Chicago Civic Federation proposes sweeping budget fixes

CHICAGO (WLS) -- A big tax hike may be the only way for Illinois to get its financial house in order, and that's just one of the tough measures suggested by the Chicago Civic Federation in its five-year plan to solve the state budget crisis.

Illinois has been without a budget for 19 months. Billions of dollars in unpaid bills have forced social services for the most vulnerable to be slashed, and the lack of budget is costing tax payers more and more every day.

"We are the worst rated credit in the U.S. That means we pay hundreds of millions more than other states when we borrow money," said Laurence Msall, president of the Chicago Civic Federation.

The non-partisan Civic Federation said the state must step up and solve the crisis. The budget watchdog group has released a five-year plan for lawmakers which calls for strict spending limits and tax hikes, including a 40 percent increase in state income tax. The plan recommends the current individual rate rise from 3.75 percent to 5.25 percent, which means an extra $750 a year if you make an annual income of $50,000.

The Civic Federation also said it's time for Illinois to tax retirement income other than Social Security, something 41 other states already do.

"It's literally worth over $2 billion to the state of Illinois in revenue by not taxing retirement income," Msall said.

The plan also calls for reducing the sales tax rate by expanding it to include consumer services such as haircuts and manicures. These sweeping recommendations come as Governor Bruce Rauner is scheduled to give his budget speech next week. He refused to weigh in on the Civic Federation's report Friday.

"There are a lot of ideas being discussed, many proposals on the table. At this point, I don't think it is appropriate for me to weigh in," Rauner said.

To control spending, the Civic Federation recommended consolidating the number of local governments. The watchdog group said Illinois has by far the highest number of local governments of any state. Its report also says the state can save money by merging pension funds.

The report could be a tough sell to lawmakers.