Localized Purchasing Will Help Illinois Reduce Deficit in Education Market

By: Lee Pietrowski

100-dollar-billsAs you may have heard, the State of Illinois is telling school districts, libraries, and municipalities that they should plan for deep cuts. Due to lack of funding, the state is looking at a $13 Billion deficit.

There are daily headlines about school districts like Naperville’s Indian Prairie District 204, Elgin School District U-46, and Woodland School District 50, cutting staff, programs and more. How are they going to keep their heads above water with the state owing school districts $725 million? Springfield keeps talking about tax increases to help the problem; but how much will tax payers of Illinois give before saying, “You got us in this mess and it’s up to you to clean it up, without tax increases”. This deficit that the state is in doesn’t only affect services, but it’s going to affect your retirement if you are part of a state funded retirement program.

We cannot wait for Springfield to deliberate and fight over the same old tax increases or wait for the federal government to bail us out. It’s not going to happen anytime soon. We have to start thinking about how we can help ourselves to get out of this hole that has been dug for us.

Chase Castle’s article titled “Lawmakers warn of deep school cuts”, featured in the March 2, 2010 edition of the Daily Herald has a quote from State Representative, Suzie Bassi. She states, “Cutting programs, reducing staff or closing buildings all are possible reactions to decreased state funding. They’re going to have to, unless they can figure out a way to manufacture money.” This is where we can actually help ourselves out of these crises, without going to the public for a tax increase. Let me explain.

What you have to do is change your philosophy regarding your purchasing habits. Every publicly funded agency is tax exempt; therefore tax is not an issue to them. But let me explain how the tax process works for the company that you are doing business with.

On average, profit margins of most companies will range from 12% to 25%. Every company has to make profit to stay in business. And yes, even though you are a government funded agency they still make profit on you.  Now here is where it gets interesting. Say you have a contract with a company that has its corporate headquarters in Wisconsin, Indiana or Iowa; the profits are taxed in that state, not in Illinois. Therefore, the bottom line is that the taxes paid on the profits are paid in that state, helping fund their school districts, libraries and municipalities. If you made that same purchase with a company that has its corporate offices in Illinois, the State of Illinois would receive the taxes on those profits which would then get put back into our state funding. The current corporate tax on profits in Illinois is 7.3%. This means that by not doing business with a company that has its corporate headquarters in Illinois you are giving other states that 7.3% tax.

Some companies will argue that they have a branch in Illinois. This doesn’t matter, as all profits recorded are at the corporate level and in the state they are in. You can verify where the corporate offices are located on most web sites. Some companies will say they are in Illinois, but they are owned by another company. Some may even have the corporation that owns them cleverly hidden on the website, usually at the bottom.

I say, it’s time to take matters into your own hands and start looking at ways to help our state get out of this funding mess. Along the way, you may just help yourself.

Ask yourself these questions:

  • How many companies do we have contracts with that are not located in Illinois?
  • Is there a vendor that can support us and has its corporate offices in Illinois?
  • How many companies on my $25,000.00+ contract list are not located in Illinois?