Ortbals Headshot 1 1 16OrtbalsBy ALAN J. ORTBALS
    Illinois State Senate President John Cullerton and Minority Leader Christine Radogno have announced a “Grand Bargain” on the two-year-old budget stalemate and they’re moving quickly to push it through the Senate. At this point, no one knows what Mike Madigan thinks about it so this may all go for naught. But, at least the sun is trying to poke its head through the gloomy Illinois fiscal sky.
    A clump of bills, SB 1 through SB 13 have been introduced, which do things like:
    •    Increase the personal income tax rate from 3.75 percent to 4.95 and the corporate rate from 5.25 percent to 7. It’s estimated that that will generate $4.1 billion a year.
    •    Authorize the issuance of $7 billion of bonds to pay off overdue bills which in mid-January totaled $10.7 billion. They figure the loan would get the state back to paying vendors and service providers within 30 days of receiving their bills.
    •    Reform the pension system, a move that’s estimated to save up to $1 billion a year.
    •    Transfer Chicago Public Schools pension obligations to the state, making the CPS the same as the other districts in Illinois.
    •    Expand gambling.
    •    Reform workers’ compensation.
    •    Gradually raise the minimum wage.
    •    And, put a freeze on local property taxes.
    Obviously, some of these things have nothing to do with the budget but that’s why it’s called the “Grand Bargain.” It makes concessions to both sides. The budget part of this package is supposed to right the fiscal ship of the state of Illinois, according to its authors. That’s a good thing, if they can pull it off but it’s not enough. We need the state to start paying its required share of education costs, something it’s a long way from doing.
    Recently, the Illinois Association of Realtors released a report analyzing the comparative tax burdens between Illinois and Missouri. Lo and behold, when taking everything together — from income taxes to property taxes to sales taxes, etc. — it was pretty much of a tossup. This surprised many, primarily because each summer we are socked with some of the highest property tax bills in the nation.
    If you couple the fact that local property taxes are sky high and yet the overall tax burden is middle of the pack, what does that tell you about the state portion? It’s very low. Our flat 3.75 percent personal income tax rate is one of the lowest in the nation. But governments have to supply services and perform functions and they depend on taxes to do it. If the money doesn’t come from one place, it has to come from another. In other words, our property taxes are so high because the state’s shirking its obligations.
    When it comes to property taxes, school districts take the lion’s share — an average of 63 percent of your property tax dollar in Madison County. They are heavily dependent on local taxes and it’s getting worse. Illinois ranks 50th in the country in the portion of education funding covered by state-based taxes and first in reliance on local property taxes. And, because of the budget stalemate, the state’s not even paying the meager amount it’s supposed to. So, localities are trying to fill that void by upping local taxes.
    For example, the Edwardsville School District is seeking to raise its tax rate by 55 cents and Madison County voters are being asked to adopt a 1 cent sales tax to fund school construction. Both measures increase the dependence of education on local funding.
    Putting the onus of education funding on local backs creates problems. Some localities have stronger tax bases than others. They may have large industries or copious retail sales or a plethora of expensive homes. The lower the tax base, the higher the tax rate needs to be. Property tax rates in places like East St Louis or Cahokia will singe your eyeballs. The higher they go, the more people leave; the more people leave, the higher they go.
    Freezing property tax rates isn’t going to fix this problem. In fact, it’ll make it worse. What’s necessary is for the state to step up and fulfill its obligations. The state constitution requires the state to cover at least 51 percent of the education bill but Illinois provides only about 25 percent. State funding needs to go up and local funding needs to come down.
    So, while they are fixing the state’s budget mess, they need to make sure they are creating a structure that provides adequate school funding and gets the property tax monster off our backs.
    Alan J. Ortbals is president and publisher of the Illinois Business Journal. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. or (618) 659-1977.

grubaugh new picGrubaughBy DENNIS GRUBAUGH
A few years ago, I was looking over a Social Security Administration recap of my lifetime earnings and was astounded to see that I had passed a coveted plateau. I had made my first million dollars.
    Alas, by that point, I had also spent my fortune, and more, dethroned by the essentials of living — college and medicine for the kids, Taco Bell for me, Home Interiors for my wife. Everything conspired to eliminate my goal of a lush life.
    Rather facetiously, I use the million-dollar mark because for so long in our history, having that kind of money really meant something. It spelled the difference between the rich and powerful and the rest of us.
    Times change, and a million today is a lot less meaningful, especially in the gilded age of Donald J. Trump, who has appointed the richest team of advisers in the history of our planet to serve as his Cabinet.
    As I write this, the confirmations are just about complete. It appears the president will have two billionaires and about 10 multimillionaires among those at his disposal.
    Mr. Trump suggests that the ability to become rich reflects a level of smartness necessary to solve problems, and as far as an individual’s ability to amass wealth goes, there is some wisdom in that statement.
    Yet, smart money says that real money means little when it comes to bridging the divides that exist inside and outside the United States. Frankly, when it comes to real-world wisdom, I’ll take diplomacy over wealth-building, a billionfold.
    And the new Cabinet is going to need the wisdom of Solomon. Members must look at a picture much larger than the nationalistic portrait painted by the president. Personal wealth won’t matter a whit compared to words, actions and convictions needed to properly guide a man whose scattershot approach is their biggest challenge.
    Mr. Trump seems to know what he wants but he is not very articulate, except at the most gut level. In deciphering their boss, the most important thing the secretaries of Defense, Treasury, Homeland, et al, can do is to channel Joe Average Citizen, the taxpaying-guy affected by health-care reform, wall-building, infrastructure spending, oil pipelines, world rogues and the rest.
    I was encouraged to see some nominees break with the commander-in-chief on some of his more irrational notions during their hearings. EPA pick Scott Pruitt said, for instance, that climate change is a real, scientific concern — not some Chinese-inspired hoax. And Defense Secretary James Mattis basically said Russia is a country to be kept at arm’s length, not coddled.
    Cabinet teammates, rich as they are in personal holdings, must be more concerned with personally holding the president to task for decisions that can affect all people, from the meekest among us all the way to those with nuclear force or nuclear ambition.
    Early on, we’ve seen the president rush through a number of executive actions that he promised, but as the months and years progress, I hope and pray we see a different kind of Trump, one who understands he has the wisdom of many, many people available to him — and takes a slower, more deliberate approach.
    Because of Mr. Trump’s inexperience, this Cabinet could be the most significant in American history. I wish the members success. Billions are depending on it.
    Dennis Grubaugh is editor and partner of the Illinois Business Journal. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. or (618) 977-6865.

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