Heading into an election year, Illinois Gov. J.B. Pritzker sought to stave off critics with a $45.4 billion budget proposal that will allow him to hit the campaign trail heralding tax relief and a budgetary turnaround – a move at least one challenger cast as “attempted bribery.”
The Democrat’s plan is catered to please voters and credit ratings agencies alike, with increases for education and violence prevention and a temporary elimination of a 1% tax on groceries, while also paying a half billion dollars more than the state’s legally required $9.6 billion pension contribution.
“Contrary to those folks who spend their time orbiting Illinois politics just spelunking for misery, our state has a lot to be proud of,” Pritzker said during a Wednesday speech at the Old State Capitol in Springfield. “Illinois, the state of our great state is strong, unbreakable and enduring.”
Illinois’ unfunded longterm pension debt is still the nation’s largest, topping $300 billion.
“The governor likes to talk about the great picture of Illinois, but there are no structural reforms anywhere,” House Republican Leader Jim Durkin said. “Today’s comments were his wish list on getting reelected. And this was a bitterly partisan address. But it was all centered on one-time, one-year gimmicks for people who are being squeezed terribly by inflation, which quite frankly none of these family recovery plan gimmicks are going to make that much of a dent in anyone’s pocketbook over the next year.”
Durkin was one of only a handful of legislators in the audience for the speech; House and Senate leaders canceled session for the week due to the snowstorm.
The Republican leader demurred on whether he’ll vote for any of the proposals – even if lawmakers have earnest quibbles, it would be easy for Democrats to spin rejection of tax relief into negative campaign ads.
It’s early in the budget process, Pritzker’s plan got early general support from Democrats who control the legislature.
“I’m not accustomed to good news in a budget speech. This is a budget proposal unlike any I’ve seen in my time in the Senate,” Illinois Senate President Don Harmon said in a statement. “There’s a lot to like with this plan, and I look forward to working with the governor to produce a final product.”
The Speaker of the House compared Illinois’ rosy financial picture to a few years ago, when a partisan standoff between Republican Gov. Bruce Rauner and the Democrat-dominated General Assembly put Illinois on the brink of junk-bond credit status and ended with $17 billion in unpaid bills.
“The governor’s budget address lays out a clear path to continue moving our state toward financial stability and surety while prioritizing hardworking Illinoisans. I could not be more proud of this state and the significant progress we’ve made in such a short amount of time,” Speaker Emanuel “Chris” Welch said in a statement. “Our future is much brighter, and our fiscal outlook is strong. This proposal by Governor Pritzker is an excellent starting point for our legislative budget negotiations. We cannot lose sight of the fact that we are still very much in the midst of an unprecedented pandemic, and we must continue providing relief to people who are struggling.”
Still, Democrats will want to put their stamp on the budget, and diverse coalitions of Democrats are already making known they are keen to ensure unbudgeted, surplus funds will be dedicated to causes from immigration to hospitals that serve vulnerable communities.
“I urge the governor to release the $30 million from the American Rescue Plan funding for safety net hospitals and hospital transformations,” State Sen. Emil Jones III, D-Chicago, said in a statement. “The safety net grants must be restored back into the budget so that our most vulnerable communities are properly equipped to combat this pandemic and other health disparities. For years, many of our safety nets haven’t seen a dime of their much needed funding. Let’s deliver on the promises we already made before we commit to new ones.”
Progressive legislators expressed disappointment that the governor didn’t focus relief more squarely on low-income Illinoisans through expanding the Earned Income Tax Credit and Child Tax Credit.
“Amid the pandemic, working families continue to struggle to pay the bills, especially with the rising prices at the grocery store and energy bills we are experiencing. Our community needs help,” said Sen. Omar Aquino, D-Chicago, who is sponsor of a bill (SB3774) that would allow childless workers and immigrants without Social Security Numbers to be eligible for the earned income tax credit.
Lawmakers have until the end of May to approve a budget before the next fiscal year begins in July, but with a June 28 primary contest on the calendar, legislators are set to have a budget completed by April 8.
Video: State lawmakers Greg Harris (D), Tom Demmer (R), Don DeWitte (R), and Elgie Sims (D) react to Gov. J.B. Pritzker’s election-year budget plan. (Produced by Paul Caine)
Among the budget highlights: Illinois will pay off a loan borrowed from the federal government the state took out early in the pandemic, shifting by the end of the fiscal year more than $800 million into a depleted “rainy day” fund, add $350 million to an evidence-based formula intended to prop the neediest schools and give a boost to higher education including the Monetary Award Program grant for low-income students.
Pritzker also proposes creating a state behavioral health officer, giving additional money to violence prevention programs, sending $200 million to a gang witness protection program dormant since its creation and hiring more Illinois State Police cadets and Department of Child and Family Services case workers.
Health care workers, who Pritzker thanked for their commitment during the pandemic, would get a year’s reprieve in paying licensure fees.
Under the proposal, other one-time offers of relief will be available to a wide spectrum of Illinois residents.
