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Rauner Lays Down His Cards in Illinois

CHICAGO – Calling passage of a compromise budget plan a matter of "political will," Illinois Gov. Bruce Rauner offered his support for an income tax increase and expanded sales tax as long as the deal permanently freezes local property taxes, caps spending, and overhauls worker's compensation.

Rauner laid out his parameters for supporting the Senate's sweeping, bipartisan 12-bill "Grand Bargain" package during his fiscal 2018 budget address Wednesday.

Rauner previously had praised the Senate's efforts but remained silent on whether the proposals met his demands for policy and governance reforms that have driven the state's 19-month-old budget stalemate.

"The budget must truly balance by the end of fiscal year 2018 – and it must balance in a way that doesn't send us right back into deficit a few years from now," Rauner said. "That means a hard cap on spending that forces state government to live within its means, balance the budget and pay off the state's debt.

"Spending reductions in the budget need to be real – not smoke and mirrors. Long-term pension reform needs to maximize savings in all pension systems," he added.

The "Grand Bargain's" pension reform bill impacts just three of the state's five systems, leaving out general workers as the union remains in contract negotiations with the administration and has threatened to strike. The judges' system is left out because the courts will have the final word on the reforms' legality.

The proposal asks state employees hired before 2011 to accept cost-of-living changes in exchange for counting future pay increases toward their pensionable salary.

The current package in the Senate also imposes just a two-year property tax freeze.

"The current Senate proposal calls for a permanent increase in the income tax rate but offers only a temporary property tax freeze in exchange. That's just not fair to hard-working taxpayers across the state," Rauner said.

On new revenue, Rauner left the door open to an income tax hike and broadening the sales tax to cover more goods and services but opposes the Senate's inclusion of groceries and medicine. The Senate plan raises $6 billion in new revenues by raising the personal income and corporate rates, trimming the state's total sales tax rate but extending it to cover more items.

Rauner shut the door on extending the income tax to cover retirement income.

That extension is not in the Senate plan but it has been pitched as an option by groups like the Chicago Civic Federation.

Rauner said legislative term limits remain among his list of demands as do worker's compensation changes that mirror Massachusetts' system.

Rauner noted Massachusetts is a "blue state."

House Speaker Michael Madigan, D-Chicago, has slammed the administration's attempts to overhaul worker's compensation as too pro-business and harmful to workers.

It's unclear whether the pending bill meets Rauner's worker's compensation demands. The package does not include legislation on term limits.

The Senate recently approved placing term limits on leadership positions and has said a future bill would be drafted to send a constitutional amendment to voters.

"Term limits get job creators excited," Rauner said, drawing jeers from Democrats.

Rauner has pressed for such governance and policy reforms billing them as crucial to improving the state's economy and creating more jobs and he's tied them to support for tax increases that many believe are needed to bail the state out of its fiscal mess.

"Now is the time to seize the moment – build on the progress made in recent weeks – and right our ship of state," Rauner said.

The legislative package would also authorize spending through fiscal 2017, expand gambling, authorize $7 billion of borrowing to pay down the bill backlog, provide teachers' pension payment help for Chicago Public Schools, pave the way for local government consolidation, and establish a new local government revenue bond program. An education funding reform bill is still being finalized.

All the bills are tied together, requiring approval of the full package for any one bill to take effect. Several of the less-controversial bills cleared the Senate earlier this month but the pension reform bill failed as Republicans withheld their support in opposition to Senate President John Cullerton's decision to call the bills before final agreements were reached on all of them. No action has since been taken.

Whether Rauner's comments Wednesday will move the package along remains unclear.

Senate Republican Minority Leader Christine Radogno said she was heartened by the speech and guidance provided.

"We can now consider the governor's advice in our discussions as we move forward," Radogno said in a statement.

Senate President John Cullerton, co-author of the Senate package along with Radogno, did not comment on the fiscal 2018 proposal laid out by Rauner or on his "Grand Bargain" demands. "Right now the Senate is working on this year's budget because there isn't one. We need to restore stability and sanity to Illinois' finances. That begins with a budget for the here and now," he said.

The House and its leader remain a key roadblock as Madigan showed no signs of backing down from his position that the budget be tackled alone.

"While the House has passed a number of budget bills to fund critical services for seniors, children and public safety, it appears that for the third straight year Governor Rauner has failed to introduce a balanced budget," Madigan said.

"We want to work cooperatively with the governor to pass a full-year balanced budget and improve our economy, but we don't accept that the only way to create jobs is by cutting wages and stripping away protections for workers in an effort to increase profits for businesses – all at the expense of middle-class families," Madigan said.

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