Fair Tax fails, SIU plans to prevent budget cuts

After the Illinois Fair Tax amendment failed to pass on election night, many worried there would be substantial budget cuts to K-12 and higher educationState-funded institutions like SIU have plans in place to prepare for potential budget shortfalls.

SIU System President Dan Mahony said while the implications could affect both the Edwardsville and Carbondale campuses differently, each has safety nets in place to protect their budgets.

“Any reduction in the budget is going to impact both [campuses] to some degree. Carbondale has usually more of a decline in enrollment, so [they] rely a little more on the state allocation than Edwardsville for those reasons,” Mahony said. “And both campuses this year put in a contingency in their budget, so they … kind of kept back some money for any reductions we might see.”

SIUE Budget Director Bill Winter said the effects of the Fair Tax’s absence will likely not be felt directly through the university, but through the state of Illinois. 

“The Fair Tax is basically a source of revenue for the state of Illinois, so … I think it would be accurate to say that it doesn’t directly impact us, because the Fair Tax money is not coming directly to us,” Winter said. “However, the state of Illinois has had its own budget challenges over the years, and this was something that was going to help the state … so when you had something that was supposed to help plug a budget hole, and they don’t have it, then that likely means that everybody … might receive a budget cut.”

Assistant economics and finance professor Alicia Plemmons said SIUE’s budgeting practices have placed them in a position to be prepared for any state-level budget problems. 

“I think SIUE is particularly well off to deal with budget [shortfalls], because it seems like we already have a very conservative approach where we set aside extra money,” Plemmons said. “We have thought years ahead of time about ‘if there’s a budget shortfall, what should we do?’ … so I think if there were going to be higher cuts to education, SIUE has already planned for this potential … and I think that they make very smart budgetary decisions that might be able to help them get through if there’s a lack of revenue.”

Winter said SIUE’s approach includes setting aside parts of the budget in case of potential funding problems. 

“We’ve asked the vice chancellor areas to hold back a 6 percent budget contingency, so what that means is … we haven’t reduced anybody’s budget, we’re just saying ‘At this point, live on 94 percent of it until we have more information,’” Winter said. “2020 as a year, including the COVID pandemic, everything else, has been a year of uncertainty, so it’s just a prudent planning tool.”

According to Plemmons, these policies put SIUE in a better position than other schools in terms of budget preparedness. 

“There’s a reason why [SIUE] didn’t have to start letting go faculty in droves during the Great Recession back in 2008 when other schools had to,” Plemmons said. “I’ve worked at different universities, but SIUE seems to have this idea that things can go wrong, so they prepare for it when times are good, which I wish more schools did.”

According to the most recent Illinois Economic and Fiscal Policy Report, Gov. J.B. Pritzker’s administration wishes to avoid making cuts to services like education, looking for alternative methods to compensate for the loss of Fair Tax revenue.

“As the cuts that would be required to bring Illinois’ budget to balance would harm education and human services programs and damage essential areas of the state’s economy, the Governor ... will work with the legislature to identify corporate and business tax loopholes that can be closed and tax adjustments that can be made that will minimize the impact to lower and middle-class families,” the report states.

 

To learn more about how the Fair Tax’s absence could affect the state budget, read the Illinois Economic and Fiscal Policy Report from Nov. 13.

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