No tax hike, no corporate tax breaks in slim Illinois budget
SPRINGFIELD, Ill. (AP) — Gov. J.B. Pritzker on Wednesday presented a slimmer state budget that would not increase income tax but would rely on transfers from other state accounts and the elimination of hundreds of millions of dollars of corporate tax breaks.
Pritzker, a man devoted to and sometimes guided by Illinois history, delivered a combined State of the State and budget address from the Illinois State Fairgrounds. There, he awakened the echoes of the field hospital set up in 1918 to care for overflow victims of the Spanish Flu; it is now one of the state’s largest coronavirus vaccination sites.
Largely because of the pandemic, Pritzker proposed a $41.6 billion operating budget for the fiscal year that begins July 1 — a 4.2% decrease from its predecessor.
“I had bolder plans for our state budget than what I am going to present to you today ...,” said Pritzker, beginning his third year in office. “But as all our families have had to make hard choices over the last year, so too does state government.”
Opponents have reason for skepticism. The proposal is a far cry from the dire predictions doled out last fall by members of the administration who were campaigning for Pritzker’s top priority — a graduated income tax that hit the wealthy harder. The administration claimed that without the amendment, which was defeated handily, state spending would demand a tax hike on all payers or across-the-board reductions of up to 20%.
Nonetheless, the blueprint — which on paper turns what was projected in November to be a $2.6 billion deficit in fiscal 2022 into a $122 million surplus — relies on transfers from other state accounts and significant adjustments to Illinois fiscal policy that must withstand legislative scrutiny. Republicans complained that it was a shell game to shield what really is a budget out of balance by $1.7 billion.
“He has put us on track to just continue to move money around and raise taxes on businesses and blue collar workers in the manufacturing sector here in Illinois,” said Senate Republican Leader Dan McConchie of Hawthorn Woods. “The governor continues to show just how out of touch he is with everyone else when we all have to balance our own budgets.”
Funding for elementary and secondary education is flat, and would not get the $350 million annual boost pledged in a 2017 school-funding overhaul. But Pritzker aides said education spending would be supplemented by expected federal dollars from a COVID-19 relief package before Congress.
The plan also depends on getting $932 million extra by ending tax breaks for corporations or by “decoupling” from federal tax breaks in those areas. This includes $30 million from reinstating the corporate franchise tax, which Pritzker eliminated in his 2019 budget. House Republican Leader Jim Durkin of Western Springs contended the governor has reneged on a deal the two struck about corporate tax breaks necessary to spur economic growth.
Cigarette tax revenue intended to finance the ongoing $45 billion Rebuild Illinois capital construction plan would be diverted to general spending for a year. Municipalities’ share of state income tax would be pro-rated at 90% of the distributive formula, but Pritzker aides say cities and counties would make up some of that with more money following the corporate tax-break closures.
Some of the money-shuffling would increase money for human service agencies called upon during the pandemic. He asked the General Assembly to take immediate action to provide an additional $60 million to bolster the unemployment insurance program, which was walloped by pandemic job losses. And he was seeking a $28 million increase in the needs-based Monetary Award Program so more low-income students can go to college.
Spending pressure would be eased dramatically were it not for a budget albatross that pre-dates the pandemic: State-employee pension contributions. No longer able to skip annual contributions in the woefully underfunded program, a bruising $9.4 billion goes toward retirement funds.
Democrats lauded the governor for responsibly funding basic needs — including the crucial if unglamorous pension payment — without socking individuals with higher taxes.
“He was able to provide a blueprint for a balanced budget ... without raising taxes on working and middle-class families,” Des Plaines Democratic Sen. Laure Murphy said. “In fact, he’s really making a concerted effort to address spending, so that the state of Illinois is going to spend within the means that the taxpayers have provided.”
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This story has been corrected to show the deficit is projected to be $2.6 billion, not $3.9 billion, and that the governor’s budget proposal would not rely on revenue from the federal COVID-19 relief package that is still under debate in Congress.