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Illinois Tax Boost, To Add $311 Million for Education, Fails in Senate

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Springfield, Ill.--Gov. James R. Thompson's bid to boost state income taxes suffered a setback last week when the state Senate passed its deadline for moving bills to the House without acting on the $1.5-billion package.

Senate leaders decided to forego a vote on the proposal after counts in party caucuses indicated they would fall at least one vote short.

Governor Thompson, who agreed to a compromise that would diminish the total yield of the tax hike, is now pondering whether to graft his plan onto other legislation before the General Assembly, to call a special session to deal with the issue, or to employ another parliamentary procedure to get legislative action, according to an aide.

Many observers now predict that a voteon the controversial tax boost will not come until the waning hours of June 30--the end of the session.

They suggest that approval of a tax increase must await the settlement of the political warfare between Chicago's new mayor, Harold Washington, and the city council. And they doubt that the Senate will act without the approval of House Speaker Michael Madigan of Chicago. The speaker has indicated that he supported a tax hike but has publicly resisted the Governor's plan.

The failure of the Senate to act on the plan capped a furious week of activity, which included:

A last-minute compromise between Mr. Thompson and his reluctant Senate sponsor, Minority Leader James Philip, a Republican from suburban Chicago.

An alternate tax plan--developed by an independent group that monitors taxes--that undercut the administration's position.

A new budget, which was announced by the Governor, showing how he would spend the extra revenue if his tax plan is passed; the proposal included most of the funding the Illinois State Board of Education has requested.

Four-Year Tax Increase

The compromise with State Senator Philip was the second the Governor has been forced to make. As a condition of his sponsorship, the senate Republican leader insisted earlier on a four-year tax increase instead of the permanent hike favored by Mr. Thompson. Individual income taxes were to rise from 2.5 percent to 4 percent, corporation taxes from 4 percent to 5.6 percent.

Last week, to appease Republican senators further, Mr. Philip and the Governor crafted a new bargain calling for the same increase for individuals but a jump to 6.4 percent for corporations in fiscal 1984. Both rates would drop in succeeding years to settle at 3.5 percent for individuals and 5.6 percent for corporations. The deal also included $100 million in property-tax relief.

The compromise plan would have raised $1.5 billion in new revenue next year, but over four years would have yielded $1.6 billion less than the Governor's original proposal, according to state budget officials.

But backers of the tax increases could not muster a majority of senators, some of whom suggested they were more impressed with a plan developed by the Tax Payers Federation of Illinois, an independent and respected lobbying organization funded primarily by corporate donations.

The federation undercut the Governor's effort by releasing its own analysis of the state's fiscal health, which said Illinois could get by with a first-year tax increase of $870 million.

The state's chief budget officer, Robert Mandeville, quickly disputed the federation's claims, saying its revenue projections were too optimistic.

In unveiling his new fiscal plan, the Governor said he would be willing to provide elementary and secondary education with $311 million of the added revenue from the tax increase.

That would be a $104.7-million increase over this year's appropriation; except for teacher-pension programs, it would fully fund the budget requested by the state board of education. In March, Mr. Thompson had revealed a "doomsday" budget, cutting aid to education by $106 million with-out new revenues from increased taxes.

Calling the new budget "clearly better than the alternative," State Superintendent Donald G. Gill said that it was "still inadequate to meet the needs of Illinois schools."

Mr. Gill said the state board's budget was based on existing revenues. Increased dollars from higher taxes, he said, "should certainly mean that more of the needs of schools would be met."

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