Illinois Policy Institute | Fall 2012

Institute
The
Yaron Brook Is Illinois ready for a free market revolution?

years celebrates of advancing liberty in
Liberty Justice Center Starts a food fight & takes on the machine

Illinois

10

Progressive Tax Why it’s wrong for Illinois

Compass
1 Letter from the CEO 2 Letter from Springfield 3 Donor profiles: Alan Minoff and Hamilton Hill 4 Putting corruption above the law 6 Food fight! 8 Cover story: 10 or 225 years of making a difference 14 Progressive tax proposal a big step in the wrong direction 16 State 48: Illinois ranks 48th in the nation in economic outlook 18 Shedding new light on Springfield’s committees 20 Policy and impact update 22 Outside commentary: Yaron Brook 24 Institute events 28 Upcoming events 29 Staff spotlight: Paul Kersey ON THE COVER
An Illinois Policy Institute publication Editor in Chief Daniel Anthony Creative & Art Director Teresa O’Leary Senior Editor Andy Quinn Production Director Teresa O’Leary Events Editor Chris Andriesen

inside

On July 4, 1776: The Declaration of Independence was approved by the majority of colonies. Then on July 19 of that same year, the Continental Congress ordered the Declaration to be “fairly engrossed on parchment” and signed by every member of Congress. As a clerk to the Secretary of the Continental Congress, Timothy Matlack – an early patriot who fought in the Revolution – was chosen to inscribe the historic document that now rests on display in the National Archives. The typeface, “American Scribe” is featured on the cover and in places throughout the Fall 2012 Compass, and was inspired by Matlack’s classic handwriting.

The Illinois Policy Institute inspires changes in hearts, minds and laws through its mission to promote personal freedom and prosperity in Illinois and America. As a leading independent, 501(c)(3) research and education organization, the Institute generates positive and sustainable policy solutions for citizens and lawmakers that help unleash talent and entrepreneurial ability.

About Us

190 S. LaSalle St., Suite 1630, Chicago, IL 60603 312.346.5700 | 802 S. 2nd St., Springfield, IL 62704 217.528.8800

Letter from the CEO
Our 10th anniversary

John Tillman – Chief Executive Officer

What were you doing 10 years ago? Ten years ago, when the Illinois Policy Institute was founded, I was a small business entrepreneur in the retail sector, my daughter was about to turn four and I’d only been married nine years.   A lot of life passes in 10 years. I hope when you think about the last 10 years, you are filled with warmth and contentment. For us at the Institute, though, our thoughts flow a bit differently: as we reflect on 10 years of history – for the last five of which I have had the privilege of serving as CEO – we certainly feel tremendous joy and a sense of accomplishment.   But one thing we do not feel is contentment.   Quite the opposite. We find ourselves waking up every day with a sense of agitation and impatience to get busy. Why are we so agitated and impatient? Two reasons: • First – Illinois remains in a dire economic and fiscal condition, and the people in charge seem completely oblivious to the depths of the problem and to the crystal-clear path out. • Second – we hear regularly from average Illinois citizens, mostly those without insider credentials or connections. They share our impatience and agitation with the status quo. They want change and are willing to work for it.   This is critical, because it is the people who must lead our state out of its present economic death spiral. In every state where things are improving ahead of the curve, there is one common theme: the people demanded it first. Inside this issue of the Compass you will find stories of success, impact and triumph. But you will also find agitation, impatience and a sustained commitment to continue the work needed to truly turn Illinois around.   Each person chooses their path as their life unfolds. We are grateful that you have chosen a path that puts this issue of the Compass in your hands. That means you have chosen to be one of the leaders of the reform movement in Illinois. To learn more about how you can expand on that leadership, read on.

John Tillman CEO

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Letter from Springfield
Driving a critical conversation

Kristina Rasmussen – Executive Vice President

Teacher pensions in Illinois are hanging by a thread. During the final weeks of the legislative session, the question of who should pay the employer share of teacher pension contributions – the state or local school districts – dragged pension talks to a standstill. As outlined in the Institute’s groundbreaking report, “Playing Favorites: Education pension spending favors wealthy, suburban schools,” we recommend that school districts become accountable for future pension costs. The governor and many legislators agreed – others did not. State leaders asked for the summer to study how this policy change would impact their districts. The Illinois Policy Institute took up the challenge to better inform the public on the hot topic of teacher pension financing. This came to life in our Local Pension Accountability Debate Tour. At nine stops across the state, we’re bringing stakeholders together for much-needed dialogue. We’ve held debates in Springfield, Carbondale, Quincy, Decatur, Lemont, Crystal Lake, among others. Hundreds of voters have heard the issue discussed by our policy analysts, as well as representatives from teacher unions and school boards. Tens of thousands more have been influenced by the countless media reports this initiative has generated. A poll commissioned by the Institute found that public opinion on this critical issue remains mixed. Our policy and outreach work will move the needle and set the stage for real reform. Sincerely,

Kristina Rasmussen Executive Vice President P.S. You know the Illinois Policy Institute is all about changing lives by changing policy. I’m pleased to announce the arrival of Matt Paprocki as our new Senior Director of Government Affairs. A former legislative staffer, he’s already making a difference by improving committee transparency at the statehouse. Learn more about his work on page 18.

