CHICAGO – As a result of months of difficult financial decisions, changes to budgeting and management practices and forced fiscal constraint, Gov. Rod R. Blagojevich today announced that the state’s new approach to its role as custodian of taxpayer money is paying off. Illinois collected more than half a billion dollars in overdue and accelerated payments under the recently completed Tax Amnesty, and a number of innovative measures being taken by the Office of Management and Budget are beginning to turn around Illinois’ dire financial situation. Of the amnesty amount, approximately $135 million is over and above the initial amount of $40 million conservatively estimated by the Budget Office, and can be used to help address the FY04 budget and FY05 deficit.
“My message today is not that we won’t have to make hard choices in next year’s budget, because we certainly will – we’re not out of the woods yet. My message is not that we’ve got $135 million in new money to spend, because we’re still paying for the reckless spending habits of years past. The fiscal mess I inherited still means we have to keep finding ways to reduce waste, cut spending, and raise new revenues, without sacrificing our values. The reason why our success in offering tax amnesty is significant is because it proves that innovation and fiscal discipline can work,” Blagojevich said.
Over the past year, the new administration has introduced a number of budgeting and management tools from the private sector to help keep spending in check and to eliminate waste and inefficiency. Auditing and information technology services have been consolidated, rather than having each agency independently do the same type of work. Now agency budgets are allocated on a quarterly basis to avoid overspending, agency expenditures are reviewed by the Governor’s Office of Management and Budget on a monthly basis, and formal spending reserves are in place in every agency under the Governor to offset any budget variances. In addition, the state is consolidating its procurement activities and its drug purchases so it can negotiate better rebates for senior citizens and taxpayer-funded health plans.
Other changes are improving accountability and integrity within state government. Early in his term, Blagojevich appointed an Inspector General over his office and the agencies under his control, and established a hotline for employees and the public to report wrongdoing. Under new ethics regulations pushed by the Governor, every state employee will receive ethics training, state workers that regulate private industries or distribute state contracts will be prohibited from turning around and accepting jobs with those companies, public officials can no longer use taxpayer-funded advertisements to promote themselves, and lobbyists will be prohibited from expending unlimited sums on state officials and workers.
“The point here is that if we’re going to become a better state, a more efficient state, a cost effective state, an accountable state, a state that rewards the people’s faith instead of failing it and falling short time after time, we’re going to have to accept change,” Blagojevich said. “That’s why our tax amnesty offering was so significant.”
Preliminary totals show that 70,000 taxpayers paid approximately $504 million during the amnesty period from October 1 to November 17, putting the Illinois program in position to be the second largest state tax amnesty ever, approaching the $520 million received in New York earlier this year.
Under Tax Amnesty, Illinois taxpayers who paid back-taxes during the 6-week amnesty period did not have to pay penalty and interest charges. Participants were motivated by the fact that on November 18 – the day after the amnesty expired – penalties and interest doubled. Most of the participation in the amnesty came from individuals, who accounted for 90% of payments and 5% of dollars collected. The average individual income tax payment was $400.
Besides the cash infusion, tax amnesty broadened the tax base and increased efficiency. Non-filers who came forward will continue to pay in future years, and resources the department would have used to collect money paid under Amnesty is available for other activities.
“Amnesty succeeded beyond our expectations,” said Revenue Director Brian Hamer. “We kept the program simple, got the word out to taxpayers, and did a good job of generating money for state and local governments.”
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