CHICAGO – Illinois’ historic budget impasse “represents a stunning failure of leadership by the governor and all of the members of the Illinois General Assembly.”
That was the stinging assessment offered by the Chicago Civic Federation, the influential non-partisan research organization, in its annual analysis of the proposed budget for the next fiscal year.
The federation’s Institute for Illinois’ Fiscal Sustainability outlined its opposition to Gov. Bruce Rauner’s proposed budget in a report that also took the state’s elected leaders to task for the 23-month-old impasse.
“Without a budget, Illinois’ credit rating has fallen to near-junk status and its ability to defer payments—as evidenced by a mountain of unpaid bills—may be coming to an end,” the report read.
Vendors, healthcare providers and school districts are straining to cope with the payment delays. State comptroller Susana Mendoza testified before lawmakers Tuesday that the current $13 billion backlog carries $800 million in interest penalties.
“The governor and General Assembly need to end this unacceptable stalemate by passing and enacting a comprehensive plan,” federation President Laurence Msall said in a statement.
Talks have been revived in the Senate on a bipartisan package but whether it will lead to an agreement that can also pass the House was unclear Tuesday. In the meantime, Senate discussions on an $800 million appropriation passed by the House to fund social service agencies and public colleges and universities remains on the backburner with efforts focused on the bigger fix.
Last year, budget talks stalled and the Republican governor and General Assembly’s Democratic majorities settled on a stopgap funding package that saw the state through the first half of fiscal 2017 from July through December. Kindergarten through 12 grade education received a full year’s appropriation. The federation opposes another stopgap.
The federation said it can’t support Rauner’s proposed budget because it of its reliance on uncertain revenue streams and one-shots to close a $4.6 billion spending gap and it does not address the backlog which would be allowed to grow to $19.7 billion if the new revenues fail to materialize.
The federation has proposed a mix of higher taxes, spending controls, and borrowing to pay down the backlog if they are part of a comprehensive solution to get the state back on track.
The administration responded to the report citing Rauner’s comments Monday on the need for a balanced budget that includes structural reforms.
The legislative session resumed this week to news of renewed efforts on a bipartisan Senate fix ahead of a May 31 legislative deadline. After that date, a three-fifths majority –instead of a simple majority -- is needed to enact legislation for it to take effect immediately.
The initial effort, led by Senate President John Cullerton, D-Chicago, and Minority Leader Christine Radogno, R-Lemont, stalled as Rauner withheld his support over several issues. They included the length of a local property tax freeze which Rauner wanted linked to the length of an income tax hike, and worker’s compensation changes.
The so-called “grand bargain” package included tax hikes, pension reforms, an expansion of gambling, authorized $7 billion in borrowing to pay down the state’s bill backlog, government consolidation, and it provided $215 million in pension funding help for the troubled Chicago Public Schools.
Renewed talks have focused on a package that would include pieces of the “grand bargain” as well as pieces of Rauner-endorsed budget bills sponsored by Sen. Bill Brady, R-Bloomington.
The package may include a five-year state income tax hike on individuals and corporations matched by a local property tax freeze for the same term along with $5 billion in spending cuts and a cap on state spending of $36 billion. New revenue might also come from extension of the state’s sales tax to some services now exempt. Together, the two sources would raise nearly $5 billion.
If the Senate reaches an agreement in the coming weeks, its fate in the House remains uncertain. House Speaker Michael Madigan, D-Chicago, on Monday held firm in his position that a budget should be adopted without Rauner’s non-budget agenda items part of the mix but left the door open to some compromise.
Madigan named four Democratic representatives to work with the administration on areas of compromise. “While we stand firm that the budget – and the budget alone – must be our top priority, it is also our desire to work cooperatively with the governor,” Madigan said.
Rauner’s refusal to consider tax increases without passage of his proposals such as worker’s compensation changes, a property tax freeze, term limits and redistricting reforms has driven the gridlock. Rauner believes they are needed to improve the state’s economic climate and Democrats believe they are too friendly to business
On Tuesday, a bipartisan group of more than 30 House members announced their support for the Senate’s efforts to broker a compromise package.
Also this week, state Treasurer Michael Frerichs highlighted the rating risks of inaction as rating agencies have all warned that more downgrades are coming without a budget resolution and he warned of the costs should the state’s rating fall two notches to junk level.
“While credit downgrades previously had been possible, a credit agency setting a deadline for the state is unusual,” Frerichs said.
The Rauner administration countered the comments with a statement from deputy governor and former comptroller Leslie Geissler Munger.
“Instead of holding press conferences, it would be helpful if he would encourage members of his party to work with the Governor on real change to get our state back on track,” Munger said.
In another development this week, Rep. Barbara Flynn Currie, D-Chicago, introduced a pension overhaul that includes Cullerton’s proposed “consideration model.” It asks employees to make a choice. If they accept cost-of-living-adjustment cuts, future raises will continue to count toward their pensionable salary. If they refuse, raises would no longer count.
Cullerton has argued the proposal would pass state constitutional muster but lawyers have pledged to challenge it if becomes law. Cullerton included the plan in the “grand bargain” package and it has Rauner’s support. The legislation also includes a buyout that would allow some to receive a lump sum payment.
House Bill 4045 also would provide $215 million to help Chicago Public Schools make their $700 million teachers’ pension payment in June. Rauner vetoed a previous bill that provided the funding because lawmakers had not yet passed state pension reforms. The district has trimmed the deficit from the veto down to about $129 million and the city and district are working on a plan to cover the shortfall.