Illinois Gov. Bruce Rauner praised passage of a bill that frees up gas and gambling taxes and emergency services funding for local governments.

CHICAGO – Motor fuel tax revenues and gambling tax funds owed to local governments in Illinois would begin flowing again under legislation advancing in the General Assembly with Gov. Bruce Rauner's support.

Distribution of those funds, along with 9-1-1 emergency services revenue appropriated in the bill, has been held up because of the more than five-month-old absence of a fiscal 2016 budget, leaving local governments straining to compensate for the lost revenue.

The legislation, which cleared the House in a bipartisan vote of 107-1 Wednesday, marks a rare achievement on spending negotiations between the first-year Republican governor and the General Assembly's Democratic majorities.

The bill, which frees up more than $2 billion in appropriations, now advances to the Senate, which is expected to take it up early next week.

"It was a compromise," Rauner said. "There were pieces of it that everybody in the process probably weren't happy with and other pieces that everyone is happy with…in the spirit of compromise we got that done."

He also praised the passage earlier Wednesday of unemployment insurance reforms.

Rauner said he backed down from his previous opposition to piecemeal spending appropriations in order to provide "essential public services" needed for "public safety."

The appropriation bill allows for the distribution of $583 million in motor fuel tax revenues, including $204 million to counties and $286 million to municipalities, with the remainder going to road districts.

Standard & Poor's in October dropped Chicago's motor fuel tax-backed bonds six notches because the lack of a state budget threw a monkey wrench into the flow of funds that backs the bonds. S&P dropped the credit to BBB-plus from AA-plus, leaving the $270 million of motor fuel debt at parity with Chicago's general obligation debt.

Previously, the rating agency gave more weight to the strength of the flow of funds. Chicago has said it would draw from funds on hand to cover debt service until an appropriation passed.

The bill allows for the distribution of $100 million in local governments' share of gambling taxes on admissions and wagering and frees up another $1 billion so the state can make good on lottery winnings.

Lottery sales have fallen since the state said most big jackpots would be withheld.

The package also frees use taxes that will benefit local governments like Chicago's, local governments' share of video gambling taxes, and funds from the emergency phone surcharge that pays for local 9-1-1 services, which some local governments had warned were in jeopardy. Funds for state police road services are also allocated.

The bill primarily is funded through non-general fund accounts that continue to receive the taxes and revenues being collected for them. They can't be distributed without an appropriation. About $28 million will come from the strained general fund, including $18 million for domestic violence shelters and $10 million needed by the secretary of state for services.

The bipartisan vote came only after Democrats and Republicans voiced their frustration over the lack of a complete budget and exchanged barbs about who was to blame for the stalemate.

Republicans attacked the "piecemeal" approval of spending appropriations absent a full budget. Republican Rep. Dwight Kay of Glen Carbon said he would vote for the bill but had serious reservations.

"The state is in great peril," he said, questioning how the state will get out from under a backlog that of bills that is headed toward $8.5 billion this month.

"A piecemeal approach is better than no approach," said House Democratic Majority Leader Barbara Flynn Curie. "Maybe it's the start of a full-out approach."

Earlier this fall the House approved a similar bill but Currie held it for reconsideration as members on both sides of the aisle sought to tinker with items slated for appropriation. Rauner was initially opposed to the so-called "piecemeal" appropriation but the administration then negotiated on the revised package.

State spending levels are at about 90% of its fiscal 2015 budget based on court orders, consent agreements, and continuing appropriations. That will leave the state with a $4 billion to $5 billion hole to plug in the second half of the fiscal year.

Rauner and the General Assembly's four leaders held a budget summit Tuesday. No progress was reported in resolving the differences between Democrats and Republicans that have held up a budget but Democratic leaders said simply meeting together represented progress.

The group will meet again early next week, most likely in Chicago, Rauner said Wednesday.

As part of the budget process, Rauner and his fellow Republicans want the General Assembly to approve worker's compensation and tort reforms, a property tax freeze, curtailment of some union contract rules, and constitutional amendments on term limits and redistricting. Democrats are opposed to most of the proposals and say the budget should be tackled separately.

Neither side gave any ground after the meeting Tuesday.

"There's got to be reform before we get to anything else," House Republican Minority Leader Jim Durkin said after the meeting.

Democratic House Speaker Michael Madigan called the meeting "productive."

Democratic Senate President John Cullerton said: "The fact that we had a meeting is the most important thing that happened….and that we agreed to have another next week, which is progress."

In his first comments since the meeting, Rauner said Wednesday he would remove redistricting as a negotiating item if Madigan commits not to sue to block the placement of a redistricting referendum on the ballot. He said term limits and collective bargaining changes for local governments remain key items on his agenda.

Moody's Investors Service dropped Illinois one notch to Baa1 from A3 in October, primarily due to the budget stalemate. Moody's assigns a negative outlook.

Fitch Ratings also in October downgraded the state to the same level at BBB-plus, but assigns a stable outlook. Standard & Poor's has the rating at A-minus on creditwatch. Illinois is the lowest rated state.






Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.