Comptroller warns of $2 billion collapse when income tax is rolled back

Posted: Jul. 8, 2014 6:28 pm Updated: Jul. 29, 2014 7:15 pm

Herald-Whig Senior Writer

Illinois Comptroller Judy Baar Topinka said the state is facing "a $2 billion collapse" early next year when the income tax increase sunsets.

"It's going to be like a heart attack" to state finances, Topinka said during a Tuesday visit to Quincy. She was here to present a proclamation to the Adams County Farm Bureau, recognizing the 100th anniversary of the organization.

As the state's fiscal officer, Topinka would rather see the income tax phased out over two years from the current 5 percent to 3.75 percent. She said that would give the Illinois Legislature a chance to rein in spending and balance the budget.

"We made a big-time promise that this would be a temporary tax increase," Topinka said.

However, she is worried about the "instant trauma" that will occur when income tax revenues dial back in January.

The Legislature passed a budget that makes no provision for the loss of nearly $2 billion. If nothing is done, state payments to vendors and caregivers will be delayed as a back-door tax.

"We started the fiscal year last week with 46,000 unpaid bills at our office, and we know there may be more out there at other state offices. We're nearly $5 billion behind on those bills. But shortly we'll be at $7 billion to $9 billion in debt," Topinka said.

"Only in Illinois could we get excited about being ‘only' $5 billion in debt."

Rep. Jil Tracy, R-Quincy, doubts that the Republican caucus would support a delay in the income tax rollback.

"That's a tough sell because we've not seen where the (Legislature) has put an end to the overspending. The state got several billion dollars from that tax increase, and we're deeper in debt than we were," Tracy said.

Tracy said she understands why Topinka, in her capacity as comptroller, would like to avoid a major funding shortfall.

"Judy has done an incredible job as a manager of the state's money. She works with legislators to pay vendors who would go under unless they get paid," Tracy said.

Topinka said the state payment cycle is down to three months, but she fears it will rise to five or six months -- for nursing homes, caregivers and others who contract with the state -- as the fiscal year proceeds and the highest tax collection season ends.