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Donor Profiles

Alan Minoff
Mark Campbell Creative

by Roxane DeVos Tyssen External Relations Associate

Hamilton Hill
Mark Campbell Creative

by MaryAnn McCabe External Relations Associate

Alan Minoff has lived in Illinois for the last 33 years and currently resides in the North Shore. Spurred by a decade-long interest in public policy and politics, Alan provides a strong voice in his community and beyond. A graduate of the Harvard Business School, he is an active member of the HBS Club of Chicago, which hosts regular events that cover a broad spectrum of topics. He is also the election judge coordinator for the New Trier Republican Organization and stresses the importance of civic duty in the voting process. Alan emphasizes election judges’ critical role in ensuring that all ballots are officially cast and proper procedures are followed for a fair, impartial and secure election.

Hamilton Hill is a prime example of the age-old adage: discipline breeds excellence. At the University of Kansas, he balanced athletics with academic success, graduating with a perfect GPA and lettering on the football team. Following his undergraduate career, he packed his bags and moved to Chicago to attend the University of Chicago Law School, where he worked on the Law Review and graduated with honors. He has been a partner at his law firm since 2007. And in 2011, he was named one of the Top 40 Illinois Attorneys under 40.

Once Hamilton settled in Illinois, he was filled with a desire to get the state back on track. “My dad sat me Now retired from corporate strategy consulting and down at a young age and explained how government negotiating mergers and acquisitions, Alan spends much actions impact each one of us,” he says. “When I heard of his time with his family, traveling both domestically about the Illinois Policy Institute and read about its and globally and exercising his political interests. He mission, I was very excited that this state finally had an was introduced to the Institute through an e-mail he organization that would tell people the truth about the received several years ago and has been an active situation the state is in and suggest real solutions to our supporter ever since. Through the information he problems.” receives from the Institute, he keeps abreast of problems that directly affect his community and how statewide Hamilton’s favorite part of living in Illinois is the warm issues such as health care and pension reform impact and friendly people with Midwestern values. Hamilton the entire state. Currently, his biggest concern is the and his wife, Traci, reside in Chicago’s Lincoln Park unfunded public employee pension system and what it neighborhood. Without the generosity and support means for the future of Illinois. He appreciates that the of the Hills and others like them, the Illinois Policy Institute seeks sound policy solutions to the enormous Institute could not work to change hearts, minds and challenges that face our state. laws across our state. Thank you, Hamilton and Traci! Alan loves the North Shore, describing the area as a safe place to live and raise a family. From fine public schools and the proximity to Lake Michigan, he finds it a perfect location that also allows easy access to downtown Chicago. Because of his love for this country and his desire to ensure that his children have a bright future, Alan is dedicated to remaining an active leader in the fight for liberty.
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Corruption
above the law
Diane Cohen – General Counsel, Liberty Justice Center

Putting

On July 24, the Institute’s Liberty Justice Center (LJC) filed a lawsuit in federal court challenging the constitutionality of Illinois’ campaign finance law, the Disclosure and Regulation of Campaign Contribution and Expenditure Act. LJC represents Illinois Liberty PAC, a not-for-profit political action committee that supports candidates for public office who embrace policies rooted in the principles of liberty and free enterprise, and Edgar Bachrach, an individual who exercises his right to free speech by making contributions to PACs and candidates he supports. Illinois Liberty PAC v. Madigan, et al., seeks to strike down the Act on First Amendment and equal protection grounds because it establishes a series of campaign contribution limits on PACs, individuals and associations – but exempts political parties from those same limits. Moreover, the Act’s series of loopholes and party exemptions far from fighting corruption, actually enhance it. The Act was enacted in the wake of the Blagojevich scandal under the guise of campaign finance reform. But the politicians who voted for the law ensured that it exempted the state’s biggest political spenders – themselves. By legislating themselves above the law, Springfield leaders preserved and enhanced their power and control over the flow of campaign spending in the state while subjecting all other Illinoisans to limits.

are limited to $50,000 in their contributions to other candidates, they can circumvent this limit because the law allows them to make unlimited contributions to parties, which in turn can make unlimited contributions to candidates. And that is precisely what happens in Illinois. Case in point: Speaker Michael Madigan simultaneously serves as the treasurer of his own candidate committee, Friends of Michael J. Madigan, and as the chairman of two party committees, the Democratic Party of Illinois and the Democratic Majority. While the Act limits what Friends of Michael J. Madigan can directly contribute to other candidates, that group can contribute unlimited amounts of money to the Democratic Party and the Democratic Majority, which can then give any amount to other candidate committees. As a result of this loophole, during the 2009-10 election cycle, Friends of Michael J. Madigan gave the Democratic Party of Illinois $2,350,000, which in turn made contributions to candidate committees ranging from $234,321 (to Senator Demuzio) to $1,475,000 (to Kilbride for Supreme Court Judge). Moreover, these contributions represented a huge proportion of the total contributions those candidates received: 54% of Judge Kilbride’s total contributions that cycle came from the Democratic Party, while 65% of the total contributions made to Senator Demuzio’s committee came from the Democratic Party and Senate Democratic Victory Fund. In addition to those special exemptions for political leaders and their parties, the Act also eliminates contribution limits entirely in a race if a self-financed candidate or independent expenditure group spends more than a certain threshold amount, but not when a party exceeds that threshold, which indeed they do.

