SPRINGFIELD – Gov. J.B. Pritzker made clear Wednesday that he believes solving the state’s long-term financial problems will require a new, graduated income tax structure that imposes higher taxes on upper-income Illinoisans.
That would require a constitutional amendment, a lengthy process that, even if approved, would not make any new money available to the state until the 2021-2022 budget year.
So for the upcoming fiscal year, which begins July 1, Pritzker outlined a proposed $38.7 billion state budget that would increase spending on education, human services and public safety.
It also relies heavily on new revenues to pay for new expenses, and increased borrowing to pay down a backlog of past-due bills and future pension liabilities.
Speaking to a joint session of the General Assembly, the Democratic governor called his budget plan for the upcoming fiscal year “a bridge to a stable fiscal future” that would enable the state to begin crawling out of its financial hole while maintaining funding for critical public services.
He also said, though, that restoring fiscal stability would take a number of years, and reiterated his call for a graduated income tax to accomplish that.
“Make no bones about it, I choose to stand up for working families and will lead the charge to finally enact a fair tax system in Illinois,” Pritzker said.
As expected, Democratic leaders generally praised the governor’s proposal, while Republicans expressed skepticism.
“Amid the challenges we heard spelled out today, we also heard that we now have a governor who recognizes the magnitude of these challenges and will work with us to address them,” House Speaker Mike Madigan, D-Chicago, said in a statement.
Senate Republican Leader Bill Brady of Bloomington, on the other hand, called Pritzker’s plan, “a starting point for negotiations.”
“We heard a lot in his speech about more spending, more tax increases and concepts tried in the past” Brady said in a statement. “And while we as legislators now begin digging into the details, I have grave concerns about the pension plan and I remain opposed to a graduated income tax.”
Pritzker’s proposed budget includes more investment in K-12, early childhood and higher education.
The evidence-based funding formula approved last session will see an added $375 million, $25 million more than the $350 million increase written into the law. The added money is first directed at the highest-need districts.
K-12 education also would see a $5 million boost to career and technical education, $2 million in funding for an Advanced Placement low-income test fee waiver program, and $250,000 in added educator misconduct investigation funding.
Early intervention programming would see a $7 million increase, and the federal preschool birth-5 grant will be allotted $3.8 billion.
Higher education will see modest increase as well, receiving $52.2 million in increased public university funding and $13.9 million for community colleges, a 5 percent increase from last fiscal year.
The Monetary Award Program, which provides grants that don’t need to be repaid if an Illinois student attends select state colleges or universities, will receive $50 million more in funding. The AIM High program, which aims to keep Illinois’s brightest students in the state for college through grant funding, will receive $35 million in the second year of the pilot program.
Funding for POW/MIA scholarships, which have not been funded since 2009, is also restored in the bill at a cost of $3.5 million.
Human services and health care
The second-largest area of increased spending in Pritzker’s budget plan is the Department of Human Services, which would see a boost of $542 million, or 9.2 percent.
Included in that is $103 million for increased funding for home services that allow people with severe disabilities to continue living independently. It also includes $107 million to pay for higher minimum wage expenses for certain workers.
It expands the Child Care Assistance Program by raising the eligibility limit to 200 percent of the federal poverty level, or $49,080 for a family of three, which would cost $30 million, and it includes $31 million more to fund 700 new placements for people with developmental disabilities to transition into less restrictive environments.
“This is less than what I would like to do, but it is what we can afford to do in year one of our recovery,” Pritzker said.
Meanwhile, Pritzker is proposing to reduce general revenue spending on Medicaid by about $700 million. That reduction would be offset by a new tax levied on managed care organizations, including those that administer the Medicaid program. Revenue from that tax would then be put into a fund that could be used to draw down additional federal Medicaid matching dollars.
New revenues and borrowing
To accomplish all that, Pritzker is asking for $1.1 billion more in new revenues. Those would include, among other things, a 32-cent per-pack increase in cigarette taxes, a new 36.5 percent tax on e-cigarettes, and a new tax on plastic shopping bags of either 5 or 7 cents per bag.
Also in Pritzker’s budget plan is about $170 million that could come from licensing fees generated by the legalization of recreational marijuana; $212 million from legalizing sports wagering, which the United States Supreme Court said last year states could do; and changing the state’s corporate tax code to capture full taxes of about $94 million on assets brought back to the United States from overseas as a result of the 2017 federal tax reform law.
Pritzker is also asking for authority to issue $4.5 billion in new bonded indebtedness next year for pension costs and paying down the backlog of unpaid bills.
That includes the $2 billion in “pension obligation bonds” he already has discussed, money that would give the pension funds an immediate infusion of cash. It also includes $1 billion to fund more early retirement buyouts, a program that he is proposing to make permanent; and $1.5 billion for the unpaid bill backlog.
Pritzker’s budget proposal is only the first step in a long legislative process that will lead to a final budget that he and lawmakers will hammer out by the end of the session, and the final plan could look very different from the one he outlined Wednesday.
“Undoubtedly all of you will bring your own priorities, ideas, and concerns to the budget process,” Pritzker said. “I welcome that conversation – that’s as it should be. We are all here, Democrats and Republicans, with the common desire to serve the people of our state well. And we do that better when we talk to each other, and more importantly, listen to each other.”
Some of Sauk Valley's legislative leaders sent news release expressing their thoughts on Gov. J.B. Pritzker's first budget address:
Sen. Neil Anderson, R-Andalusia
I found items in the governor’s budget proposal that I support. I was glad to see that he prioritized spending for K-12 schools and higher education. However, I also have some major concerns.
While the governor correctly addressed the problems Illinois faces, he failed to provide appropriate solutions. His solution was simply tax and borrow, repeating the mistakes of the past and kicking the can down the road.
The residents and businesses in my district cannot afford another tax increase of any kind. If we keep adding to the burden placed on employers it’s going to be hard for them to stay in my district. Instead, they’ll cross the river and continue doing business in Iowa, where there’s a lower minimum wage and lower workers’ compensation costs.
I recognize that this is just a starting point. Going forward I hope the governor’s rhetoric on bipartisanship matches his actions as we continue to address the budget needs of the state.
Rep. Dan Swanson, R-Alpha
I appreciate that the governor described his perspective as "bold optimism." However, I am very concerned about his comments about changing Illinois’ Constitution to create a progressive income tax scheme.
I understand moving this direction is the only possible way he can pay for the $1.121 billion in new spending this year and the mushrooming spending to follow further into Pritzker’s administration, but Illinoisans are sick of kicking the can down the road without addressing the real cost-drivers of our out-of-control state spending.
The reality is fewer and fewer Illinoisans are being asked to pay for more and more services to those deemed disadvantaged by progressive members of the Legislature. Many of those being asked to pick up the bill are seeing no benefit to themselves in continuing to do so and are leaving our state.
The governor’s speech and agenda seemingly does little to negate that problem.
Rep. Andrew Chesney, R-Freeport
Illinois is losing population and, unfortunately, what we heard today is a tax-and-spend policy, peppered with borrowing gimmicks, and proposed sale of long-term assets to meet short-term spending. As expected, there was a fair amount of Gov. Pritzker pandering to the progressive wing of his party.
It is going to take many years of intense fiscal discipline to dig Illinois out of the hole dug by 20 years of Democrat leadership over the budgeting process.
Regarding the governor’s comments on pension reform, Chesney cautioned, “We should approach his ideas cautiously to ensure we are not simply robbing Peter to pay Paul.A return to Blagojevich’s failed budget strategy of pension holidays is worrisome, to say the least.”