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Pritzker vows ‘honest’ budget, with big push for progressive income tax

Pritzker Budget Address

Gov. J.B. Pritzker delivers his budget address to a joint session of the General Assembly Wednesday, Feb. 20, 2019 at the Capitol in Springfield, Ill. | Rich Saal/The State Journal-Register via AP

SPRINGFIELD — Saying the state suffered immensely because of an “ideological battle,” Democratic Gov. J.B. Pritzker on Wednesday vowed an “honest” budget plan with no “quick fix” — with an immense push for the state to enact a progressive income tax.

But Pritzker’s budget includes revenue from big-picture items that still need approval, like legalizing marijuana and sports betting. It also includes putting off pension payments — extending the state’s pension payment “ramp” by seven years to reduce short-term costs, which may worsen problems in the future.

And it proposes a world in which his plan to enact a progressive income tax would save the state, a plan already being fought tooth and nail via competing dark money groups.

“It’s time for a change,” Pritzker said during his first budget address, which also served as a State of the State speech. “Workers deserve an income tax cut and a property tax break. A fair tax system will allow us to eliminate the structural deficit that has plagued our state for nearly two decades.”

Pritzker’s proposed budget includes $38.9 billion in revenue and $38.75 billion in expenditures. It warned the state would face a $3.2 billion deficit without his recommendations. And the state already faces a $900 million hole for the current budget that ends in late June.

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Read the text of Gov. J.B. Pritzker’s first budget address
• Read the 2020 budget proposal

The governor’s plan includes an estimated $1.1 billion in new revenue, with the Pritzker administration banking on selling 20 sports betting licenses at $10 million a piece, and selling “thousands” of marijuana business licenses for a one-time fee of $100,000.

Other tax bumps would include raising taxes on a pack of cigarettes from $1.98 to $2.30 and taxing e-cigarettes at a 36.5 percent rate, the same as all other tobacco products. The administration is also pushing for a 5 percent statewide bag tax.

Should that new revenue package fail, the administration would propose a 4 percent cut to all state agencies, Deputy Gov. Dan Hynes said in a budget briefing Wednesday afternoon. A budget document stated those cuts would work to fill a budget gap but wouldn’t include employee health care or pension and debt service costs.

Regarding delaying pensions payments — which many have scoffed at — Hynes said it is the “sensible” thing to do with an unsustainable ramp that forces the state to dedicate 21 percent of revenue to pensions. The state recommends reducing the scheduled pension payment by $800 million. But Hynes counted the progressive income tax as a way to make further investments — and the transferring of state assets as a way to reduce the ramp.

To address the state’s massive bill backlog, Pritzker offered up his grand plan for a progressive income tax — which will require a constitutional amendment — and called it the best solution. And he said he “intends to immediately begin negotiations over proposed fair tax rates with leaders from the House and Senate.”

The governor’s budget address, in a sense, is a preview of some big battles ahead, with Republicans and business groups not on board with a change to the income tax system.

“I expect different opinions and viewpoints over the best way to achieve an equitable tax system, and I sincerely welcome that conversation,” Pritzker said. “I have already asked a few legislators who oppose the fair tax to offer their best ideas to improve it, and I am confident they will come to the table in good faith.”

But he called his blueprint “an honest proposal.”

“The costs are not hidden, the revenues I propose are not out of reach, the hole we need to fill is not ignored,” Pritzker said.

For now, as the state continues to dig itself out of a massive hole, Pritzker recommended legalizing cannabis, which he said would create jobs and bring in $170 million in “licensing and other fees”; legalizing and taxing sports betting, which he said could bring in $200 million; and a tax on insurance companies to generate $390 million in revenue to help cover the costs of the Medicaid system. Pritzker’s revenue package also includes $175 million from a proposed delinquent tax payment incentive program.

Licenses for marijuana, however, can’t be sold until recreational use of marijuana is legalized in Illinois. The administration — which is banking on fast movement of a marijuana legalization bill — believes it’ll be ready to accept applications at the end of the fiscal year, with license fees and other upfront fees to bring in money.

And the administration will focus on legalizing sports betting, not adding new casinos.

Despite moving quickly on some issues that had no Republican support — like raising the minimum wage — Pritzker, too, vowed bipartisanship and “civility” in his first budget address.

“I’m not shy to say I’m a Democrat. But I know we will get more done for Illinois by listening to each other, which we will do with respect and civility,” Pritzker said to applause from both Democratic and Republican lawmakers.

Democratic leaders unsurprisingly applauded the address. Illinois House Speaker Mike Madigan in a statement said the state “now has a governor who recognizes the magnitude of these challenges and will work to address them.” Illinois Senate President John Cullerton said the plan “is filled with ideas — real, doable, constitutional ideas,” while crediting Pritzker for “stepping forward today and presenting specifics.”

“Now, whether or not they happen remains to be seen,” he said in a statement. “That’s what the legislative process is for.”

Speaking after the address, Illinois House Republican Leader Jim Durkin said Pritzker’s plan “was mostly addressed toward his constituency.”

Durkin said the legislative leaders met privately with Pritzker prior to the address: “It was clear to me that there was going to be some sharp divides on how we manage this year’s budget.”

But Durkin said he is mostly concerned about delaying pension payments.

“This is what got us into this problem with our pension system today, shortchanging the systems, also having statutory pension holidays,” Durkin said. “I don’t believe that’s right. My caucus doesn’t believe that’s right.”

Durkin said he told the governor that his pension plan should be reviewed.

“It wasn’t received well,” Durkin said, adding suspending payments is a “non-starter” with Republicans.

Illinois Senate Republican Leader Bill Brady, R-Bloomington, said the governor’s first address showed there are issues in which Republicans “disagree fundamentally,” including a change to the state’s tax system.