How does the law work?
The Act limits contributions that individuals, political action committees and other nonparty speakers may make to candidates during a general election while expressly exempting political parties from these same limits. Further, while committees formed by candidates
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No justification for exempting parties and their leaders
The U.S. Supreme Court has recognized only one state interest sufficiently compelling to justify restrictions on campaign contributions: preventing quid pro quo corruption or the appearance thereof. That means the state must show that any restrictions serve this precise purpose. Liberty PAC and all nonparty speakers who likewise want to be free to make campaign contributions. On August 27, LJC filed a motion seeking to immediately stop the enforcement of this statute so that everyone, not just political parties and their leaders, can exercise their rights to free speech in time for the Simply put, Illinois cannot claim to be advancing the November elections. A decision is expected at the end interest of preventing corruption or the appearance of September. Regardless of the decision, an immediate thereof while creating an irrational regulatory scheme appeal to the Seventh Circuit Court of Appeals is that favors political parties at the expense of all other expected. political speakers. This scheme unfairly treats Illinois
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FOOD FIGHT
Food fight! Young entrepreneurs look to fry unconstitutional restrictions
by Jacob Huebert – Associate Counsel, Liberty Justice Center

University – an anti-competitive city regulation forced them to hit the brakes. In 2010, the Evanston City Council passed an ordinance prohibiting food trucks unless the food-truck operator already owns a brick-and-mortar restaurant in the city. This restriction has nothing to do with legitimate public concerns such as health and safety; indeed, separate city ordinances cover those areas and Beavers Donuts meets or exceeds them all. Instead, this rule exists only to protect one class of business owners from the creative competition and expanded choices that food trucks could offer Evanston consumers. Jim and Gabe have everything they need to succeed in Evanston except government permission. They are being denied that permission only because a group of well-connected restaurant owners would rather use government to shut them out than compete with the value and friendly service Jim and Gabe provide.

James Nuccio and Gabriel Wiesen always wanted to start a business together. After college, the two friends and Chicago natives hoped to open a pizza shop, but the economic downturn left them unable to line up the necessary financing. So they stayed flexible and entered a business with lower startup costs: in December 2011, Jim and Gabe bought a food truck and launched Beavers Coffee + Donuts.

Taking down the unconstitutional road block

The Illinois Constitution guarantees equal protection under the law, but the Evanston rule offers some citizens (restaurant owners) a special privilege (the opportunity to operate a food truck) that it denies everyone else for no valid reason. And the state constitution’s guarantee of due process of law requires that all laws serve the public’s health, safety, or welfare – In the months since then, they have poured time and which this anti-competitive ordinance does not. energy into their new enterprise, serving up hot, fresh donuts day after day to a growing base of delighted That is where the Liberty Justice Center comes in. On customers in and around Chicago. Beavers Donuts taps August 7, the LJC filed a lawsuit against the City of into two of the hottest culinary trends, gourmet donuts Evanston on behalf of Jim and Gabe. Judging by the and the growing food-truck industry, and Jim and Gabe considerable grassroots interest and media attention reap the benefits of their ingenuity and hard work every this case has already generated, Illinoisans seem as time a hungry consumer comes to their window. hungry for economic liberty and entrepreneurial freedom as they are for Jim’s and Gabe’s hot, fresh donuts!

A bump in the road

Like any successful entrepreneurs, Jim and Gabe are looking to expand their business. Some communities have welcomed them warmly, recognizing the boost their versatile operation could bring to a restaurant scene. But when they looked into bringing Beavers Donuts to the City of Evanston – home to Northwestern
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The legal proceedings will play out over the coming weeks and months, but one thing is already clear: Jim’s and Gabe’s fight for their right to earn an honest living is much more than just a food fight – it is about ensuring that Illinois has an economy where businesses succeed or fail based on their ability to please consumers, not based on their ability to win political favors.

Update: Julie Crowe Julie Crowe v. the City of Bloomington
The Liberty Justice Center team continues to work hard on behalf of our first client – Julie Crowe, a military veteran, Bloomington resident, and would-be entrepreneur. Julie wanted to start a specialized vehicle-for-hire service, but the city manager blocked her business because the added competition was arbitrarily deemed not to be in the “public interest.” This case is currently in the discovery stage and LJC will be moving toward filing a motion for summary judgment that seeks to strike down the City’s unconstitutional policies and practices in the next several months. The Liberty Justice Center, a project of the Illinois Policy Institute, is a non-profit, non-partisan public interest litigation center that fights to protect economic liberty, private property rights, free speech, and other fundamental rights in Illinois and beyond.   First and foremost, the Liberty Justice Center seeks to advance freedom and ensure that the rights to earn a living and to start a business, are available not just to a politically privileged few, but to all.   The Liberty Justice Center pursues its goals through strategic, precedentsetting litigation to revitalize constitutional restraints on government power and protections for individual rights. To learn more visit LibertyJusticeCenter.org.
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10 225
years of making a difference

or

by John Tillman – Chief Executive Officer

Do think tanks matter? I’m proud to say we at the Illinois Policy Institute wake up every day asking ourselves that very question. In the end, that is the only question that matters. And we work constantly to ensure that the answer is “yes.” I’m proud to say that over the past 10 years, for the last five of which I have had the privilege of serving as CEO, the Illinois Policy Institute has been making a difference. But our work alone – while impressive, foundational and essential – is simply not enough. One of my favorite sayings is that public policy passes through a political process. Think tanks are essential to ensure that the policies passing through that process are sound – but what think tanks cannot do is politics itself. We are restricted from campaign activities by IRS regulations; our tools are research, education and advocacy.

Two founding pillars
The greatest public policy works to ever pass through a political process are two founding pillars of American liberty – the Declaration of Independence (1776) and the Constitution (1787). The Second Continental Congress declared liberty in 1776, and in 1787, dissatisfied with the Articles of Confederation, the founders opened the Constitutional Convention. The Convention’s original purpose was to revise the Articles of Confederation, but it ended up creating and adopting a new constitution instead. But that was not the end of the policy fight: the states had to ratify the proposed constitution. We sometimes forget that there was a pitched policy battle in the public, in the media, among key influencers and, of course, in each sovereign state legislature. I mentioned two pillars above, but there is a third pillar – one without which there would have been no American experiment in liberty.

