CHICAGO — The Illinois Senate could vote as early as Wednesday on a revamped financing scheme, which includes a cigarette-tax hike that would allow the state to continue issuing bonds and keep a $31 billion capital budget on track ahead of a court decision on the original plan’s legality.
The Illinois Supreme Court has agreed to hear on an accelerated basis the state’s appeal of an appellate court decision invalidating the capital budget and the funding streams that support it.
A stay is in place against enforcing the lower court decision handed down in January that struck down the public works program, ruling that it violated the state constitution’s single-subject clause.
The appellate court’s action reversed a district court’s dismissal of the lawsuit filed by Wirtz Beverage Illinois LLC shortly after Gov. Pat Quinn signed the law in April 2009, a decade after Illinois’ last major public works program was adopted.
The state sold more than $3 billion of taxable general obligation Build America Bonds to support its capital budget last year and planned to sell about $1.5 billion of debt for capital projects this spring. Another $2.5 billion of bonding was planned for fiscal 2012.
Most of those revenues — which come from expanded gaming and tax and fee increases on motor vehicle titles, license plates, liquor, candy, and personal hygiene products — were invalidated by the appellate ruling.
The Wirtz lawsuit also challenged the state’s move to enact a higher tax increase on spirits and wine than on beer.
Under the revised legislation announced Monday by Senate President John Cullerton, D-Chicago, lawmakers are being asked to again enact most of the taxes, with the exception of video gaming, which had failed to generate much revenue due to widespread opposition from local governments.
The tax hike on wine and spirits would be rolled back to the amount imposed on beer. The new legislation also includes a $1 increase in the state’s 98-cent-a-pack cigarette tax.
A similar increase to help fund education previously passed the Senate but failed in the House.
While Cullerton believes the state will prevail before the high court, he said the General Assembly can’t wait for the ruling if it wants to move forward with projects during the upcoming spring and summer construction season.
“There’s a challenge to the capital bill … if they overturn it we won’t have any funding for the bonds that we’ve sold or the bonds we want to sell, so we are responding to the concerns raised by the lawsuit,” Cullerton said Monday. “We need revenues reinstated right now.”
Under the capital-bill financing scheme, officials anticipate covering the state’s $14.6 billion share of the $33 billion through GO and sales-tax-backed borrowing over the length of the program. Local and federal matching dollars cover the remainder.
Illinois would repay the borrowing with $150 million annually taken from the road fund, $122 million generated from a hike in the motor vehicle title fees, and $180 million from an increase in licenses plate fees.
Another $300 million would come from expanded gaming, $109 million from the liquor tax hike, and $53 million from increased taxes on candy, sweet tea, coffee, and personal hygiene items. The cigarette tax would replace the lost liquor tax and gaming revenue.