Illinois Senate Democrats passed what they called a “compromise” budget on Tuesday, even though it attracted no Republican votes, was denounced by the GOP and failed to include the one piece Gov. Bruce Rauner said was most important.
With pressure mounting as the legislative session inched toward a close, Democrats approved a budget and tax package that includes a politically unpopular income tax hike that may never see the light of day in the Illinois House.
Before the measures cleared, sans any Republican support, Rauner warned legislators about the missing piece of the budget puzzle.
“Let me be clear, to get my signature, any agreement must include real property tax relief,” the governor said.
And underscoring the political nature of the budget impasse and the timing of the governor’s race, the Rauner-led Illinois Republican Party on Tuesday said the Senate passage “confirms that the entire Democratic Party’s position is to raise taxes while protecting the status quo.”
The party has tried to pin a proposed income tax hike on Illinois House Speaker Michael Madigan for months, saying he’s trying to get a tax increase without the governor’s preferred reforms.
Amid all the outcry, Senate Democrats approved three budgetary measures: a revenue bill that includes increasing the personal income tax rate to 4.95 percent; a spending bill that relies on the income tax hike and other revenue increases and an implementation plan that also includes cuts.
The flurry of activity came nearly a week after Democrats failed to implement a budget spending plan without Republican support. Republicans last week said they wanted more time to further negotiate taxes. And there are still loose ends in talks regarding property tax relief and workers’ compensation changes — two issues Rauner and Republicans say they need resolved in order to approve a budget.
Ahead of the Senate votes, Rauner, in turn, drew a line in the sand, reiterating the reform he says he needs to get budget approval: “real” property tax relief. That reform is missing in action in the Senate plan and has been a major source of contention in budget talks.
During a Facebook Live on Tuesday, Rauner called it the largest sticking point in negotiations. The governor’s administration and Republicans are seeking a four-year property tax freeze paired with an income tax hike. Democrats say they’re concerned over school district funding and would prefer a shorter freeze.
“We’ll keep negotiating. We’ll keep working. We’ll never give up. We’ll get a balanced budget and we will protect taxpayers,” Rauner said.
His administration later released a video with Rauner saying he won’t sign off on a budget deal without a property tax freeze.
The governor also accused Madigan’s “legislators” of wanting a permanent income tax hike “while refusing to enact true and lasting property tax relief.”
After session on Tuesday, Illinois Senate President John Cullerton said he’d continue to work with the governor on property tax relief, but noted he favored a two-year freeze which Illinois Senate Republican Leader Christine Radogno, R-Lemont, introduced in 2015.
“I don’t know why that wouldn’t be a good starting point,” Cullerton said, who pointed the finger at Republicans for not publicly supporting measures that were part of key negotiations.
“You’re going to have a hard time criticizing individual parts of this budget because it’s the product of negotiations with Republicans. The taxes are a product of negotiations with Republicans. The only thing you’re missing are Republican votes because apparently there are some more reforms that the governor wants even though we passed a lot of those as well,” Cullerton said.
Bills approved last week included authorization to borrow $7 billion to pay down bills, local government consolidation, pension reform, school funding reform, procurement reform and gaming. There was Republican support on gambling, pension and on the consolidation bill.
The Senate president too gave some advice to the House, who will undoubtedly make changes to the bills: “I would urge them to consider these factors. Think about the fact the governor has to sign this; to work within the framework that we’re working on, and I think they’ll find this is a very well crafted budget. Of course we’re open to suggested changes. That’s why it’s a Senate bill that they an amend.”
Madigan in a neutral statement said the Senate measures “will be thoughtfully considered” by a budget working group headed by State Rep. Greg Harris, D-Chicago.
“They will thoroughly review the Senate’s proposal and consider it as part of our efforts to pass a full-year balanced budget that will end the budget impasse,” Madigan said in the statement.
The measures aren’t expected to make it through the House easily. They’ll be met with many Republicans unwilling to sign off on a tax hike. House Republican Leader Jim Durkin, R-Western Springs, on Tuesday said the budget and tax increase isn’t “acceptable” to his caucus.
“Once again, their work is incomplete as crucial reforms and spending cuts must be in the final package,” Durkin said in a statement.
The revenue bill would increase the personal income tax to 4.95 percent from the current 3.75 percent to generate $4.453 billion annually. There’s also a bump in the corporate income tax to 7 percent from 5.25 percent, which is expected to generate $514 million annually.
The bill also eliminates three corporate tax loopholes worth a combined $125 million a year. A sales tax on services would generate $55 million. And cable, satellite and streaming services would be taxed through a franchise tax, not a sales tax.
The Senate spending plan includes $37.3 billion in spending from the state’s General Revenue Fund, which Democrats say matches Rauner’s spending proposal from February. The Senate budget plan includes a mix of cuts and revenue to create a balanced budget. And it removes $405 million in cuts to Medicaid, which was still included in last week’s plan.
It includes $3 billion in cuts, including 5 percent across the board cuts to nearly all state programs and agencies.
Also included in the spending plan is $5 billion in supplemental funding for social service agencies, public universities and for group health insurance costs to get them through the rest of the year. Funding ran out when a partial budget expired on Jan. 1.
Mounting frustration over the impasse was clear during debate on the revenue bill.
“I’ve been working on this for two years, and I dare anybody to dispute me on this. This is a budget that is based on a revenue number you demanded,” State Sen. Toi Hutchinson, D-Chicago Heights, Hutchinson said to Senate Republicans. “It’s based on a structure you demanded on a bill you won’t sign your name to and you won’t commit to vote for. So this is what compromise looks like.”
But Republicans on the floor said they had “grave concerns” over the revenue bill, and how it will impact the state.
State Sen. Sue Rezin, R-Peru, said it will “immediately impact the middle class,” and said there should be assurances of reforms to help the state get back on its feet.