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James Madison The first American “think tank”

John Jay

Alexander Hamilton

In the months following the Constitutional Convention, perhaps the greatest public policy debate in history took place. This policy debate on the merits of the Constitution was, in part, driven by the work of the “think tankers” who wrote the Federalist Papers (you know, guys like James Madison, John Jay and Alexander Hamilton).

that then existed. As part of that plan, our Institute team has worked hard to increase our impact over these past five years, from our authoritative work on the Illinois budget and state competitiveness (see pages 16 – 17), to our pioneering work in school choice and educational freedom, to our public interest litigation center, the Liberty Justice Center (see pages 4-7), to the cutting-edge work of our Health Care Policy Center In other words, the research, the education and the (see page 20), to the launch of our Labor Policy Center advocacy of the Federalist Papers was the first “think focused on worker freedom (see page 29) to our grasstank” effort that had an impact! That is why I refer to roots outreach efforts, including the Local Government the Federalist Papers as the third pillar of America’s Transparency audits we carry out with local leaders (see founding. And this impact was not only essential during page 21). These are just a few things we have done. the ratification debates: the Federalist Papers have become a key foundational element of understanding That is quite a record, but, frankly, it is still not enough. the meaning of the Constitution ever since. As noted above, the Declaration, the Constitution and even the Federalist Papers were not enough. What is So think tanks mattered then, and they matter even enough? more today. So far, we’ve covered three pillars of America’s When we wrote a plan in Spring 2007 to “build a founding: the Declaration, the Constitution and the liberty campaign” in Illinois, we did not set out to build Federalist Papers. But there is also a fourth pillar. And it a great think tank, though I am proud that we have. is too often the forgotten pillar – alarmingly, because it Rather, we set out to add to the robust liberty movement is the most important of all. continued on page 13 in Illinois and do our part to fill the gaps in capacity

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10 years
Advancing liberty in Illinois
Exposed the “Obama Myth” in The American Spectator after the 2004 Democratic National Convention speech, explaining how his patina of “moderation in style and substance” was “too good to be true”

Offered a voucher-based alternative to Gov. Rod Blagojevich’s “Preschool for All” initiative Promoted digital Illinois schools learning for rural

Called on Illinois conservatives to unite behind a “No Tax Hike” pledge

Illinois Policy Institute founded

2002

2003

2004

2005

2006

20

Fought plans to swap higher income and sales taxes for paltry property-tax relief

Opposed tax increases education spending reform

disguised

as

Published the first Illinois Piglet Book focused on exposing waste in state government, otherwise known as “the book Springfield doesn’t want you to read” Spoke out against All Kids’ high cost, market distortions and poor care outcomes

Stopped HB 750, which would have increased taxes without guaranteeing improvements in educational achievement Fought and defeated Blagojevich’s gross receipts tax and “Illinois Covered” government health care plan Protected the ability of Chicago’s charter schools to expand into new campuses Provided accountability on the CTA bailout by demonstrating how the real financial culprit was declining productivity, and not a lack of revenues Founded the Liberty Leaders program for training and mobilizing residents to put free market ideas into practice at all levels of government

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CEO John Tillman debated Gov. Pat Quinn on FOX Chicago over how to best solve Illinois’ budget troubles Defeated Quinn’s plan to increase income taxes by 50 percent Increased the statewide cap on charter schools Defeated plans to provide taxpayer money for political campaigns Introduced the Economic Reform Agenda of common-sense budget reforms with the House Republican Caucus Helped pass legislation creating the Illinois Transparency and Accountability Portal in order to shine light on state spending and labor costs Changed the fiscal reform narrative with Budget Solutions 2010, the inaugural liberty-inspired alternative budget Launched a series examining best practices in local government management Support for the Institute exceeds $1.5 million; number of donors exceeds 675

Fought a lame-duck income tax hike and stopped a fake spending limit from being used to leverage votes for revenue increases Led the Repeal the Tax Hike campaign; more than 10,000 Illinoisans signed a repeal petition, and 80 candidates pledged to repeal the tax hike Blew the whistle on a state budget that hid spending and grew outlays Made the policy and moral case for public pension benefit reforms Passed legislation that created a new authorizing agency for charter schools and joined a successful coalition to reform teacher tenure, hiring rules and collective bargaining Protected the integrity of the Illinois Transparency and Accountability Portal and restored historical salary information to the site Passed the Tax Transparency Act to make Illinois a national leader in local tax burden transparency Researched and wrote more than 12 separate pieces of legislation and offered analysis and testimony on more than 40 pieces of legislation Audited the transparency practices of more than 50 local government entities with the Local Government Transparency Project and hosted eight Adopt-A-District Trainings attended by more than 320 enthused citizens Launched the Liberty Justice Center, a litigation outfit focused on protecting free markets and individual freedom Number of news media appearances exceeds 800 Support for the Institute exceeds $2.8 million; number of donors exceeds 1,330

07

2008

2009

2010

2011

2012

Authored the Illinois Liberty Agenda, a comprehensive plan to bring jobs, prosperity and commerce back to Illinois Released a school choice poll that found, if given the option, 4 out of 5 Illinoisans would choose a school other than a traditional public school for their children Published the second Illinois Piglet Book, highlighting more than $686 million in wasteful spending Joined legislators in calling for suspension of the state sales tax on gasoline Called for the elimination of the Health Facilities Planning Board as a barrier to care Launched the Illinois Transparency Pledge, with 20-plus candidates pledging to support greater transparency at all levels of government

