For the third straight year, the Democratic-controlled General Assembly and Republican Gov. Bruce Rauner have been unable to come to an agreement on a full-year state budget.
The latest deadline expired at midnight Wednesday with the end of the spring legislative session, which means that any budget plan will require a three-fifths House and Senate supermajority vote to pass until January.
The possibility exists that a deal could be reached before the July 1 start of fiscal 2018. Without one, the possibility exists that school districts statewide may have to decide whether they can open at the end of summer vacation – a deal struck last year to fund K-12 education through the 2017 school year expires next month.
Democratic House Speaker Michael Madigan said the House will work through June to try to get a budget passed – he did not bring a Senate proposal, which likely would have been vetoed by Rauner, up for a vote. But some of McHenry County’s representatives in Springfield are warning that the delay will mean beleaguered taxpayers will have to fork over even more to a fiscally irresponsible state government.
“This is an absolute travesty. It’s a disgrace,” state Rep. David McSweeney, R-Barrington Hills, said Thursday morning. “Now that we’re in overtime session, you have politicians in both parties clamoring for a massive tax increase. The problem in Illinois is that we’re spending too much money.”
McSweeney spoke about an hour after S&P Global Ratings dropped
Illinois’ credit rating to BBB-, or one notch above noninvestment grade, or junk, status. The state’s rating with Moody’s Investors Service also dropped to BBB-, and Fitch Ratings is two steps above junk bonds, with a negative outlook.
The budget plan approved by the Illinois Senate included $37.3 billion in spending, anchored by $5.4 billion in tax increases. It included raising the individual income tax rate from 3.75 percent to 4.95 percent, raising the corporate rate from 5.25 percent to 7 percent, and expanding the state sales tax to a number of services. The Senate plan makes the tax increase retroactive to Jan. 1, which would have made individual tax rates 5.81 percent for the rest of the year.
It passed with no Republican votes after months of bipartisan work among Senate leaders failed to produce a “grand bargain” that could get support from the GOP, which like Rauner, wants to tie any tax increases to meaningful reforms.
Sen. Dan McConchie, R-Hawthorn Woods, said he could not sign off on a budget plan that he said started with massive tax increases and then cut some as an afterthought. All of McHenry County’s lawmakers in the Illinois House and Senate are Republicans.
“This entire budget started in the wrong place,” McConchie said. “It started with how much did politicians think they could get away with raising in taxes, and then make some cuts to get to a balanced budget.”
As of Wednesday, the state is more than about $6 billion in the red. Although the state has not had a full-year budget since 2015, about 90 percent of its spending has continued, mandated by court orders, consent decrees and state statute. However, payments to social service agencies, higher education and other expenses are not mandated – on top of putting these groups in an ever-worsening fiscal squeeze, it has resulted in a $14.5 billion backlog of unpaid bills.
The ongoing standoff began in spring 2015 with Rauner’s veto of a deficit budget that was about $4 billion out of whack. He and other Republicans have insisted that any increase in taxes be pair with real political and economic reform. Democrats, on the other hand, have called many of the proposed reforms hurtful to middle- and working-class people, and consider the budget and reforms to be two unrelated issues.
The proposed reforms have changed considerably since the impasse began, with Rauner backing away for now from some of the more ambitious and contentious ones, such as legislative term limits and curtailing collective bargaining, in hopes of getting a budget deal struck. The proposed reform getting the most attention this time around was a statewide freeze on property taxes, although the best the Senate could do is pass a two-year freeze.
McSweeney, who has made property tax reform a top legislative priority, calls a freeze an inadequate reform that would not come close to making up for the proposed income tax increase. Illinois has the highest average property tax burden of all 50 states, and one study puts McHenry County’s at 29th highest of all counties nationwide.
Critics who allege that tax increases won’t fix the state’s problems have a powerful example to point to – the previous income tax increase.
Democratic lawmakers in the final hours of session in January 2011 approved the largest income tax increase in state history – 67 percent on individuals and 46 percent on corporations – in an effort to right the state’s fiscal ship and pay off its pile of unpaid bills. The temporary, four-year increase collected an additional $32 billion, but more than 90 percent of the surplus went to pay the state’s ballooning public pension costs – the unfunded obligations for the state’s five state-run pension systems now stands at $130 billion.
State Rep. Barbara Wheeler, R-Crystal Lake, said that the passing of Wednesday’s deadline meant the end of “another opportunity to stop the financial death spiral gripping Illinois.” She pinned the blame for the lack of a budget on Madigan, but held out hope that a full-year budget deal can be reached before July 1.
Approving a budget deal now would require three-fifths supermajority votes in both houses. While Democrats hold a supermajority in the Senate, they do not in the House, meaning several Republican votes will be required to secure a budget deal.
“We can still pass a balanced budget before the current fiscal year ends on June 30, albeit through a more restrictive process now,” Wheeler said. “Failure to do so will cause even more services to stop. We must stop the political games and do what’s right to pass a balanced budget built on reasonable reform before it is too late.”
McSweeney, too, anticipates being called back to Springfield later in June. But he’s warning that whatever deal comes out of it will be a lot of hurt on taxpayers and job creators in exchange for very little.
“The scariest words in Illinois right now are ‘grand bargain.’ It’s code for, ‘I’m going to raise your taxes through the roof,’ ” McSweeney said.