CHICAGO – One hurdle remains to legislative efforts to end two years of historic budget gridlock that has left Illinois’ ratings on the verge of junk status.

The House will attempt this week to override Gov. Bruce Rauner’s veto of a $36 billion fiscal 2018 budget package that trims $3 billion in spending, relies on $5 billion of annual tax hikes, and authorizes up to $6 billion of general obligation-backed cash flow borrowing to pay down a $14.7 billion bill backlog.

Two rating agencies on Monday weighed in, saying the package, if it becomes final, represents progress toward stabilizing the state’s rocky finances. The state risks falling to junk, which would be a first for a sovereign state, by entering a third fiscal year Saturday without a budget.

“My expectation is that the bills that the Senate just passed will become law and we will have taken a huge step towards correcting the financial imbalances of Illinois,” said House Speaker Michael Madigan, D-Chicago, said of the Tuesday action.

The Senate’s narrow override of Rauner’s veto on the July 4th holiday capped a tumultuous five days of action that came in fits and starts beginning with an initial budget vote in the House Friday that cleared with strong bipartisan support.

Talks then broke down on a final agreement but Madigan brought the package’s three bills up for a vote Sunday. They narrowly passed with the required three-fifths majority after 15 Republicans broke ranks with Rauner and joined the Democratic majority in narrowly passing the package.

Action moved to the Senate on Tuesday where one GOP member joined with the Democratic majority to reach the needed three-fifths majority for the tax bill to take effect immediately and survive the threatened veto.

The votes came without a final agreement on issues including worker’s compensation reforms and a local property tax freeze sought by Rauner as part of a final deal, so most GOP members withheld their support. Rauner moved quickly to veto the bills.

Illinois Gov. Bruce Rauner made good on his threat to veto budget bills that rely on tax hikes without policy and governance reforms he's sought over the last two years.

“The package of legislation fails to address Illinois’ fiscal and economic crisis – and in fact, makes it worse in the long run,” Rauner said in his veto message. “It does not balance the budget. It does not make nearly sufficient spending reductions, does not pay down our debt, and holds schools hostage to force a Chicago bailout.”

Rauner charged that even with “the Madigan permanent 32% income tax increase, this budget remains $2 billion out of balance for fiscal year 2018” and “will require even more tax hikes to balance the budget and pay down the bill backlog.”

The Senate moved quickly on override votes Tuesday.

“We formally move to override this veto motion to make sure that when the markets open tomorrow that we are not the first state in the history of the United States to reach junk status,” said Sen. Toi Hutchinson, D-Olympia Fields.

The House lacked the votes needed to follow the Senate, but is expected to take its turn at an override attempt as soon as Thursday. Ten Democrats broke with the caucus on the tax bill and 15 Republicans supported it. Madigan will need those 15 to remain behind the package for an override to succeed.

Full story to follow.

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