Defeated Gov. Quinn’s attempt to increase Illinois income taxes Published third Illinois Piglet Book highlighting more than $350 million in wasteful spending Introduced a line-by-line alternative budget, Budget Solutions 2011, that balanced the budget without tax increases Introduced the Pension Funding and Fairness Act to protect taxpayers and public pensioners with a sensible spending cap Passed vouchers out of the Senate and reinvigorated a wider conversation about school choice Made vital improvements to the Open Meetings Act and prevented officials from withholding public information Published the 2010 Legislators’ Guide to the Issues, a comprehensive guidebook to Illinois’ most pressing policy challenges Informed voters how legislators voted on free market issues with the new Illinois General Assembly Vote Card Hit the road with the Illinois Turnaround Tour, covering 8,000 miles and 130 cities in 78 days and asking legislators to “get on board” with sound policy solutions Support for the Institute exceeds $1.7 million; number of donors exceeds 1,100

Institute celebrates 10th anniversary Institute reshapes scope of pension reform in Illinois by shedding light on the unfunded liability’s true size and the core services threatened by its uncontrolled growth Institute helps to halt legislative implementation of ObamaCare health care exchange and makes the case against a disastrous Medicaid expansion Institute uncovers higher-than-everimagined unfunded liability for government retiree health care, paving the way for reforms signed into law. Institute audits more than 90 local government transparency practices, leading to greater posting of key budget and operations documents online for all to see Institute sounds a warning bell on unionbacked efforts to take more from Illinois families through a progressive income tax Institute issues a clarion call for labor policy reform, particularly for government employee unions, with its Labor Manifesto

Even more to come in the next 10 years!

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continued from page 9

You are the fourth pillar. For without you, without “we the people,” all the work of the Founders to declare, fight and win liberty; to secure that liberty with a constitutional draft; and then to research, educate and advocate on behalf of the Constitution through the Federalist Papers – all of that would have gone nowhere. It was the people who fought, state capital by state capital and legislator by legislator, to achieve ratification of the new Constitution. The reason liberty is at risk today is that we don’t have all four pillars fully engaged. The Founders did the heavy lifting with the first three. Now it is up to us – you, me and everyone we know – to ensure that in Illinois and across America, we have all four pillars strong, growing and holding up our liberty safe from those who seek to knock it down. In the end, it is we the people who help great ideas pass through a political process to secure and sustain our liberty. If you would like to learn more about what you can do to increase your impact and help our ideas pass through the political process, please call me. You can reach me directly at 773-294-5081. Let’s chart the next ten years of liberty in Illinois and across America together.

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Progressive tax proposal a big step in the wrong direction
by Ted Dabrowski - Vice President of Policy and Dr. Lawrence J. McQuillan – Chief Economist

“The progressive tax will be unleashed on the middle class to pay for an even bigger Illinois government.”
In a recent interview with the Huffington Post, Gov. Pat Quinn proclaimed that Illinois needs a progressive income tax. “That’s one of my goals before I stop breathing and I sure hope we can get that done in Illinois,” he declared. “Sooner rather than later.” The same forces that helped Quinn land the governorship in 2010 and raise income taxes in 2011 are laying the groundwork for his progressive tax initiative. In contrast to our current flat tax system, in which all Illinoisans pay the same percentage (5%) of their income, a progressive system (sometimes called a “graduated” income tax) taxes individual income at ever-higher marginal tax rates as a taxpayer’s income rises. State Senator Toi Hutchinson (D-Chicago Heights), chair of the Senate Revenue Committee, supports a progressive income tax – as does Illinois Senate President John Cullerton (D-Chicago), Keith Kelleher, president of SEIU Healthcare Illinois, and Henry Bayer, executive director of AFSCME Council 31, the largest union representing state government employees. One union-funded Chicago group, the Center for Tax and Budget Accountability (CTBA), is working to make Quinn’s dream come true. The CTBA plan circulating around the state would impose eight ever-higher marginal tax rates on income, topping off at 11 percent. Their scheme would leave Illinois tied with Hawaii for the nation’s highest top income tax rate, and would increase the burden on Illinois taxpayers by at least $2.4 billion.

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A big government money grab
But – as detailed in a forthcoming study – Quinn’s big dream is actually an economic nightmare. A progressive income tax would result in a big government money grab, bringing higher taxes for middle-class Illinoisans and fewer needed jobs for working families and the poor. California is the poster child for how the progressive tax actually works. The Golden State taxes personal income at seven increasingly higher rates, including a top rate of 10.3 percent. Back when California’s income tax was first implemented in 1935, that high rate only applied to people earning more than $838,000 in today’s dollars. But today, California’s second-highest marginal rate of 9.3 percent kicks in when an individual taxpayer earns just $48,000. This is how progressive taxes work – they start with Paris Hilton, but soon come after everyone else by creeping down the income ladder. The progressive tax will be unleashed on the middle class to pay for an even bigger Illinois government. Progressive tax supporters claim they “only want the rich to pay their fair share,” but other states’ experiences show that the middle class will pay more, too. Thirty-four states currently have a progressive income tax. And in 24 of these states, a family of four with taxable income of $50,000 is taxed at a higher rate than in Illinois. So don’t be fooled – a progressive tax ultimately means higher taxes for you, too. The progressive tax plan that’s circulating across Illinois closely resembles Hawaii’s tax system. And if Illinois adopted Hawaii’s progressive tax, a family making just $50,000 would pay $881 more in income taxes each year. For many, that money could be used for a month or two of groceries. If Illinois adopted a progressive income tax, it would mean higher taxes for working families, slower economic growth and more unemployment – at least 88,000 jobs lost, according to economic studies.

