Illinois Governor Blagojevich's Budget Proposal's Impact Upon Housing
This week governor Blagojevich presented his State of the State, Budget address. Again we heard a speech long on rhetoric and short on detail. I hope our legislators receive a copy of the budget more than 24 hours before a vote is required. All signs point to another stalemate, and drawn out session.
I don't claim to be a budgetary expert, however it was obvious to me that the governor continues his drive for new programs when we can't pay for the programs we have. The good news were his remarks that we need to lower taxes to spark a sluggish economy, by lowering corporate taxes 20% one time, which he estimates will save corporations over $300,000,000. In his next breath he proposed a 3% payroll tax on companies with ten or more employees, not spending at least four percent of their payroll on health insurance, to fund the governors health care initiative. A one time break of $300 million won't offset a nearly $500 million annual tax on small business. An obvious bait and switch.
Like the federal government Blagojevich proposes a $300 per child rebate to spur the economy. He told us that twice, once in English, and once in Spanish. The only thing missing was how we would pay for the rebates, in any language. The governor also proposed leasing the lottery, however this time we would maintain 20% ownership. Funny, I believe we already have 100% ownership. Blagojevich says that education funding won't be hurt with the loss of the $600 million in revenues now generated by the lottery, however doesn't tell us how that money will be replaced. Last year when Blagojevich proposed selling the lottery to private investors our State Senator Larry Bomke said that's like trading your cow for a gallon of milk. I believe that is still true today.
The sorely needed capital plan to rebuild our failing infrastructure would be funded by bonds paid for with the lease payments on the lottery. No question of the need for a capital improvement plan, the question will be; what is a responsible way to pay? I believe our legislators let the governor off the hook by not demanding the Chicago Mass Transit bailout be tied to a capital plan. That left downstate to trust the governor. The result? The proposed leasing of one of our most valuable assets.
The local housing market is off to the slowest start since 2002 due to stagnant job growth, and satisfied demand. What we heard from the governor won't change that scenario. In fact, if you missed it, Blagojevich said we also need to cut spending, and yes that is a good thing to do, however he wants to accomplish spending cuts with 3% across the board cuts within state agencies, excepting those that provide vital services.
Our largest employer just put us on notice. When Blagojevich came into office there were well over 21,000 state employees living in Sangamon, and Menard counties. Today there are about 17,000. This has weakened demand for housing.
Activity has begun to pick up in home sales locally, but just hasn't managed to really take off yet. Closed home sales continue to run behind last year by 24%, and sales pending are improving, however remain 18% behind last year's pace. I am confident a strong spring market is on the horizon which will improve those sales numbers.
The uncertainty of a fiscally sound budget, a capital improvement program, business fearing higher taxes, and now concerns of more state jobs being lost in our local market will not help build demand for homes.
Hopefully we can get some leadership at the Capitol that will pass a financially responsible budget, implement a capital plan that would create construction jobs, and when completed attract new businesses. I know that is a lot to hope for as our anti-business governor once again attempts to implement universal health care on the backs of business.
It's not all bad news if the governor is successful in passing his new business tax, the advertising would be fun to listen to; "Illinois the home of the governor that's never had a real job or owned a business, now invites your business to pay some of the highest taxes in the Midwest. Illinois, now hiring up to nine employees. Move to Illinois where the economically challenged governor's policies have made housing real cheap. Move your business to Illinois, where even your illegal workers get free health care, and kid care. Move to Illinois, the finest socialist state between New York and California." This message brought to you by the "Throw the baby out with the bathwater group."