CHICAGO – The partisan political in Illinois further deepened Wednesday as the Democratic House Speaker prepared to call a spending plan slammed by Republicans as phony and $7 billion out of whack.
With a little more than a month remaining in fiscal 2016, the state has yet to produce a budget and there's been little sign of progress or agreement between the leaders of the legislature's Democratic majorities and Republican Gov. Bruce Rauner.
Pressure has been mounting for them to resolve their differences, possibly through a grand bargain that includes a budget for both fiscal years. Bipartisan budget and reform working groups have been negotiating toward that goal and one of the groups has pitched a general outline that includes $2 billion in cuts and $5 billion in new revenue.
The regular session ends May 31 and any legislation passed afterward requires a three-fifths majority instead of a simple majority. The prospects for such a deal, which already were a longshot as Democrats remain opposed to governance and policy proposals Rauner wants included in any deal, dimmed Wednesday.
House Speaker Michael Madigan, D-Chicago, who has borne the brunt of Rauner's attacks since he took office early last year, emerged from a leaders meeting Wednesday with harsh words for Rauner and said he planned to call an appropriation package for fiscal 2017 later in the day.
"He [Rauner] and his agents are not being persuasive" with the working groups, Madigan told reporters. He declined to discuss details of the 2017 spending plan that was distributed earlier in the day and has continued to evolve.
The Madigan plan allocates about $39 billion in spending although the state anticipates revenues of only $32 billion. It initially appeared to provide $500 million in additional funding for poorer school districts through grants but that figure was raised to $700 million, including $300 million to $400 million for the distressed Chicago Public Schools, which are grappling with a $1.1 billion deficit.
Republicans attacked the plan. "The House Democrats are proposing a budget that is as much as $7 billion out of balance…It is by far the phoniest phony budget in recent Illinois history – and that's saying something," the Rauner administration said.
The Rauner budget team said the level of proposed spending would force the state to raise the income tax rate to 5.5%. It currently is at 3.75%. Lawmakers temporarily raised it to 5% from 3% in 2011.
The current debate mirrors the situation last year when Democrats pushed through a $36 billion spending plan and Rauner vetoed all but the K-12 education appropriation.
Democrats want a mix of cuts and tax hikes to balance the budget while Rauner won't sign off on new revenue unless Democrats support his proposals on worker's compensation and tort reforms and curbs on local government collective bargaining.
Democrats say the governor is free to veto items from the budget instead of whacking the entire plan. The administration counters that the governor's line-item powers only go so far given that some spending levels are mandated by state law.
Comptroller Leslie Geissler Munger weighed in Wednesday warning that the House plan would drive the state's bill backlog up to more than $15 billion from its current $7 billion.
"The only thing more irresponsible than allowing our state to operate without a budget would be to pass a spending plan that digs us deeper into debt. Yet, legislation being circulated in the House does just that," said Munger, who was appointed by Rauner last year to finish out the term of the former comptroller who died in office. "The consequences of implementing this proposed budget would be catastrophic to those who are already suffering from the state's continued fiscal mismanagement."
Much of state government continues to function and receive funds through continuing appropriations, court orders and consent agreements that don't impact social services and higher education. While some higher education aid resumed after a bipartisan agreement was recently reached, social services has continued to languish.
Debt service continues to be paid under an ongoing appropriation as well as pension contributions. Some community colleges and public universities have suffered credit deterioration due to the lack of funding. Illinois is already the lowest rated state and its general obligation credit faces further erosion if it doesn't make structural budget strides or takes action to tackle its more than $100 billion in unfunded pension obligations, several rating agencies have warned.
The state's 10-year GO paper has been trading at a 180 basis point spread to the Municipal Market Data's top-rated benchmark.