A step in the wrong direction
Progressive income taxes are so economically damaging that several states with them are working to get rid of them. This year, Kansas, Missouri and Oklahoma considered measures to eliminate their progressive income tax. Oklahoma Gov. Mary Fallin proposed a plan to phase it out completely over 15 years. At a time when other states are trying desperately to undo their progressive tax schemes, Quinn wants to impose one on our state’s already struggling economy. Proposals for a progressive income tax offend our values of fairness and liberty, and their enactment would dim Illinois’ prospects for economic prosperity.

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48
STATE

ECONOMIC PERFORMANCE RANK 48 FUTURE PROSPECTS RANK 48

A new Institute analysis finds the key to job creation in Illinois is jump-starting new establishment job creation. Creating an environment conducive to starting new businesses is vital to increasing the number of jobs available to Illinoisans. The analysis derives findings from the latest release of the National Establishment Time-Series (NETS) database of Illinois’ businesses. The NETS database paints a dismal picture of job creation in Illinois from 1995-2009. The state was 48th in the country in generating jobs from the creation of new businesses. Additionally, the ALEC-Laffer State Economic Competitiveness Index, released in January 2012, ranks Illinois 48th in the nation in its forward-looking economic outlook index. The following illustration tells the story of how when Illinois entrepreneurs aren’t creating new jobs, our whole economy suffers…

WHAT IS SPRINGFIELD DOING ABOUT IT?

cutting sweetheart deals for big name companies that threaten to leave . .And raising taxes on everyone else to finance that favor factory

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the most important component of job creation hasn’t been big name firms moving in and out of illinois

. .and it hasn’t been existing companies growing or shrinking

new research confirms the crucial factor is. . births of new businesses

when illinois entrepreneurs aren’t creating new jobs, our whole economy suffers

but, entrepreneurs can’t afford..

the powerful connections and fancy P.R. consultants big businesses use to buy their special treatment illinois needs a real sweetheart deal for all job creators..

Lower taxes Fairer regulation smarter spending

that would jump-start our economy in a way that inconsistent handouts for the politcally priveledged will never accomplish illinoispolicy.org/state48
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Shedding new light on Springfield’s committees
by Matt Paprocki – Senior Director of Government Affairs

That’s why I made increasing committee transparency my first order of business upon joining the Institute. I set up a series of meetings with the statehouse clerks who are responsible for online committee information. After in-depth discussions, the clerks agreed with our position that real steps must be taken to expand The need for transparent government has in no way committee transparency. diminished since Thomas Jefferson penned those remarks more than 200 years ago. Elected officials in The Institute’s proactive approach to online committee Illinois are directly responsible for countless public transparency has led to the following changes: policies that directly impact the lives of the state’s residents; without easy access to information about When government officials, lobbyists, citizen activists, those officials and policies, citizens cannot hold their or any other interested parties want to make their position known, they fill out a witness slip and indicate government accountable. whether they support or oppose the bill. These slips I served as a legislative analyst on the House Republi- are collected, read into the committee record, and filed can staff for nearly a decade before joining the Illinois away – but records of the slips are not available Policy Institute. During that time, I spoke regularly with online. That’s going to change. Soon, witness slips frustrated constituents who found information regard- will be available online, so that citizens can see who ing legislative committees either difficult to track down supported which position on important issues.     or completely absent. Those citizens had good reason to be particularly interested in the committee phase of The Illinois General Assembly’s website, ILGA.gov, the political process: committees are the first forums in provides an aggregate total for each committee which a bill is publicly discussed. In committee, experts vote (e.g. 9-0-1). But it does not list how individual give testimony, proponents and opponents debate the legislators voted, or even who voted: committee bill in question, legislators discuss the merits and a vote members are regularly substituted in and out of committee. The website will soon be updated to include is taken. a detailed roll call for each individual bill, showing who But very little information about these important voted in committee and how they voted.   hearings is accessible online – so, unless a resident can attend a hearing or listen to it live, he or she lacks the The Illinois Policy Institute’s aggressive push to promote ability to access critical information about the proceed- committee transparency is just one step in our effort to expand citizens’ access to critical information about ings.   Illinois government.  Over the coming months, the The Institute looked into these concerns with “Let Government Affairs team at the Institute will begin to me see it: Committee votes lack transparency,” a new develop an ambitious legislative agenda for the fall veto study published in July 2012. The study found that the session that will promote transparency, freedom and complaints I had heard from constituents were valid: liberty in Illinois. Illinoisans are indeed left in the dark when it comes to this key point in the lawmaking process. “We might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them.”
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$203 billion and counting

