Illinois House lawmakers adjourned Friday without approving a budget, officially entering a third fiscal year without one, but with optimism that a deal – including a 32.5 percent income tax increase – can be reached over the weekend.
Democratic House Speaker Michael Madigan conceded Friday morning that a budget deal wouldn’t be consummated by midnight – the start of the 2018 state fiscal year – and implored the major bond ratings agencies not to downgrade the state’s credit rating to junk status.
But House lawmakers offered up a glimmer of hope with a bipartisan 90-25 test vote to approve a $36.5 billion spending plan fueled by a $5 billion income tax increase that would boost the individual rate from 3.75 percent to 4.95 percent.
Lawmakers and experts statewide had warned for months about the host of bad consequences that await the state should it enter an unprecedented third straight year without a budget, courtesy of the differences between the Democratic-dominated General Assembly and Republican Gov. Bruce Rauner.
They go far beyond becoming the first U.S. state to be have its credit rating dip below investment grade. For starters, Comptroller Susana Mendoza has said she will be unable to cover the basic state services ordered paid by courts, and the Illinois State Department of Transportation has halted all of its road construction projects.
“We will remain in session to continue our progress toward passing a balanced budget,” Madigan said in the statement. “In light of this ongoing progress, I would ask that bond rating agencies temporarily withhold judgment and allow legislators time to negotiate a bipartisan, balanced budget.”
Madigan’s statement included letters he sent Friday to Fitch Ratings, Standard & Poor’s and Moody’s Investors Service. Standard & Poor’s warned several weeks ago that it will downgrade the state to junk should it not have a budget by Saturday, and the other two agencies could follow suit.
“We will continue working to put a compromise on the governor’s desk and end this impasse through the next week, and I ask you to allow these negotiations to move forward,” Madigan wrote to all three ratings firms.
Illinois’ current spending, mandated by court orders and consent decrees despite the lack of a budget, has resulted in a $6.2 billion deficit and a $14.7 billion stack of unpaid bills as of Friday afternoon.
The proposed budget in the House relies on increasing the state income tax and cutting $2.4 billion.
The revenue plan conceived by House Democrats likely would increase the income tax rate for individual filers by 32 percent, or from 3.75 percent to 4.95 percent of income. The increase would take effect Saturday – earlier versions that made the increase retroactive to Jan. 1 met with resistance from Republicans.
If approved, it would take on average an extra $600 a year from a worker making $50,000 a year.
The 4.95 percent rate is close to the 5 percent rate that Illinois taxpayers paid for four years after lawmakers raised taxes in the lame-duck session after the 2010 election. That temporary increase, which raised the individual rate by 66 percent, took an average of a week’s pay from every Illinois worker.
Rauner, who was elected in 2014 on a platform of reversing Illinois’ sinking fortunes, has insisted that any budget that includes tax increases must include sufficient pro-taxpayer and pro-business reforms. They include a four-year property tax freeze, and reforms to workers’ compensation laws and changes to pension benefits for state employees.
The bitter partisan divide in Springfield over how to come together on a spending plan has eased in significant part to cooperation as Republicans and Democrats alike work to avoid the nightmare scenario that experts warn will come to pass if a budget isn’t finalized, and fast.
“I come to you today with great joy, not with regret or despair. We’re going to save our state, and we’re going to save it together,” Rep. Steve Andersson, R-Geneva, the House Republicans’ floor leader, said to thunderous applause.
Andersson, whose district includes a sliver of McHenry County, was the only local house lawmaker who voted yes on the 90-25 test bill. Republican Reps. David McSweeney, R-Barrington Hills; Barbara Wheeler, R-Crystal Lake; Steven Reick, R-Woodstock; and Allen Skillicorn, R-East Dundee, all voted no.
Skillicorn said that Illinois taxpayers will be giving more to the state in exchange for weak and “watered down” reforms.
“It’s pretty clear to me that the governor and a large portion of Republicans have capitulated to the speaker,” Skillicorn said. “The appropriations amendment didn’t have any substantial cuts, no structural reforms, and really was something that compromises the values of the people of McHenry County.”
McSweeney, as he has since the budget impasse started, reiterated that he is a “hell no” on any tax increase.
“There’s nothing that’s been done to reform Illinois government or spending. It’s a travesty. It’s a joke,” McSweeney said.
Whatever plan the House passes will need to clear the Senate before going to Rauner for a vote. Senate Democrats approved a budget in May in the last days of the legislative session – without a single Republican vote – but Madigan did not bring it forward for consideration.
The Associated Press contributed to this story.