Rauner budget relies on pension cuts, tax hike he says he ‘was right’ to veto
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SPRINGFIELD — Using funds from an income tax hike he vetoed, Gov. Bruce Rauner on Wednesday said he’d help balance the budget through a change in health insurance benefits for retired teachers and state employees — and a cut to Chicago Public Schools teacher pensions.
“The simple truth is this: We have to change the way we manage pension costs and group health expenses,” Rauner said. “If we don’t, our finances will continue to deteriorate, our economy will remain sluggish and our tax burdens will stay high and keep rising.”
In his fourth budget proposal — just weeks before a primary election — Rauner is seeking to cut $228 million for Chicago teacher pensions, and $101 million from university pensions.
He’s also proposing the removal of group health insurance for state employees from collective bargaining — a move that will require legislative support that may prove difficult to get. That would save an estimated $470 million, Rauner argued, while adding the state would have an extra $351 million in surplus to help pay down debts within his plan.
Pushed on how those estimated savings could be included in a balanced budget, the Rauner administration reiterated that “every budget requires legislation.” The changes to teacher and state pensions, however, may get caught up in a court challenge. But the administration contends it would win that challenge.
The governor’s budget proposal once again relies on selling the James R. Thompson Center, which will also require legislative approval and became a sticking point last year between Rauner and Mayor Rahm Emanuel. The administration said the estimated $300 million would be counted in savings in next year’s budget.
Rauner said he “was right” in his veto of a budget package that included the income tax rate now in place, even though about $5 billion of his spending would come from income taxes.
“We see the budget as an opportunity to set priorities without spending beyond our means,” Rauner said. “It is a framework designed to spark a constructive dialogue on the steps we need to take to resolve the state’s financial issues.”
To help roll back an income tax hike legislators approved in their budget plan this year, overriding his veto, Rauner said “true pension reform” is needed.
“For middle class earners and young mobile workers, the pension crisis is not about the politics that are played in Springfield. It’s about how much money we are taking out of their pockets. The people of Illinois are taxed out. A $1 billion income tax cut should be our No. 1 objective at the end of this session,” Rauner said to some applause.
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The governor’s budget includes shifting some suburban and Downstate school’s “normal” pension costs away from the state and to local districts. That would equate to a cut in paying for pension costs for Chicago Public Schools — setting the governor up for another battle over CPS funding.
Under a school funding deal reached last year, CPS received $221 million more for its teacher pensions. The talk of shifting pensions had CPS officials on edge — as the new funding formula hasn’t even been enacted.
“Our state made historic progress just six months ago, and we cannot go backwards,” CPS CEO Janice Jackson said in a statement. “The families, educators and courageous lawmakers who fought so hard to achieve fair funding will not allow their hard-earned progress to be reversed, and together we will ensure Illinois students receive the resources they deserve and were promised.”
The proposed Rauner budget includes a $37.6 billion spending plan — with $1.3 billion in savings coming from shifting pension costs onto schools. The budget calls for increasing education funding by about $550 million.
Assistant Majority Leader State Rep. Greg Harris, D-Chicago, said Democrats plan “to carefully review” the budget to ensure it’s balanced. Harris said the plan neglects to deal with the bill backlog caused by the impasse, accruing more than $16 billion in unpaid bills and $1 billion in interest penalties.
“That’s a $1 billion that should have been used to fund schools, provide health care for those in need, and protect victims of domestic violence,” Harris said.
Harris said legislators will work with the governor or without him to get a balanced budget.
“Throughout Governor Rauner’s time in office, progress has only been made when legislators agreed to work together without him,” Harris said. “If the governor is finally sincere in his desire to be a part of the process, he’ll find willing partners in House Democrats.”
Illinois Senate President John Cullerton called the budget proposal “intentionally deceptive,” and one that undermined Rauner’s own accomplishments.
“I met with the governor this morning. He said he wants to roll back taxes and put more money in education. Here’s the problem. His budget does the opposite. He spends the entire tax increase. And he cuts money for education,” Cullerton said in a statement. “It’s almost like he doesn’t know what his budget does. I can’t explain the disconnect. It seems intentionally deceptive and it’s troubling.”
Republicans sang a different tune.
Illinois House Republican Leader Jim Durkin called the proposal “a fair, reasonable and balanced budget,” while calling on legislators to work together for a “long overdue balanced budget that Illinois taxpayers deserve.”
And Illinois Senate Republican Leader Bill Brady, R-Bloomington, too called it a “balanced budget.”
“Governor Rauner delivered on his pledge and presented a budget proposal that is both balanced and holds the line on taxes. Illinois residents are already overtaxed and it is imperative the State of Illinois begins to live within its means. Now, with this balanced budget proposal in hand, we can begin the bipartisan process of giving Illinois residents a budget that will help stimulate our economy, grow jobs and continue providing record funding for education.”