New Illinois Tax Increases Offer Only Modest Relief for Unpaid Charities

Illinois took a step this week to put its financial house in order, but life for the state’s beleaguered nonprofits will not improve overnight.

Gov. Patrick J. Quinn is set to sign legislation to increase the state’s income and corporate taxes and help the state plug a budget hole of at least $13-billion.

That should make it somewhat easier for the state to pay its bills, including to charities that provide human services. Illinois has the worst record in the country when it comes to late payments for government contracts, according to a recent nationwide survey of nonprofits.

But the change won’t be readily apparent to most nonprofits. That’s because the General Assembly, which rushed to approve the tax increases before its term ended on Wednesday, failed to adopt separate legislation to authorize the state to raise more than $8-billion to pay a backlog of outstanding bills.

“It’s not nirvana for providers as of right now,” says Ralph Martire, executive director of the Center for Tax and Budget Policy, a Chicago think tank. “There’s long-term relief but not immediate relief.”

Judith Gethner, executive director of the Illinois Partners for Human Service, a coalition of charities and other groups, agrees that nonprofit service providers are not out of trouble yet and need to push lawmakers to restructure the state’s debt so it can pay its bills.

But she is excited about one aspect of the legislation. It creates a new Commitment to Human Services Fund that will take shape in 2015. That will set aside roughly $400-million that will be earmarked for human-services programs, to “supplement and not supplant the current level of human-services funding.”

“This is a very big win for us,” she says. “Human services has never had that.”

Mr. Martire is a bit more sober about the new fund. He says because lawmakers also agreed to limit the annual growth in overall state spending at 2 percent, budgets for human services are likely to be cut or at least lag behind inflation for the next four years. When the new fund is created, he says, it could simply return human-services spending to today’s levels, or provide only a modest increase.

Read an article from The Chronicle’s archive about the problems Illinois charities and other nonprofits nationwide face because of slow payments.