In light of the pandemic’s “tough decisions”, Illinois Governor JB Pritzker proposed a $ 41.6 billion state budget on Wednesday that will keep the income tax rate stable and lower corporate tax credits, but could shift dramatically when Congress delivers another billions of dollars in COVID. 19 relief.
The Democratic governor’s plan to keep the new spending under control takes a no-frills, dramatic approach shaped by the sweeping nature of the COVID-19 pandemic, which Pritzker said has forced a sobering recalibration of his priorities before the pandemic.
“I had bolder plans for our national budget than what I am about to present to you today. It would be a lie to suggest otherwise, ”the governor said in his budget address on Wednesday streamed from the Illinois State Fairgrounds, which was an emergency hospital during the 1918 Spanish flu pandemic and is now a place for mass vaccination against the coronavirus.
“But just like all of our families had to make difficult decisions last year, so did the state government. And right now we need to get a balanced budget that strikes the right balance between tightening our belts and preventing further trouble for Illinois people who are already carrying a heavy burden, ”he said.
After losing his tiered income tax change in November, Pritzker didn’t take a financial move that some had believed would be inevitable: to raise the state’s income tax rate by 4.95 percent.
Instead, in his draft government spending plan due in July, the governor is proposing “flat” spending, maintaining cuts of more than $ 700 million imposed late last year and the elimination of $ 932 million in corporate tax relief is claimed.
At the same time, the governor pledged a $ 60 million increase to help tackle the spate of pandemic jobless claims from people who have lost their jobs and to steer some of the new federal dollars that will put Illinois in the way of small businesses that are affected by a pandemic -imposed shutdowns.
Government spending on education and public safety is nearly unchanged in Pritzker’s proposed budget, but funding for human service sees one of the biggest improvements in his plan. The governor also pledged to provide more than $ 10 billion to cover mandatory state pension payments.
The package will go outside a Democratically controlled Illinois House and Senate, where Republicans will be relegated to super-minority status without the numbers blocking the governor and his legislative allies.
Pritzker used part of his speech to address obstructive Republicans who have been fighting him every step of the way in dealing with the pandemic.
“During the pandemic, they encouraged companies to oppose health guidelines, spread conspiracy theories about deaths from Covid, and crack down on mask guidelines with teeth and nails,” he said. “Amid the tragedy of this pandemic, they have campaigned against the federal government to bring relief to the Illinois people, while ignoring the life-changing economic pain of real working families.
“Essentially, they got rid of the fire department, burned the house down and poured gas into the flames – and now they’re asking why we aren’t doing more to prevent fires,” said Pritzker. “In a normal year, I could have more patience for their hypocrisy. But this is not a normal year. “
Republicans and some corporate groups threw back their own barbs on Pritzker to remove some corporate tax breaks that were part of a budget deal between the governor and the GOP for 2019.
Jim Durkin, minority chairman of the R-Western Springs House of Representatives, accused Pritzker of violating his word two years ago and questioned whether it was “some kind of repayment” against Republicans for his phased change in Didn’t support income tax. He also mocked the governor’s characterization of the tax breaks as mere “loopholes”.
“There is a difference between gaps and incentives,” Durkin said after Wednesday’s speech. “Incentives create jobs, grow our economies, and keep our families in Illinois. “Loopholes”, on the other hand, are used by tycoons to avoid paying taxes in Illinois such as parking money in the Cayman Islands or using questionable property tax exemptions. “
This excavation stems from some of the tough campaign issues the billionaire governor faced in his 2018 election.
Pritzker admitted having deposits in the controversial Caribbean tax haven. He also had to answer for a controversial property tax reduction on a Gold Coast home he was renovating by removing its toilets. A federal investigation into the governor’s property tax reduction followed, although the investigation did not reveal any criminal charges.
Durkin also accused the governor of attempting to brush the corporate tax break as “some sort of repayment” against the GOP for defeat of its tiered tax change.
The Illinois Retail Merchants Association, the only large group of companies that didn’t endorse GOP Governor Bruce Rauner in 2018, pounded Pritzker over his move to reduce a certain tax break taken by small businesses to the state $ 73 million US dollars to save.