Policy & impact update
ObamaCare ruling delivers mixed results
The Illinois Policy Institute is leading the movement to block, repeal and replace ObamaCare.   Although the Supreme Court narrowly upheld the individual mandate as a tax – a blow to advocates of limited government – the decision did come with a silver lining. The Court held that the federal government cannot force states to further expand their broken Medicaid programs. That means the states retain ultimate power over much of the President’s health care takeover. Illinois’ Medicaid program is already on the verge of collapse, and it fails to adequately serve the needs of the truly poor.  The Illinois Policy Institute is working hard to ensure that Illinois joins the growing chorus of lawmakers and leaders around the country who reject ObamaCare’s massive expansion of Medicaid and its state exchanges.   The Institute has continued to play an important role in the national movement against ObamaCare, working with the State Policy Network and others on the Patient Centered Reform project, which highlights the need for putting power back in the hands of actual patients. And Institute experts provided analysis of the Court’s ruling on more than 30 occasions for state, local and national media, including eight unique television appearances. As the national discussion surrounding health care continues, the Institute will remain a key player, working on both the state and national levels to bring the right sort of change to our healthcare system.
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The Institute is changing the way politicians and the press talk about pension reform. A report we released in June outlined the many sources of taxpayer-supported retirement debt in Illinois, thus illuminating the true scope of the problem. It is well known that the state of Illinois has a severe problem with growing retirement debt. Politicians are focused on what looks like an $83 billion problem – but the reality is even worse: Illinois has a $203 billion problem. The state does owe $83 billion to its five pension funds as a result of past underfunding and overly generous benefits, but this figure presents an incomplete picture of the retirement debt crisis. It ignores many other sources of retirement debt for which Illinois taxpayers are responsible. Illinois also owes more than $15 billion on the bonds used to fund the pension system. And the state is further on the hook for $54 billion for retirees’ health care benefits. This adds up to about $152 billion in state retiree debts. And on top of all that statewide debt, taxpayers also face a sea of red ink at the local level. Pensions, retiree health benefits, and local bond issuances from local governments across the state total another $51 billion. That leaves Illinois taxpayers with a total of $203 billion in unfunded retirement debt – that’s more than $41,000 in retirement debt for every household in our state. The Institute’s work to bring the full scope of this crisis to light is changing the way legislators and media talk about pension reform. We have had 137 media appearances on this topic just since May 1, including 25 TV and radio appearances and eleven citations by newspaper editorial boards across the state, including the Chicago Tribune. The more accurate $203 billion figure is now quoted frequently, and Illinois legislators are no longer able to pretend the problem is smaller than it is as the pension reform debate rages on in Springfield.

Pen ion
Local Pension Accountability Tour Continuing the fight for local government transparency
The Illinois Policy Institute continues to execute our Local Transparency Project to ensure citizens can stay informed about governance on the local level.   Back in May, the Illinois Policy Institute released “Playing Favorites,” a report outlining how state pension spending on teacher retirements favored wealthy suburban schools. This is symptomatic of a bigger problem: when the state pays for teacher pensions but the local school boards dole out benefits and salaries, any accountability for pension spending is destroyed. With our transparency audit and public scoring, the Institute has been able to draw attention to transparency issues across the state. Recently, the Institute singled out the Village of Willlowbrook for That is the message the Institute has been taking all exemplary transparency: the Village recently mailed across the state of Illinois: we’re going community to public employee compensation information to every community and explaining why local pension resident. accountability is important and why a change in the status quo must occur. Events in towns like Lemont, And the Project has also enabled us to highlight Decatur and Crystal Lake have generated local head- examples of governments failing to act transparently lines and given the Institute an opportunity to debate – as with the village of Lyons, which actively removed officials from local school boards and teachers unions, a number of documents from their village website, and to present our case in favor of shifting pension costs including some the law requires them to publish. back down to local school districts. The Illinois Policy Institute believes citizens should We are making progress. Legislators in Springfield are be able to better engage with the activities of their now debating whether to implement this cost shift, communities. The Local Transparency Project is a which would go a long way toward bringing back critical part of that mission, and receives significant accountability to spending. The Institute will keep attention from Illinois media. Since May 1, the Instiup the fight for local pension accountability and will tute’s role in pushing for transparency has been featured work to hold local school districts responsible for the more than 70 times in outlets such as the Rockford expenses they incur. Register Star, Daily Herald, Northwest Herald and Kane County Chronicle, among others.
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Outside commentary

revolution?
by Yaron Brook

How do we stop the growth of the state? According them as moral, government’s grip on the economy will to Yaron Brook, executive director of the Ayn Rand keep tightening.” Institute, we have never needed an answer to that One of the most hopeful signs, according to Brook, is question more urgently than today. the recent surge in interest in the novelist-philosopher “In Illinois,” Brook says, “as in the country as a whole, Ayn Rand, whose magnum opus Atlas Shrugged has what we’ve seen over the past one hundred years is that sold more than a million copies since Obama took government intervention only grows. Even when we do office. take a step forward toward freer markets, we inevitably “As we argue in Free Market Revolution,” Brook says, take two giant leaps back.” “Rand’s crucial political contribution is a moral defense In a new book, Free Market Revolution: How Ayn Rand’s of capitalism. Above all, Rand is the only thinker, in Ideas Can End Big Government (co-authored by Don my judgment, who is able to address the fundamental Watkins), Brook argues that the reason government ethical objection to capitalism and limited government, intervention increases is a set of prevalent and deeply the one that underlies virtually every call for greater regulation and wealth redistribution: this idea that entrenched cultural ideas – specifically, moral ideas. markets are bad because they’re selfish.” According to Dr. Brook, “We are at a turning point: are we going to move in the direction of more freedom—or He adds, “That’s what we mean by a ‘free market less? The answer is not going to be determined by who revolution.’ It’s a revolution in the way people think wins November’s elections, but ultimately by the ideas about free markets. What we want is to create a country we accept. Today, property rights are widely viewed as that celebrates the pursuit of profit and rational self-inselfish, the profit motive as immoral, and free markets terest under economic freedom, so that at a federal as dangerous and even depraved. Unless we stop view- level, at a state level, and at a local level we can restore ing free markets with suspicion and instead come to see real limits on government.”

On October 1, Brook will join the Illinois Policy Institute to discuss his new book, Rand’s growing popularity, and how Rand’s ideas can help transform states like Illinois. In addition to being the executive director of the Ayn Rand Institute, Brook is an internationally sought-after speaker who has appeared on The O’Reilly Factor, The Glenn Beck Show, On the Money and Closing Bell, among others. His writings have appeared in the Wall Street Journal, USA Today, Investor’s Business Daily and CNN.com, and he is co-author with Don Watkins of a popular column on business and capitalism at Forbes.com.

