CHICAGO — Illinois Gov. Bruce Rauner is expected to propose deeply slash state spending to erase billions of red ink in the fiscal 2016 budget without new taxes, legislative leaders said after emerging from a meeting with the governor Tuesday.
Rauner, a recently elected Republican, will deliver his first budget in an address Wednesday at noon Central time.
"The governor simply said that he's got some tough medicine to deliver tomorrow. He understands that some people will not be happy, but he's committed to reforming the finances of the state," Democratic House Speaker Michael Madigan said according to published reports. Madigan said the governor did not share any plans to raise taxes during the meeting.
House Republican minority leader Jim Durkin, R-Western Springs, offered the same assessment.
The budget also won't propose any new debt, he said. "We're going to reverse the voracious spending habits of the past. There's going to be cuts in all areas of government," Durkin was quoted as saying.
The governor is expected to made big cuts to Medicaid and higher education as well as to propose new pension reforms.
Release of a budget that relies primarily on deep cuts to state programs and government restructuring won't sit well with Democrats, who hold a veto-proof majority in the General Assembly. It's unclear, however, where they would turn for new revenue and whether they want to bear the political burden of raising taxes. Democrats previously said they expected to restore income tax rates that dropped Jan. 1 after they returned to work this year. Former Gov. Pat Quinn, who lost to Rauner in the November election, sought to permanently extend a 2011 temporary income tax last year.
Lawmakers balked with an election looming and passed a fiscal 2015 budget that is now about $1.4 billion short on needed funding. The state faces a $3 billion drop in revenue in fiscal 2016 which begins July 1 due to the lower income tax rates and the deficit grows to about $5 billion due to rising healthcare, pension, and other spending demands.
"I said 10 days ago that I don't think you can cut your way out of the problem," Madigan said Tuesday. "I think you need some additional revenue."
Rauner previously floated expanding the state's sales tax to cover some services.
Rauner has painted a grim picture of the state's fiscal condition, warning after he took office that the state is in even worse shape than he thought during the campaign. He warned that sweeping change is needed to put the state's budget on the path toward structural balance, but is expected to seek emergency legislative authority to transfer money from various governmental funds to partially cover the deficit in the current fiscal year. Such a move would represent the use of one-time revenue that past administrations have relied on to cover gaps and has contributed to the state's structural woes.
"We all have a moral duty to serve the long-term interests of the people of Illinois - to focus on the next generation, not the next election," Rauner told lawmakers in his recent State of the State address. "The task ahead of us is daunting and we have no time to waste."
Investors and rating agency analysts will be watching closely. The state is the weakest rated among its counterparts at the A-minus level with negative outlooks across the board due to budget and pension pressures with a $4 billion to $5 billion bill backlog. Illinois is saddled with more than $100 billion of unfunded liabilities and the constitutionality of a 2013 overhaul of pension benefits is pending before the Illinois Supreme Court after being struck down by lower state courts.
Several budget watchdog groups have warned in recent reports that the state's budget hole is too deep to be solved with cuts alone without damaging state services and economic growth. New revenue is needed to support a multi-year plan to structurally shore up the state's fiscal foundation, reports have recommended.