BLAGOJEVICH PITCHES RECORD-BREAKING BUDGET: Last Wednesday, ILLINOIS Gov. Rod Blagojevich (D) proposed a 2008 budget that is not only the state's biggest ever, but is also built on the largest tax hike and borrowing deal in Prairie State history.
The $60.1 billion spending plan calls for $7 billion in new business taxes — a $6 billion gross receipts tax, which would replace the corporate income tax, and a 3 percent payroll tax on businesses that provide only limited health insurance coverage — and $16 billion in new borrowing, along with the lease of the state lottery for $10 billion.
Blagajovich's vision is to use that multi-billion infusion of cash to improve the public school system, provide health care for the uninsured and shrink the $42 billion hole in the public pension system projected for the coming decades.
In making the case for his plan before a joint session of the General Assembly, the governor appealed to the lawmakers' populist instincts. "Today, we will begin the biggest, most fundamental change in our four-year effort to put middle-class and working families at the center of who we fight for," he said.
He went on to criticize the state's businesses for failing to pay their share of the costs of government, pointing out that while individual taxpayers currently shell out an average of $1,500 in state income taxes, the state's 12,521 corporations, with combined sales of $263 billion, pay an average of only $151. "Here is the choice we now face: overburden the steelworker, the farmer, the nurse, the janitor...by raising their income taxes or increasing their sales taxes or get the biggest corporations who are making billions of dollars in ILLINOIS to simply pay their fair share," he said. "To me, the choice is simple," he continued. "I stand with the people."
The speech doesn't appear to have roused the troops, however. It drew only polite applause, even from the governor's fellow Democrats, who control the General Assembly. And some of them actually expressed considerable skepticism about his plan. "I think the governor is asking for another credit card," said Martin Sandoval (D), "and I'm not sure if he knows whether he can make the first payment when the bill comes in." (CHICAGO SUN TIMES)
STATES TEAMING UP TO ATTRACT BUSINESS: Traditionally, states have fought each other to the bitter economic end seeking to lure new business within their own — and not their rivals' — borders. But that sort of rugged economic individualism may be on the way out.
One indication of that is the alliance recently formed by Republican governors Bob Riley (R) of ALABAMA, Haley Barbour (R) of MISSISSIPPI and Charlie Crist (R) of FLORIDA to bring a steel mill currently being shopped around by the German company ThyssenKrupp to Mobile. With a projected 2,700 jobs in the offing, ALABAMA's interest is obvious. Barbour and Crist agreed to help out Riley, however, because 30 percent of those jobs will go to their states. "Partisanship brings it together, and shared self-interest makes it work," said David Lanoue, chair of the political science department at the University of ALAMABA in Tuscaloosa.
Pete Whalley, an economic development analyst at the University Research Center in Jackson, MISSISSIPPI, said the alliance is part of a gradual shift toward greater economic regionalism, particularly in the South. "[Southern states] have built incentive packages out the wazoo...but they're insufficient," he said. "Market forces don't care about state lines, so we don't need to think about boundaries anymore." But what states do need to think about, Whalley says, is growing competition from China and other countries, which is making the state-against-state approach increasingly unviable.
The government incentives themselves, however, aren't likely to disappear any time soon. They're lucrative for businesses. For instance, in exchange for agreeing to locate a 210-employee server station in NORTH CAROLINA, Google just received tax breaks amounting to $1 million per job. And incentives appear to work for states too. Partly as a result of the $166,000 per job it paid in 1993 to lure a Mercedes Benz plant to the Birmingham area, ALABAMA's GDP is now the 15th-fastest-growing in the nation. "What's happening now...is we're replacing $30,000 a year jobs with $60,000 a year jobs, and that's how you change not just the quality of life, but the culture of life, where people can buy a bass boat where they couldn't before," said Sen. Roger Bedford (D). (CHRISTIAN SCIENCE MONITOR)
RELIGIOUS SCHOOLS GIVEN GO-AHEAD ON GOVERNMENT BONDS: In a 4-3 ruling last Monday, the CALIFORNIA Supreme Court granted government agencies the authority to issue tax-free government bonds to help religious schools — even those that are "pervasively sectarian" — improve their facilities. While specifying that the government bonds could only be used for facilities where secular subjects would be taught, the majority opinion instructed lower court judges to focus on the "substance of the education provided" rather than the school's "religious character" when considering the constitutionality of such borrowing.
The ruling overturned a pair of lower court decisions barring three evangelical Christian institutions from using tax-exempt bonds to provide funding for new classrooms, dormitories and other facilities. Eugene J. Carron, a lawyer for the public authority that was seeking to issue the bonds for the three schools, said that "the vast majority" of religious schools in the state would qualify to make use of the tax-free bonds under the court's standards, but whether they will actually do so ultimately depends on their creditworthiness. (LOS ANGELES TIMES)
SHOW ME THE PORK: NEW YORK doesn't refer to the district-specific government expenditures that find their way into its state budget at the last minute every year as "pork barrel spending." It calls them "pet projects." And in NEW JERSEY, they're known as "Christmas tree" items. But lately, both states have taken a slightly dimmer view of the practice and instituted reforms.
In NEW YORK, lawmakers have agreed to list each one of their pet projects in the budget so they are not only visible to the public, but also subject to the governor's line-item veto. NEW JERSEY's legislature, meanwhile, has adopted new rules requiring spending requests to be detailed and disclose whether family or business relations will benefit from them.
The governors of the two states, Eliot Spitzer (D) and Jon S. Corzine (D), have played key roles in bringing about the changes. But NEW JERSEY lawmakers have had the added incentive of a federal investigation into the budget dealings of one of their own — Sen. Wayne R. Bryant (D) — a probe that has expanded in recent weeks. (NEW YORK TIMES)
BUDGETS IN BRIEF: FEMA agreed last week to fund a $14 million program to help LOUISIANA implement the tough new building code state lawmakers passed in the aftermath of hurricanes Katrina and Rita. Gov. Kathleen Blanco (D) said successful implementation of the code was a "must-do" to keep insurance affordable in the Pelican State (ADVOCATE [BATON ROUGE]).
— Compiled by KOREY CLARK