As if Chicago, Cook County or Illinois itself needed yet another black eye to its ongoing financial woes: Thursday, the federal government stated that Illinois may be in violation of federal law when it comes to the application of Cook County’s sweetened beverage tax, which could cost it $87 million in federal food stamp money.
The sticky situation arose when, in November of 2016, Cook County decided that the penny-per-ounce tax would be the best way to attempt to buffer the shortfalls in the county’s budget. Plus, as we were assured, if the tax dissuaded you from purchasing a sugary drink (as Politifact’s article showed, Chicago’s soft drinks are now the most expensive in the nation), it’s for your own good anyway because of health reasons or something.
Illinois fiscal problems are well documented. Currently, Illinois owes over $250 billion in pension debt, which was part of the reason for Moody’s Investors to downgrade Illinois credit rating to just above junk-status. As Illinois Policy’s Ted Dowbrowski and John Klingner report in their article:
“The state’s fiscal collapse is the culmination of decades of budget gimmicks used to paper over Illinois’ structural spending problems and misplaced spending priorities that favor special interests over ordinary residents.”
The piece goes on to say:
“Illinois has suffered 21 downgrades from the three major ratings agencies since 2009.
The downgrades began when Illinois started borrowing to conceal its growing pension crisis. As governor, Quinn borrowed a total of more than $7 billion in two years to make the state’s pension contributions.”
Instead of trying to tackle the ongoing and well-documented spending problem, Illinois resorted to passing a variety of taxes such as an increased income tax and the much derided Soda Tax. Shortly after passing the bill, Cook County was met with a lawsuit by the Illinois Retail Merchants Association and several grocers who alleged that the tax was “too vague and violated the State Constitution.” A few days after that, Illinois Circuit Judge Daniel Kubasiak issued a temporary restraining order stating also that the tax was unconstitutional.
Yet, on August 2nd, the highly contested tax bill went into effect and less than a month later, it is under heat from the federal government. The problem is, as the Chicago Tribune’s Greg Trotter and Ally Marotti reports:
Purchases made with federal food stamp benefits are exempt from the soda tax under federal law, but Cook County has allowed retailers to tax those purchases and provide refunds as a workaround for stores that haven’t been able to program their point-of-sale systems.
Earlier this week, the U.S. Department of Agriculture’s Food and Nutrition Services, the federal agency overseeing the SNAP food stamp program — officially known as the Supplemental Nutrition Assistance Program — warned Illinois that federal money could be withheld if the problem isn’t fixed.
USDA officials told the county the regulation was “unacceptable” in a phone call in late June, according to its memo to the state.
“It is (Food and Nutrition Services’) strict interpretation that retailers may not charge the tax to SNAP recipients at any time and that providing an immediate subsequent refund at a customer service does not cure the problem or the violation of the law”
Doubtful the fledgling Soda Tax, nor Illinois vast fiscal problems have seen the last of their controversies.