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Institute event

Two Futures
On June 19th, the Institute hosted columnist Stephen Hayes, who argued that the dramatic increases in spending, deficits and debt we’ve seen in the last couple of years offers voters a clear choice and sets the stage for a serious debate about our national and state priorities.

Photos: Mark Campbell Creative

Watch the In Black and White: Stephen Hayes video at youtube.com/illinoispolicy

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Institute event

Bringing Innovation to Chicago Education Reform
On June 28th, the Institute hosted a luncheon with Mike Feinberg, co-founder of the Knowledge Is Power Program – one of the nation’s best-known networks of charter schools. Feinberg spoke about a new middle school on Chicago’s West Side that will blend KIPP’s successful approach to instruction with the newest developments in digital learning.

Photos: Mark Campbell Creative

Watch the In Black and White: Mike Feinberg video at youtube.com/illinoispolicy

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Institute event

Photos: Mark Campbell Creative

Watch the In Black and White: John Blundell video at youtube.com/illinoispolicy

On July 19th, the Institute co-hosted a cocktail hour with author John Blundell. Blundell discussed two of his books, Margaret Thatcher: A Portrait of the Iron Lady and Ladies for Liberty: Women Who Made a Difference in American History.
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Coming Apart

Photos: Mark Campbell Creative

Watch the In Black and White: Charles Murray video at youtube.com/illinoispolicy

On August 1st, the Institute hosted two events – a luncheon in Rockford and a cocktail hour in Chicago – featuring Dr. Charles Murray. Murray argued that the fundamental problem in America today is cultural inequality, not income inequality, and that the growth of this inequality over the last half century puts the success of the American project at risk.
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Upcoming events

Free Market Revolution
On Oct. 1, the Institute will host Yaron Brook, President of the Ayn Rand Institute, who will discuss his new book, Free Market Revolution. See his comments on page: 23 To RSVP visit http://freemarketrev.eventbrite.com/

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Election Night Anniversary Party!
Join the Institute for an election night viewing and 10th anniversary party at the Hotel Palomar in Chicago Nov. 6. To RSVP email Chris Andriesen at chris@illinoispolicy.org

Gifts of the Free Market Holiday Party
On Dec. 13, the Institute will host its annual “Gifts of the Free Market” Holiday Party. To RSVP email Chris Andriesen at chris@illinoispolicy.org

2012 Institute interns Austin Berg and John Lee

From policy research and writing to helping out around the office, interns and other summer staffers are an essential part of the Illinois Policy Institute team. This summer, we were lucky to have Jordan Anetsberger, Conor Durkin, John Klingner, John Lee and James McQuaid (through the Institute’s own Milton Friedman Internship program) Austin Berg and Anthony Glosson (through the Charles G. Koch Summer Fellow Program), Andy Quinn (a former Milton Friedman Intern returning as a Junior Associate) and Rob Isham (the Liberty Justice Center’s first summer law clerk). Thank you for your hard work!
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Staff spotlight: Paul Kersey, Director of Labor Policy
Having worked both at the state level and in Washington D.C., Paul Kersey brings a wealth of experience in labor issues to his role on the Illinois Policy Institute team. Q: What experience do you bring to the Institute? A: In the late 1990s, I served as state legislation director for the National Right to Work Committee. That experience took me to the Mackinac Center, a pro-liberty think-tank in Michigan, where I served first as a Labor Research Associate and eventually as director of labor policy. I also spent some time at the Heritage Foundation in Washington, D.C. as a visiting fellow. Q: Did anything about labor politics in Michigan take you by surprise? A: In 2008, unions were backing a ballot initiative that would have seriously altered Michigan’s judiciary and redistricting, and handed enormous new leverage to the unions’ allies on the left. But the disruptive changes were cleverly disguised as uncontroversial reform. Or, they were well disguised – until we found a PowerPoint stored on the United Auto Workers’ website that detailed all the ways the proposal would skew the political balance in their favor! That discovery helped turn the tide of public opinion. Q: Is Illinois doomed to follow in Michigan’s footsteps? A: I grew up in Detroit and watched that city fall apart because of destructive policies. We can’t let that happen here. Illinois today is where Michigan was ten years ago: government-employee unions still claim an out-sized share of political power and state resources, but many taxpayers are beginning to realize the scope of the crisis. There is real promise for reform. Even when public-sector unions aren’t the direct cause of a political problem, they too often work to block solutions. For the sake of all Illinoisans, that can’t continue.
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Photos: Mark Campbell Creative

Momentum: A decade for liberty
As we race toward a consequential election, we must consider what forthcoming decisions will mean for the people of Illinois. Will this year be a fulcrum in the modern history of our state, unleashing the power of human freedom and ingenuity to make this the best place in the world to live and work? We believe that it can be, and that is why the Illinois Policy Institute will continue to press tirelessly for true reform. We have accomplished much in the past 10 years, but there is so much more that we must do. Our achievements over the years are a result of the trust we have earned from committed Illinoisans and Americans like you. We are humbled and inspired by your tremendous generosity, your belief in liberty, your courageous engagement, and your dedication to our state and our nation. Working together, we will continue forward in our fight for freedom – and we will win. Please visit illinoispolicy.org/donate or contact the Illinois Policy Institute’s vice president of external relations, John Knowles at jknowles@illinoispolicy.org to learn more about how you can continue to partner with us in the future!
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