“While the governor claims his focus is on rebuilding the state economy, it is counterintuitive that his first step is to increase costs for businesses by removing the retail discount that shopkeepers only partially manage and collect of sales tax reimbursed on behalf of the state, ”said Rob Karr, president and CEO of the retail group.
Fighting aside, the governor is fortunate to have the state weather the effects of the coronavirus without the state government’s two main sources of funding – state income and sales taxes – falling free due to the pandemic.
A new report from the legislature’s bipartisan budget forecast, the State Commission on Government Forecasts and Accountability, shows that state income tax revenues are nearly 10% higher than a year ago and state sales tax revenues are nearly 4% higher during the same period.
These surprisingly strong financial results at a time of high unemployment are one of the reasons the pandemic-impacted financial picture in Illinois is not as bad as it was once feared.
Even so, even the budget framework Pritzker put on the table on Wednesday could look very different in a few weeks, depending on the fate of President Joe Biden’s $ 1.9 trillion COVID-19 aid package, which was launched on an action by the Congress is waiting.
The office of U.S. Representative Raja Krishnamoorthi, D-Ill., Estimated on Monday that Illinois ‘contribution to House Democrats’ COVID-19 relief plan totaled more than $ 7.5 billion. Another $ 5.7 billion would be earmarked for local government in Illinois, including $ 1.8 billion for Chicago and $ 1 billion for Cook County.
A vote by the entire US House is expected within two weeks, and then the move would move to the Democratic-led US Senate.
Senior Pritzker administration sources said Wednesday if that money comes through, his administration intends to accelerate repayment of more than $ 3 billion in pandemic-related loans from the Federal Reserve Bank between June and December last year.
“Actions by Congress will help us today, but the remaining tax challenges in Illinois will not be resolved,” said Pritzker. “Therefore, any money we receive from the federal government must be spent wisely by paying back the borrowings and our accounts. All that is left must be used to invest in job creation and economic growth.
“More jobs, more businesses, more economic activity – means a higher standard of living, a healthier budget and a healthier state government for our citizens,” he said.
Last week the governor’s office made it clear that he would not seek an increase in the state’s individual income tax rate of 4.95%. In December, former Democratic House Speaker Michael Madigan had considered this a possibility and said he would help the governor push for the increase if Pritzker so wished this spring.
“I assumed that hard-working families no longer have to pay when they are thinnest,” said the governor on Wednesday. “I want middle-class Illinois people to pay lower income taxes, not higher. So this budget does not provide for any general tax increases. “
Pritzker also set several non-budgetary priorities in his speech, including calling for a ban on Illinois lawmakers lobbying other government agencies and ending a practice whereby retired lawmakers can become lobbyists immediately.
In addition, Pritzker expressed his support for another lottery for the licensing of cannabis and this spring again campaigned for a kind of energy omnibus that “protects our nuclear fleet and builds our wind and solar industry, the environment, the consumers puts the first position and supports jobs ”.
The governor’s speech was not directly related to his recent call for lawmakers to separate Illinois tax law from federal law, but administration sources stressed that this was still a priority that will re-emerge in Springfield over the next month and for the State government could mean a profit of $ 500 million.
When Congress passed previous COVID-19 relief last spring, it changed the way that federal law treats net operating losses and excessive business losses. This provision also affected state law regarding these business tax issues, resulting in an expected revenue loss to the state of $ 500 million. Legislative measures to decouple the state from this federal regulation would keep that money in Springfield.
Because of the pandemic, Pritzker described his proposed spending plan as “one of the toughest budgets this government has ever had,” but vowed to work with the General Assembly and not to add suffering to the coronavirus burden on Illinoisians.
“I go into the negotiation process openly. I only have one hard and fast rule: we will not treat people who have been decimated by this pandemic as road kill, ”he said. “The neediest in our desperate times deserve our help, and we cannot let them fail.”
Dave McKinney and Tony Arnold report on politics in Illinois for WBEZ. Follow them on Twitter @davemckinney and @tonyjarnold.