CHICAGO - Lawmakers are working on a Plan B in Illinois, where Gov. Pat Quinn's plan to make permanent an expiring income tax hike is faltering in the state House.
Without anywhere near the required votes for Quinn's tax plan, and the General Assembly set to adjourn at the end of next week, House Speaker Michael Madigan, D-Chicago, ordered the heads of budget appropriation committees to revise spending plans for fiscal 2015 downward by a few billion.
The House had previously passed spending bills that relied on the continuation of current income tax rates. They begin to expire Jan. 1, midway through fiscal 2015. The current personal income tax rate of 5% will fall to 3.75 %. It was raised from 3% in 2011. The corporate rate falls to 4.8% from 7 %.
Madigan late Wednesday polled his 71 Democratic members and only 34 said they would vote for the measure. Most others are opposed and a handful undecided. Sixty votes are needed. As a result, he's instructed his appropriation committee chairs to head "back to work" to "develop an alternative budget."
Madigan said he would continue to work to build support for Quinn's $38 billion general fund plan that relies on the higher tax rates. At the lower tax rate, the House has estimated there's $34.5 billion to spend.
"Obviously, it's a very difficult vote coming at a very difficult time," Madigan said. Many lawmakers face re-election in November. House Republicans have said they would not vote for the tax extension. The Senate is waiting on the House to act first on the tax measure.
Quinn's fellow Democrats weren't moved by his personal lobbying earlier in the week and warnings about the impact of cuts needed to offset the drop in revenue if the tax expires. The administration warned that $875 million in education funding cuts would be needed if tax rates fall.
Some believe the move to craft an austere budget plan could change the tide. Quinn's three-year budget forecast has also projected a steep rise in the state's overdue bill backlog. The state anticipates carrying over this year nearly $5 billion of bills, down from a high of more than $9 billion in 2010. That number could rise by billions if the tax rate drops.
If the budget is not approved by May 31, it requires a super-majority instead of a simple majority. Lawmakers could amend it in January - after the November election -- when only a simple majority is needed.
Some rating agency comments have said the continuation of the temporary taxes, along with pension reforms enacted in December which are the subject of a legal challenge, could prevent any further deterioration of Illinois' A-minus credit.
Standard & Poor's warned in a recent report that a budget "reductions of the magnitude" called for in a budget without the higher tax revenues "could be difficult to achieve and might lead to year-end budget deficits and higher payables."
Fitch Ratings and Moody's Investors Service assign negative outlooks.
Other measures before lawmakers in the session's waning days include legislation Rep. Elaine Nekritz, D-Northbrook, introduced to divert $800 million in sales taxes generated annually on gasoline from the general fund to fund capital spending on roads and bridges.
Madigan said Wednesday some of his members have talked about new spending on capital, but he didn't discuss it with them, signaling the measure is on the backburner.
Also, Madigan on Thursday resurrected legislation allowing an advisory referendum on an income tax surcharge on millionaires.
He had floated the measure as a constitutional amendment earlier but it stalled. It would amend the state constitution to impose a 3% surcharge on incomes above $1 million with money going to schools.
Pension reform measures also could see a vote. Lawmakers earlier in the session approved reforms for two of Chicago's four pension funds. Cook County Board President Toni Preckwinkle was at the capital Thursday to lobby for a package that's expected to be submitted next week.
The county is expected to seek approval for a plan that would raise payments into the system and cut cost-of-living adjustments. Cook County's unfunded obligations decreased to $6.4 billion in fiscal 2013 from $6.8 billion a year earlier. The system is now 56.6% funded with insolvency projected in 2038, according to the Civic Federation of Chicago.
A plan is also expected to surface for 600 suburban and downstate police and firefighter funds that could ease some investment rules, but it's unlikely to have the type of benefit and payment changes local leaders want.
They have warned they can't afford $8.4 billion of police and fire fund unfunded liabilities. Higher taxes or deep cuts will be needed, mayors recently warned.
