Governor to deliver first spending plan
to lawmakers Feb. 20, cites $3.2B deficit
Democratic Gov. J.B. Pritzker’s administration on Friday set the stage for a low-expectations budget plan later this month, attacking former Republican Gov. Bruce Rauner for driving Illinois “into a financial ditch” that will take years to pull out of.
“Rebuilding a strong financial foundation for Illinois will take more than one year, or even one gubernatorial term,” said a report from Deputy Gov. Dan Hynes, a former state comptroller. “The current administration is committed to working diligently and across party lines to put our state on a path to fiscal stability.”
As Pritzker prepares to deliver his first spending plan to lawmakers Feb. 20, his administration said it is facing a $3.2 billion hole for the budget year that begins July 1. That deficit is more than $400 million deeper than the Rauner administration estimated before leaving office.
Word of the larger deficit and the stark tone of the document that details it — dubbed “Digging Out: The Rauner Wreckage Report” — provided a dramatic contrast to Pritzker’s populist campaign promises of spending more money on education and a host of social services.
How Pritzker plans to address the budget hole in the near term remains unclear.
Throughout his campaign, Pritzker repeated his plan to shift from a flat state income tax to a federal-style graduated system in which higher earners would pay higher rates. But that requires an amendment to the Illinois Constitution, which would take almost two years to get on the ballot for voter approval.
His other ideas for generating new revenue — legalizing and taxing recreational marijuana and sports betting — also would take time to implement and wouldn’t raise the substantial sums that an income tax change could.
“We’ve begun to identify revenue sources that can be implemented immediately,” Hynes said, declining to elaborate.
A separate report released Friday from Pritkzer’s transition team raised the prospect of expanding the state sales tax to some services — a concept long discussed and disregarded. It even raised the prospect of a statewide tax on plastic bags such as the one imposed in Chicago.
At one point in the campaign, Pritzker discussed raising the state’s overall flat income tax rate but adding tax credits on lower incomes to create a de facto graduated tax pending the constitutional amendment, but he backed away from the idea after facing criticism.
It’s not uncommon for new governors to blame the state’s financial woes on their predecessors, often saying they discovered things were worse when they got on the job.
When Rauner took office in 2015, he blamed previous administrations over decades for failing to develop “a credible financial plan” to deal with the state’s money troubles. But in the Pritzker report, Rauner is blasted for waging “ideological warfare” with the Democratic legislature over his union-weakening agenda that left the state with a historic budget impasse.
“The Rauner years will have ripple effects for a generation to come on those who suffered direct harm, including taxpayers,” the Pritzker report said, citing increased debt and a growing pile of unpaid bills to those providing state services — particularly social service agencies.
The Rauner administration estimated the deficit for next budget year at nearly $2.8 billion. But the Pritzker administration said “widespread cost pressures” in higher education, social services and other areas will make the hole even deeper. That includes an additional $275 million needed for human services, $70 million more for higher education and $170 million for state employee health insurance — an expense Rauner tried unsuccessfully to cut by reducing benefits in contract talks with union workers.
Also complicating the budget picture is a $500 million bill for pay increases owed to those workers. Rauner tried to block the raises during contract negotiations with the union representing the largest share of state workers, but Pritzker has said he will comply with a court order to pay them.
He also faces pension obligations of $9.2 billion next year, which will consume about a quarter of the state’s general revenue, and a backlog of unpaid bills nearing $8 billion.
The new governor has made his first legislative priority raising the statewide minimum wage to $15 per hour, a move that would fulfill a campaign promise but also has financial consequences for the state running into the hundreds of millions of dollars.
“The human and financial costs that have accrued over the last four years — to say nothing of the missed opportunity to stabilize Illinois’ finances during a period of relatively strong economic growth — will require a tremendous amount of effort to remedy going forward,” the report said.
In addition to the financial hole cited in the report, the state faces monumental costs to rebuild and improve its infrastructure. Pritzker and Republicans have voiced support for a massive public works bill, but no one has identified how to pay for it. The state has not had a public works plan since 2009, and a separate transition report offered goals but no specific sources of revenue.
While Pritzker has pinned his long-term financial vision for the state on a graduated income tax, prospects for voter ratification in 2020 of a constitutional amendment are questionable. The issue would likely be one of the most expensive ballot battles in the state during the upcoming election cycle, pitting business interests against Democratic allies in organized labor.
Already, a pro-business political committee headed by Greg Baise, the former president and CEO of the Illinois Manufacturers’ Association, announced the formation of a group called Ideas Illinois to combat the graduated-rate tax. Pritzker has dubbed the new tax system as a “fair tax,” while Baise is calling it a “jobs tax.”
“Reckless spending and a massive jobs tax are not the way to fix Illinois’ broken economy,” said Baise, who is chairing Ideas Illinois. “Ideas Illinois will provide the people of our state with an independent voice that is committed to tax reform policies, building a stronger business climate and finding real long-term economic solutions.”
The group is an offshoot of a political committee founded by Baise and businessman Ron Gidwitz called the Coalition for Jobs, Growth and Prosperity. Gidwitz left the committee after being named President Donald Trump’s ambassador to Belgium.
PREVIOUS ARTICLE
