CHICAGO -Illinois Gov. Bruce Rauner wants to promote business and economic growth by overhauling the tax code, curbing some organized labor powers, and implementing reforms targeting public pensions and unpaid bills.
"This is our last best chance to get our house in order, to restore good government," Rauner said of the "turnaround agenda" he promoted Wednesday in his first State of the State address.
Rauner did not offer any details on spending reductions or revenue increases that would close the estimated $1.4 billion gap in the current budget that runs through June 30.
The state then faces a $3 billion drop in income tax revenue in the next budget due to the partial expiration on Jan. 1 of a 2011 income tax hike.
Rauner, a Republican who must work with a veto-proof Democratic majority in the General Assembly, called for bipartisan cooperation to solve the state's fiscal and economic woes. Rauner is slated to release his fiscal 2016 budget on Feb. 18.
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 bill backlog that is expected to skyrocket in the coming years.
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.
"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, asking them to consider his agenda as a whole. "The task ahead of us is daunting and we have no time to waste."
Rauner provided the most detail yet on tax changes and local government reforms he would seek although in many proposals remain short on specifics.
The state's motor fuel tax would be restructured to invest in infrastructure.
Property taxes would be frozen for two years by amending Illinois' Property Tax Extension Limitation Law with exemptions only for new construction or tax-increment financing properties. Voters could override the freeze by referendum. The sales tax would be broadened to include some services.
Rauner's government reform package would "extend to municipalities bankruptcy protections to help turn around struggling communities." No additional information was provided on the proposal.
Newer state employees would be moved to a 401(k)-style retirement plan and permanent pension relief would be sought through a constitutional amendment.
Rauner also wants a binding balanced-budget amendment to the state constitution on the 2018 ballot that would prohibit the carry-over of past-due bills. The state typically manages its cash flow by pushing off bill repayment, a figure that hit a high of $9 billion five years ago and is closely watched by rating agencies.
Rauner proposed overhauling workers compensation, unemployment insurance and liability costs. He proposed raising the minimum wage to $10 per hour over the next seven years, coupled with other reforms.
In an initiative sure to draw a rebuke from unions and Democrats, the governor sought to promote collective bargaining curbs and other reforms as a means to achieve local property tax relief.
"Illinois' high property taxes have skyrocketed because state and local governments have been unable or unwilling to control their own spending," he said. "We must empower taxpayers to take control of their property tax bills by giving them greater ability to control local government spending."
Rauner wants to create local employee empowerment zones that would give local voters the ability to control some collective bargaining issues and decide whether employees want to join a union. He also wants to free local governments from some rules on project labor agreements and prevailing wage requirements that he argued have cost taxpayers hundreds of millions of dollars with savings from more competitive bidding going to fund infrastructure.
Rauner also wants to consolidate some of the state's 7,000 units of local governments and to reduce unfunded mandates, asking his lieutenant governor and other leaders to work on the effort.
"By implementing these reforms, we will give taxpayers and local governments the tools they need to freeze property taxes," he said.
Rauner also wants lawmakers to agree to put a term-limits question to voters on the 2016 ballot as well as a merger of two state constitutional positions, the treasurer and comptroller.
On the ethics front, Rauner proposed extending the current campaign contribution ban on businesses with state contracts to cover outside organizations like hospitals that receive state Medicaid funding. The ban would extend to all organizations with a state collective bargaining agreements.
Rauner said he intends to provide more funding for kindergarten through 12th grade education and would also expand early childhood education and hire more corrections officers. Increased education aid will be welcomed by Democrats but it's unclear how Rauner will cover the additional costs.
Republicans praised Rauner for reaching across party aisles to ask for cooperation and suggested lawmakers could find common ground on some reforms and education funding.
"This is going to be about coalition building," said Senate Minority Leader Christine Radogno, R-Lemont. "I think there's a lot of hope and optimism."
The General Assembly's Democratic leaders reacted in different ways.
Senate President John Cullerton, D-Chicago, said Rauner's speech sounded like more "campaign rhetoric."
"The people of this state elected a divided government, but the governor will soon learn that it doesn't mean that he needs to be divisive," Cullerton said.
House Speaker Michael Madigan struck a more conciliatory tone, saying he agreed with the governor on some fronts including structural changes needed to shore up the state's finances and was open to tax changes, but added the first priority is on balancing the budget.
"I pledge to work with him cooperatively and professionally," he said, adding that the budget deficit is his highest priority.
Madigan said in recent discussions the governor was inclined to leave income tax rates where they now stand. Madigan said he believes a balance of cuts and new revenue is needed but is open to where the sources for the new revenue.