The “family relief plan” would keep flat the tax on gasoline when it’s supposed to increase this summer by 2 cents a gallon (from 39.2 cents to 41.4 cents a gallon); temporarily lift a 1% state tax on groceries, saving families a buck per $100 of food; and offer 2 million households a 5% property tax rebate worth a max of $300.
Powerful interests are also pushing back, although it’s questionable whether they have enough sway with legislators – themselves looking to make moves that will please voters – to block them.
The tax on motor fuel is used to pay for road repairs and untying the tax from inflation for a year will short the road fund $135 million.
The Local Operating Engineers 150 union says that’s not responsible.
“Only a week ago, we saw a bridge collapse in Pennsylvania, and there are currently more than 2,000 structurally deficient bridges in Illinois. Our state is only beginning to make progress on this, and now is not the time to start writing IOUs for our critical infrastructure,” the union’s spokesman Ed Maher said in a statement.
Maher said someone who drives 15,000 miles a year could expect to save $10 with the two-cent reduction.
The Illinois Chamber of Commerce shares that concern, and has others.
President Todd Masich said the small bits of relief won’t materially make a difference for Illinoisians.
“It’s chicken feed being sprinkled around to different areas. I don’t think the grocery tax relief is going to be that meaningful. It’s a good impetus but it’s not going to be that meaningful. Even less so on the gas tax. When it’s 2 cents on $3.40 a gallon, what difference does that make?” Maisch said. “Let’s go ahead and put that all into property tax relief and sustain vital investment in our vital transportation infrastructure.”
Masich points out that the property tax plan excludes renters, as well as commercial property owners such as those who make up the chamber.
He said all of the tax relief should go toward property tax relief that will last for years, not just through the next governor’s race.
Meanwhile, the Illinois Fuel and Retail Association said the gas tax proposal doesn’t go far enough.
“Illinois already has the second highest gasoline taxes in the country and Governor Pritzker’s proposal today does nothing to change that. The Governor is correct that something needs to be done to address Illinois’ sky-high gas taxes, but more permanent solutions are needed,” the organization’s CEO Josh Sharp said in a statement. “Eliminating the automatic gas tax increase altogether would be one suggestion, as would reducing or removing Illinois’ sales tax on motor fuel.”
The governor credits prudent fiscal stewardship for making the tax relief and various investments possible.
“Look, the actual work of managing Illinois’ state finances is decidedly unglamorous. It is hours of hammering away at calcified problems of the past, persistently reducing liabilities on our state’s balance sheet, finding and implementing efficiencies and savings, upgrading systems that track expenditures, and asking every government employee to be a partner in smart budgeting,” he said. “It requires resisting the temptation to let political expediency take over our budget process, and it demands discipline and a commitment to do what’s right.”
House Democrats’ lead budget negotiator, Rep. Greg Harris of Chicago, also gives Pritzker credit.
“We have to deal with the hand that we are dealt. We had to deal for the last couple of years with the effects of COVID that devastated swathes of our economy that overtaxed our health care system. That disrupted peoples’ family and work lives. And yes, the federal government gave all the states some resources to deal with that,” Harris said.
Republicans said inflation driven by federal stimulus money has driven up the state’s take of sales tax revenue as well as $8.11 billion in COVID-19 relief money are behind the state’s current bounty, and that Illinois needs to be wise about how it’s spent.
“We have to acknowledge the fact that the past couple of budget years have been heavily influenced by an avalanche of cash from the federal government,” said Rep. Tom Demmer, R-Dixon.
The caucus is calling instead for permanent tax relief.
“I think these one-time gestures of tax cuts – what I would say to the governor is ‘welcome to the table.’ We have been suggesting all along that taxes against residents of this state continue to grow year after year,” said State Sen. Don DeWitte, R-West Dundee.
Some Republicans question Pritzker’s credibility, given that the governor in 2020 signaled that Illinois’ budget would take devastating hits if voters failed to approve a graduated tax increase estimated to raise $3 billion.
“This was a very different budget message than we heard from the governor in previous years … Just a year and a half ago Gov. Pritzker was out telling voters across Illinois that they needed to approve his $3 billion tax increase otherwise there would be drastic cuts or tax increases across the board,” Demmer said. “Then he followed it up last year with a proposal to increase taxes on businesses by over a billion dollars that was rejected by the General Assembly. But this year, with reelection looming, Gov. Pritzker wants to paint a very rosy picture.”
Still unresolved is how Illinois will deal with a $4.3 billion deficit to the state’s unemployment insurance trust fund, built up as record numbers of workers lost their jobs during the pandemic.
Legislators, business groups and the governor’s office are negotiating on how to pay that down, and the Pritzker administration said it has given that group reassurance it will devote some of the billions remaining of federal COVID-19 relief to the cause.
Still, chamber leader Maisch said a lack of resolution stands to saddle employers with having to pay that cost in higher taxes. Illinois, meanwhile, is incurring interest as it waits to make the fund whole.
“The $1 billion of tax relief is a drop in the bucket if it’s followed up by $4.3 billion of tax increases on employers,” Maisch said.