A year after historic tax increase, Illinois remains in the red
One year ago, lawmakers overrode Gov. Bruce Rauner’s veto, passing a $36.5 billion budget that took an additional $5 billion from taxpayers and ended a more-than-two-year standoff between the freshman governor demanding pro-business reforms and Democrats in the General Assembly, who passed a budget with the help of a handful of defecting Republicans.
The final vote tallies were slim, but Democrats passed the budget Rauner said in his veto message included “no changes to create jobs and grow our economy. It will push more families and businesses out of our state.”
On the House Floor, Democrats and Republicans who crossed their politically-allied governor extolled the virtues of creating stability for the state’s educational institutions and averting the dubious title of “first junk-rated state” while raising the money to keep social-service providers open and paying down billions of dollars in backlogged bills.
State Rep. David Harris, R-Arlington Heights, told his colleagues on the House floor there was no joy in voting for a tax increase, but “How long can this impasse go on? We all understand where we are. We’re looking into a financial abyss.”
House Speaker Michael Madigan, D-Chicago, won the day, successfully overcoming Rauner’s veto and securing permanently higher tax rates of 4.95 percent for personal income and pass-through businesses and 7.95 for corporate income. “Our budget agreement was made possible by legislators on both sides of the aisle who looked beyond partisan differences and put the best interests of our state and its residents first,” he said.
Whether the budget did that still is being debated.
Orphe Divounguy, chief economist with the Illinois Policy Institute, said the tax increase contributed to Illinois’ sluggish economic growth in relation to the rest of the nation.
“The U.S. economy is doing really well,” he said. “But in Illinois, what we saw after the tax increase is that jobs growth slowed 34 percent relative to expectations and 30 percent relative to the rest of the nation.”
Divounguy said the budget raised revenues but failed to slow spending, leading to the ongoing $3 billion budget unbalance.
“Those people who are not leaving the state are going to have to pay higher and higher tax bills to take care of their state government obligations,” he said.
Regardless of whom were to blame for the historic budget stalemate, health care providers, social services and various other businesses that relied on the state making good on their contracts and grants were stretched to the limits during that time. Many closed.
“We’re happy to have a state budget, but what many people don’t realize is that the budget impasse effects continue to be felt,” said Andrea Durbin, CEO of the Illinois Collaboration on Youth. “This year’s budget didn’t address the backlog of bills.”
One of the largest issues the state failed to address with the budget was its largest debt: $130 billion in unfunded pension liabilities.
“Fundamentally, we are where we were three years ago in terms of our overall situation concerning the unfunded pension numbers,” said Bill Bergman, with the nonprofit Truth in Accounting. “That’s despite a huge tailwind in the stock market.”
The budget that took effect July 1 spends $38.5 billion.