CHICAGO — Illinois lawmakers signed off this week on a $26 billion capital budget that relies on a series of new and increased fees and expanded gaming to repay borrowing needed to support the state’s $12 billion share in funding the package.
The Senate overwhelmingly approved the legislation late Wednesday and the House approved it late yesterday. The capital plan has strong bipartisan support and is a top legislative priority for Gov. Pat Quinn. It has been 10 years since the last major public works program passed — the $12 billion Illinois FIRST program — and there has been a six-year drought in bonding authorization for capital projects.
“The gridlock we’ve been going through for six years has ended,” Senate President John Cullerton, D-Chicago, said of the plan.
Escalating tensions between former Gov. Rod Blagojevich, a Democrat, and lawmakers of both parties in recent years prevented a consensus on how to pay for new capital spending. Blagojevich was removed from office earlier this year by lawmakers following his arrest in December on federal corruption charges alleging widespread pay-to-play abuses in his administration.
The legislation is a follow-up to $3 billion of new, mostly general obligation bonding approved last month to ensure the state leveraged federal funds, and includes new bonding authorization of $3.6 billion. The measure lifts the GO cap by $2.8 billion to $33.5 billion and the sales-tax-backed Build Illinois debt cap by $810 million to $4.6 billion.
Illinois currently has $19.4 billion of GOs outstanding and $2.1 billion of sales tax bonds. The total capital spending plan relies on $12 billion of state funds with the remainder coming from federal and local matching funds, and pay-as-you-go financing.
The current authority will see the program through the first two years, with additional bonding authorization needed in future years. Republicans, a minority in both chambers, sought to limit the bonding authority in the legislation as a means to maintain some say over spending issues.
“The bonding is limited so we can maintain a check and balance on how the infrastructure program is progressing,” said Senate Republican spokeswoman Patty Schuh.
The program relies on $330 million in additional annual revenue from increases in car title costs, registration fees, driver’s license fees, and fines on overweight semi trailers.
An additional $375 million would come from legalized video gaming, the sale of lottery tickets online — which requires approval from the U.S. Justice Department — and the hiring of a private manager for the lottery. Another $113 million would come from an increase in the alcohol tax and another $110 million from the reclassification of soft drinks, candy, and beauty aids for sales tax purposes.
“The revenue package is not ideal in everyone’s mind, but it’s certainly real revenue. The way we got into trouble in this state is not paying for things we’ve bought or used,” Senate Minority Leader Christine Radogno, R-Lemont, said after the vote.
The new program would provide funding for roads, transit, school construction, bridges, higher education, environmental, and other projects. The Illinois Department of Transportation this week unveiled a $11.25 billion, five-year improvement program that focuses funding on maintenance of the current road system. The plan relies on $7.5 billion in federal funds and $3 billion in state funds, including $1.5 billion of bonding from the new capital program and $704 million in local funds.
Quinn is expected to sign the package — despite his opposition to expanded gaming — because he believes the program is urgently needed to create jobs and boost the economy.
Ahead of the expected House vote, some Democratic members called for a delay, saying they wanted a resolution on the operating budget first. Quinn on Monday sought to drum up support for his $52.9 billion budget, painting a grim picture of what would result from deep spending cuts under a “doomsday” budget scenario if lawmakers don’t approve his income tax increase to help eliminate a $12 billion deficit.
Quinn’s budget relies on an additional $2.9 billion from a 50% increase in the individual income tax rate to 4.5% from 3% and $350 million from an increase in the corporate income tax. His plan increases the personal exemption to help lower- and middle-class residents and yesterday he said he would sweeten the proposal by providing a more generous earned-income tax credit and property tax relief, in hopes of winning more legislative support.
The budget also relies on restructuring about $2.2 billion of debt to save $530 million, cutting about $2.5 billion off the $4 billion scheduled pension payment, requiring workers to take four unpaid furlough days, and transferring $580 million from non-general fund accounts along with federal stimulus payments.
With the state facing a $73 billion unfunded pension liability, Quinn has proposed a two-tiered pension system under which new employees would receive fewer benefits to help reduce that burden.
Fitch Ratings rates the state’s GO debt AA-minus, on negative watch. Moody’s Investors Service rates it A1 and Standard & Poor’s rates it AA-minus.