Will Illinois’ Next Capital Bill be a Boon or a Boondoggle?

April 19, 2019

It has been ten years since Illinois’ last major capital bill, but a new one may come as soon as next month. Whether any bill that emerges adequately addresses Illinois’ capital needs depends on whether the General Assembly and Governor incorporate the lessons offered by the last major bill.

In May 2009 the General Assembly approved the $31 billion Illinois Jobs Now! (IJN) plan. IJN itself came ten years after Illinois’ previous major capital program, Governor George Ryan’s $12 billion Illinois FIRST (Fund for Infrastructure, Roads, Schools & Transit). The vote for IJN was conducted hurriedly in the depths of the Great Recession in order to qualify for federal stimulus funds distributed through the American Recovery and Reinvestment Act. Unfortunately, the lack of strategic planning ensured that the resulting capital program was underfunded and insufficient to meet the long term needs of Illinois.

Because the State faced its own fiscal and economic strain during the Great Recession, the General Assembly and Governor Pat Quinn opted not to fund the new program with traditional sources, such as the motor fuel tax, which at that point had been not been raised from $0.19 per gallon for over nineteen years. Instead, the plan relied on a variety of new revenue sources, such as video gambling, leasing the state lottery, liquor taxes, vehicle license fees and expanding the sales tax on candy, sweetened beverages and some hygiene products.

The new revenues were directed to the Capital Projects Fund, which would make debt service payment on bonds issued for capital projects and direct the remaining revenues to the General Funds. However, many of the revenue sources underperformed expectations, requiring expenditures from the General Funds in order to make debt service payments. Additionally, the legalization of video gambling resulted in social costs that are only now being evaluated.

IJN’s second flaw was the lack of a comprehensive plan to prioritize projects and ensure that funds were being spent efficiently and with maximal impact on Illinois’ economy. While Governor Pat Quinn’s office released a list of projects to be included in the plan, it offered no explanation of how they were selected. The last ten years of capital budgets have similarly included project lists, as well as some emphasis on various priorities. But they have fallen far short of offering a comprehensive assessment of capital needs or a clear understanding of how each project fits into the whole plan.

Now, ten years after IJN, Governor J.B. Pritzker has said that he supports enacting a new major capital bill this year. A major capital initiative would replace the Governor’s formally proposed FY2020 Capital Budget, which is best understood as a maintenance capital budget that spends down remaining authority from IJN using existing revenues.

The General Assembly has been holding hearings throughout the State to assess capital needs in preparation for a bill. There is near universal agreement that major infrastructure investment is necessary to maintain and expand Illinois’ transportation systems and address a large maintenance backlog at State facilities and educational institutions.

However, the State has yet to agree on the source of revenues needed to fund any significant infrastructure investments.  It has now been 29 years since Illinois last raised its gas tax. Since that time, construction costs have doubled while gas tax revenue has grown by only 20%.

A bill sponsored by Senate Transportation Committee Chair Martin Sandoval would double the tax to $0.38 per gallon and index it to inflation thereafter. However, such a measure remains unpopular and it is still unclear whether it will pass. Illinois is an outlier in its reluctance to raise gas taxes—22 other states have raised theirs in the last six years. One explanation is that Illinois is one of only a few states that also charge sales tax on gasoline.

In addition to the gas tax, the Civic Federation has previously recommended that the State explore alternative transportation funding sources, such as a vehicle miles traveled tax. However, a bill to implement such a tax was tabled by its sponsor in February. Other new revenues proposed by Governor Pritzker, such as legalized cannabis and sports betting, a plastic bag tax and a tax on electronic cigarettes, have been designated to help close the FY2020 budget deficit.

Along with identifying a sustainable revenue sources, the Civic Federation has urged that the State incorporate better planning in infrastructure spending. A recent forum cohosted by the Civic Federation and the Federal Reserve Bank of Chicago showcased best practices in planning. One intriguing method of project prioritization is the Virginia Department of Transportation’s SMART SCALE. Virginia statute requires the use of an objective, weighted scoring system for each proposed transportation project that takes into account the project’s impact on congestion, safety, accessibility, economic development, the environment and transportation-efficient land use. The resulting scores guide lawmakers’ allocation of funding resources.

With pressure to pass an operating budget for FY2020 by the end of the session on May 31, the General Assembly and Governor may not be able to adequately consider sustainable revenue sources or develop a comprehensive project prioritization plan in the next six weeks. A better outcome for the State could be passing the Governor’s maintenance capital budget, then taking the time to make sure a major capital expansion is done right.