Governor proposes new cigarette tax

Struggling with what he estimates is a $1.1 billion deficit, Governor Rod Blagojevich proposed a $53 billion budget Wednesday that aims at making money by increasing cigarette taxes, while saving funds by overhauling the state pension system and keeping state universities' budgets flat. Local officials worry Blagojevich is vastly underestimating the deficit, which was previously projected at $2 billion, and is proposing risky and temporary fixes to fiscal problems. Blagojevich's proposal now awaits approval from the Illinois Senate and House of Representatives.

Blagojevich proposed a 75-cent tax increase on cigarettes, which he said would generate $155 million a year for construction projects across the state. But Rep. Mike Bost, R-Murphysboro, and Rep. John Bradley, D-Marion, believe the tax increase would push even more consumers over state borders. If approved, Illinois' cigarette tax would increase to $1.73 a pack, becoming the 5th highest cigarette tax in the nation.

"That worries me," Bost said. "We have a lot of people that move across the border for fuel and other products we have a high tax on already. And people won't just buy gas and cigarettes, but they will eat in other states' restaurants and shop there, too. I think the state of Missouri just loves to see things like this happen."

The cigarette tax increase would support ventures like two of SIU's capital projects, which received the nod from the governor. SIUC's Transportation Education Center and SIUE's Science building renovations would receive planning funds, but nothing is final until the Legislature gives its approval. In his third budget speech, Blagojevich also made many references to education, but not for higher education.

While the governor's budget included a number of construction projects at universities across the state, there were no increases to the institutions' annual budgets. Blagojevich did not take the Illinois Board of Higher Education's $1 million increase, which would have included pay raises. This is the fourth consecutive year that their budgets have been cut or remained flat.

"Here's the problem that has been since this governor has taken over, huge decrease in overall funding for higher education that have forced tuition increases," said Rep. Mike Bost, R-Murphysboro. "We have worked for years prior to this to keep higher education affordable and expand higher education." Chancellor Walter Wendler said the University is going to try to supplement pay increases through its own resources. Wendler said the proposal did not come as a surprise.

But the bulk of Blagojevich's budget proposal was a plan to cut pension benefits for future state employees, which includes university workers and faculty. While those already on the payroll would not be affected, future state employees would have smaller automatic pension increases and the retirement age would be pushed back an extra five years.

Blagojevich said the state could save $800 million in the upcoming budget year if his pension plan is approved, but Jim Hastings, director of the State Universities Retirement System, said the governor's proposal will probably not play out as he thinks.

"This budget proposal will end up in effect spending those future savings in the next immediate foreseeable fiscal year and in the fiscal years immediately proceeding that," Hastings said. Mike Lawrence, director of the Paul Simon Public Policy Institute, said he is also skeptical about a pension overhaul, primarily because while the governor has cut some expenses by downsizing the government, he is typically a big spender.

"Frankly, it sounds like some of the smoke and mirrors budgeting that we have seen far too much of in this state throughout the years," Lawrence said. "If this represents a change of operating on his part, I applaud it, but I think we have to wait and see if the action matches the rhetoric." SIUC Chancellor Walter Wendler said although the proposed overhaul would not affect any current University workers and faculty, it could affect the University's future.

"We want to have a benefits package that is competitive with other universities. Maybe this is a step that has to be taken," Wendler said. "It is possible that it could negatively impact our recruiting." And while Blagojevich avoided ruffling feathers by not trying to increase the income or sales tax, Lawrence said sooner or later taxes will have to go up, or programs will face cuts.

"Without increases in general taxes, we will have to look at cuts for programs for children and senior citizens and people who have mental illnesses," Lawrence said. "But he addressed a lot of different issues in very general terms and talked about making tough decisions. But it is a lot easier to talk about cutting spending than it is to cut spending."