CHICAGO – With just a few days left to strike a deal, Illinois House Democrats laid out a $36.5 billion fiscal 2018 spending plan on Tuesday and announced plans to begin voting Wednesday on items aimed at appeasing Gov. Bruce Rauner.
“I’m not saying that this is perfect. I’m not saying that it completely meets every request of the governor, but I think that it goes a long way toward giving the state of Illinois a good, solid spending plan that responds to the real needs of the state,” House Speaker Michael Madigan, D-Chicago, said after a leaders meeting Tuesday.
The budget trims $3 billion in costs largely through a 5% reduction in most areas of government spending. House Democrats want to borrow to help pay down the state’s $15 billion backlog but have not set a figure. The Senate Democrats approved $7 billion and GOP has proposed $4 billion.
The House majority’s spending plan now joins on the negotiating table the $37.3 billion plan previously approved by Senate Democrats and a $36 billion proposal unveiled by House and Senate Republicans earlier this month. The state is currently collecting just $33 billion in revenue but spending $39 billion based on continuing appropriations and legal orders.
The state faces a historic fall to speculative grade territory if lawmakers enter a third fiscal year Saturday without a budget. An impasse between Republican Rauner and the Democratic legislative majorities has left Illinois without a budget for two years.
Rauner initially proposed a $37.3 billion plan earlier this year that relied on new revenues expected as part of the bipartisan Senate package known as the “grand bargain.” The GOP eventually pulled its support for most pieces of the package that included tax hikes, cash flow borrowing, gambling expansion, and pension reforms. Local government consolidation and procurement reforms did receive GOP support.
Senate Democrats also approved a tax bill that would raise more than $5 billion in new annual revenue primarily from an income tax hike. Neither the GOP plan nor the House Democratic package offers a tax bill although both have said their plans are generally based on the Senate Democratic bill.
One notable exception is the GOP’s demand that an increase in the personal income tax rate from 3.75% to 4.95% and the corporate tax to 7% from 5.25% sunset after four years.
Whether lawmakers can bridge their remaining differences – largely centered over the details of non-budgetary policy and governance items sought by Rauner – and approve tax hikes all agree are needed to stabilize the state’s rocky fiscal foundation remains far from clear.
The key sticking points remain the tax bill and details of a local government property tax freeze and worker’s compensation reforms. Leaders say a disagreement over whether to impose the income tax hike on July 1 or make it retroactive to Jan. 1 is under discussion and a final number of cash flow borrowing to pay down the bill backlog is also still under negotiation.
While negotiations are ongoing among House members and leaders acrimony and distrust runs deep. Each side is questioning whether efforts to compromise are sincere or represent political posturing for the 2018 campaign.
House Minority Leader Jim Durkin, R-Western Springs, questioned whether the Democratic budget plan is truly balanced because it did not lay out cuts in an implementation bill or tax hikes.
“Unless we see revenue, we cannot determine whether it’s a balanced budget,” Durkin said after the leaders’ meeting.
The House Democrats' lead budget negotiator, Greg Harris, D-Chicago, said the goal is to adopt a budget and then address the revenue side.
With the regular session ended, a three-fifths super majority is now needed for legislation to win approval if it is to take effect immediately. Democrats are four votes shy of the 71 needed for House approval.
Madigan plans to call bills implementing workers’ compensation reform, local government consolidation, pension changes, and a four-year property tax freeze on Wednesday.
Madigan contends they are aimed at meeting Rauner’s demands. “This is governmental negotiation….nobody gets 100 percent,” Madigan said in urging the governor to be “reasonable.”
Durkin questioned the rush to bring the worker’s compensation and local property tax bills up for floor votes as negotiations are ongoing and the GOP believes they still fall short of needed reforms. Taking the votes now “isn’t healthy for the process…we need to resolve this in a bipartisan manner by the end of the week,” Durkin said.
Durkin also accused Madigan of moving the goal post for a second time this week by requiring Rauner’s support for a 9-1-1 fee hike which he has threatened to veto. The increase is statewide and Chicago would use funds to cover its emergency services center, freeing up general funds for its laborers’ pension fund contributions.
Madigan earlier said he wants the governor’s support on a bill overhauling education funding formulas and two other items.
House Democrats pushed through committee a four-year property tax freeze without GOP votes on Tuesday. It differs from the GOP proposal in exempting Chicago and Chicago Public Schools, along with 18 other districts on the state’s financial watchlist, and pension related costs. The GOP opposes the pension exemption.
Democrats on the committee voiced their deep opposition to the freeze because of the negative impact on local governments and school districts.
“We are in situation where doomsday is right around the corner….so I’m willing to move out of my usual progressive, liberal ways” and willing to meet Rauner “more than halfway” in order to reach a budget agreement, Rep. Barbara Flynn Currie, D-Chicago, said at the hearing.
The Center for Tax and Budget Accountability released a report this week warning of the “devastating” impact of a two-year freeze – which is in the Senate Democratic package – on districts that face the loss of between $430 million and $830 million annually.
Senate President John Cullerton, D-Chicago, expressed the most optimistic view that an accord can be reached by Friday so the state doesn’t enter a third year without a budget. S&P Global Ratings has warned it could lower Illinois to junk come July 1. It has two ratings, including S&P's, on the very lowest rung of investment grade.
“You should know the Senate passed a budget and we have been reconciling that with the House,” Cullerton said after the leaders' meeting. “It’s a byproduct of a lot of bipartisan work, and I think it looks like we should have a very good agreement on it.”