Democrats warn of ‘severe’ state budget cuts unless GOP-sought tax loopholes are closed: ‘It’s a very bad scenario’

SPRINGFIELD — Despite earlier signs of a brighter fiscal outlook, Illinois House Majority Leader Greg Harris warned Thursday nothing could be “left unscathed” if legislators must look for cuts to fine tune the state’s budget before the end of session.

“If we do have to cut $1.3 billion,” the North Side Democrat said. “I mean, nothing is left unscathed. I mean, education will be cut, colleges and universities will be cut, severe cuts to our human services. It’s a very bad scenario.”

Any potential budget cuts are still being worked through by the General Assembly’s appropriations committees, Harris said at a Thursday news conference.

Reached later Thursday, Harris clarified those serious cuts would likely be on the table if the state doesn’t close some “corporate tax loopholes” that Gov. J.B. Pritzker laid out in his February budget proposal.

“We have two choices here,” Harris told the Chicago Sun-Times in a follow-up telephone interview. “We can either vote to support closing loopholes on the wealthiest of corporations that Gov. Pritzker proposed in his budget. If people don’t want to vote for that new revenue, then we’ll have to go to the cuts.”

Pritzker used a similar tack last November, warning of “painful” budget cuts or tax hikes after voters rejected his proposal to move to a graduated income tax. But those cuts and tax increases were missing from the budget he unveiled in February, which was based instead on closing the “loopholes” and decreasing some state spending.

What the Democrats dub “loopholes,” Republicans characterize as business tax incentives designed to make Illinois more economically competitive. The GOP accuses Pritzker of “breaking his word” by now calling for the repeal of many of the incentives he agreed to two years ago.

As recently as last week, Harris, a leading House Democrat on budget negotiations, said he and others working on the spending plan had hoped to use federal funds from President Joe Biden’s American Rescue Plan to patch up shortfalls.

Ashlee Rezin/Sun-Times file

On Thursday, the House majority leader admitted that won’t happen.

“The thing that has sort of been overshadowing a lot of this … is we were hoping that some of those federal funds could be used to pay back the borrowing and the municipal credits,” Harris said at a statehouse news conference. “Clearly the current interim guidance says that’s not a permissible use.”

Instead, the Chicago Democrat said the budget will “make full repayments using state resources.”

A plan to pay off the remaining $2 billion of a $3.2 billion federal loan was laid out Thursday afternoon. The federal loan was scheduled to be repaid in three installments by December 2023, according to a news release announcing the plan.

Instead, the state comptroller will “utilize the state’s revenue overperformance and effective cash management to pay off the debt in its entirety within the next budget year,” the news release reads in part.

The early repayment of the borrowed funds is expected to save taxpayers up to $100 million in interest costs, according to the release.

Last week, Harris demurred when asked whether federal guidance on the rescue plan funds prevented Illinois from using them on the state’s debt.

“We have to wait until that final guidance comes out because, until it’s done and it’s final, you’re not absolutely sure what your limitations are,” Harris said last Thursday.

The state’s finances have seen positive changes since Pritzker unveiled his budget proposal during his “State of the State” address in February.

Screen image from Facebook recording.

That preliminary spending plan relied on closing what the governor characterized as “corporate tax loopholes” and reducing some state departments’ spending to help fill a nearly $3 billion budget gap.

Pritzker announced earlier this month a “brighter” fiscal outlook would mean a $350 million increase in evidence-based funding for schools, a move intended to offer some “relief” to students, families and educators after initially keeping education funding flat.

About a week later, the Governor’s Office of Management and Budget issued a revised revenue estimate for the state’s General Funds revenue, increasing its estimation by $1.469 billion for fiscal year 2021 and by $842 million for fiscal year 2022 over approximations announced in February with Pritzker’s budget plan.

Legislators have until the end of session — which is slated for May 31 — to pass the budget and other, outstanding legislation.

Andrew Sullender reported from Springfield, Rachel Hinton from Chicago.