comes to instructional expenses, Flat Grant districts spend $2324 more per student on average than do Foundation Formula districts. MONEY MATTERS http://www.isbe.net http://www.isbe.net “2007 Illinois Report Card”

31 © Center for Tax and Budget Accountability 2008 31 YEAH, $ DOES APPEAR TO MATTER *Linear regression is a statistical analysis that shows the correlation of two or more variables, in this case, how per-pupil expenditures correspond to ISAT test scores. The regression line (heavy red) represents the predicted test score results a school district should obtain, given a specific level of instructional expenditure.

32 © Center for Tax and Budget Accountability 2008 32 The EAV of school districts with the greatest amount of low income is 5 times less than that of the percentage of the districts with the smallest low income population. *LIR – means Low Income Rate http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card” POVERTY AND SCHOOLS

33 © Center for Tax and Budget Accountability 2008 33 There exists a significant discrepancy in teacher salary and the percentage of teachers with masters among lowest and highest LIR school districts. This gap in teacher quality mirrors disparities in academic performance and district wealth between the school districts with the highest and lowest concentrations of low income students. TEACHER QUALITY http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card”

34 © Center for Tax and Budget Accountability 2008 34 http://www.isbe.nethttp://www.isbe.net “IL State Report Cards” LOW INCOME

35 © Center for Tax and Budget Accountability 2008 35 The percentage of students meeting or exceeding ISAT standards in the districts with the lowest levels of poverty is markedly different from those districts with the highest levels of poverty. MONEY MATTERS http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card”

36 © Center for Tax and Budget Accountability 2008 36 POVERTY MATTERS http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card”

37 © Center for Tax and Budget Accountability 2008 37 POVERTY MATTERS http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card”

38 © Center for Tax and Budget Accountability 2008 38 The disparity between those districts meeting AYP corresponds directly to a school district’s LIR. LOW INCOME MATTERS http://www.isbe.nethttp://www.isbe.net “2007 Illinois Report Card”

39 © Center for Tax and Budget Accountability 2008 39 RACE MATTERS

40 © Center for Tax and Budget Accountability 2008 40 RACE MATTERS

41 © Center for Tax and Budget Accountability 2008 41 RACE MATTERS

42 © Center for Tax and Budget Accountability 2008 42 STATE BUDGET OUR PRIORITIES?

43 © Center for Tax and Budget Accountability 2008 43 WHAT ABOUT REVENUE GROWTH $$$$$$$$ NEW $$$ ?

44 © Center for Tax and Budget Accountability 2008 44  NOT SO MUCH THERE ISN’T ANY

45 © Center for Tax and Budget Accountability 2008 45 FAIR  PROGRESSIVE RESPONSIVE  TO MODERN ECONOMY STABLE  DURING POOR ECONOMIES EFFICIENT  DOESN ’ T DISTORT PRIVATE MARKETS ELEMENTS OF A SOUND AND FAIR FISCAL SYSTEM WHAT SHOULD BE: BUT ISN’T

46 © Center for Tax and Budget Accountability 2008 46 *Adjusts solely for historic rates of inflation and population growth, and assumes normal economic growth. STRUCTURAL DEFICIT

47 © Center for Tax and Budget Accountability 2008 47 -6% 5% 33.20 % 50.20% 93.4% -20% 0% 20% 40% 60% 80% 100 % Bottom 60% Next 20% Top 20% Top 15% Top 1% Income Growth in the United States 1979-1999 (Real 1999 Dollars) *Source U.S. Census Data Percent Change INCOME INEQUALITY Fair? Responsive?

48 © Center for Tax and Budget Accountability 2008 48 State & Local Tax Burden as a Percentage of Income REGRESSIVE Fair? Responsive?

49 © Center for Tax and Budget Accountability 2008 49 INCOME TAX INCREASE 3%  5% 3%  2%=5% 2/3=67% *Note, corporate rate goes up from 4.8% to 8%, but ― overall corporate tax burden goes down! SB750

50 © Center for Tax and Budget Accountability 2008 50 ONLY HB750

51 © Center for Tax and Budget Accountability 2008 51 For More Information: Center for Tax and Budget Accountability www.ctbaonline.org Ralph M. Martire Executive Director (312) 332-1049 rmartire@ctbaonline.org rmartire@ctbaonline.org Chrissy A. Mancini Director of Budget and Policy Analysis (312) 332-1481 cmancini@ctbaonline.org cmancini@ctbaonline.org Yerik Kaslow Research Associate (312) 332-2151 ykaslow@ctbaonline.org ykaslow@ctbaonline.org Further Information

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