Gov. J.B. Pritzker's 'more austere' $52.7 billion budget plan turns to big business, sportsbooks for tax increases

SPRINGFIELD — Gov. J.B. Pritzker on Wednesday unveiled a $52.7 billion budget that includes the blueprint for a pension overhaul, funding to care for newly arriving migrants and a new set of costs for businesses.

It’s also a plan that Republicans say prioritizes the needs of migrants and the undocumented over Illinois residents.

While calling the state’s financial future “bright,” the sixth spending plan of the Democratic governor’s tenure leans on large corporations and lucrative casino sportsbooks to churn out more than $800 million in revenue for the state.

Those proposals were not mentioned in the governor’s 52-minute joint State of the State and budget address before the Illinois General Assembly.

Instead, Pritzker focused on some of his key priorities, including early education, social services and health care. He defended the state’s response to the migrant crisis — while also railing against former President Donald Trump — and the state’s Republican congressional delegation — for rejecting an immigration bill that would have revamped the country’s border policies and helped Illinois.

“Listen, maybe some of you think we should just say, ‘This is not our problem,’ and that we should let the migrant families starve or freeze to death. But that’s not what decent Midwesterners do. That’s not what leaders do,” Pritzker said. “We didn’t ask for this manufactured crisis. But we must deal with it all the same.”

Pritzker, who also serves as a key surrogate for President Joe Biden’s reelection campaign, also acknowledged “our immigration system has been broken for a long time.”

“No doubt, the current migrant crisis is a problem of the federal government’s making, and I mean both political parties,” the governor said.

Some Republicans groaned when Pritzker called Biden a “very good president who has rescued the economy and protected freedom.”

New revenue

The governor is projecting a 1.5% increase in state revenue for the new fiscal year, which begins July 1, for a haul of nearly $53 billion. That’s largely due to the $800 million plus in tax increases mostly targeting large businesses.

Pritkzer’s plan extends a limit on the amount of operating losses corporations can write off on their income taxes. A $100,000 cap that was slated to expire at the end of the year would be extended three years, under the plan from Pritzker’s team, which aims to soften that blow on businesses by upping that cap to $500,000. The maneuver would generate another $526 million for the state, the governor’s office estimates.

The governor’s office pushed back on characterizing it as a new tax, arguing the continuation of the cap on corporate tax deductions will help the state keep gaining revenue.

The governor also wants to more than double the state tax on sports betting revenue collected by sportsbooks from 15% to 35%, a proposal that’s sure to draw pushback from a rapidly expanding industry that raked in more than $1 billion in 2023. The governor’s team predicts such a hike could pump an additional $200 million into state coffers.

And he wants to lower the tax discount retailers receive for collecting sales taxes, a measure his office says would net the state an additional $101 million. In his speech, Pritzker also said he wants to permanently eliminate the 1% grocery tax. But the Illinois Municipal League already opposes that initiative — saying the tax goes entirely to local governments across the state and would cost them $325 million a year.

“This loss in revenue is entirely borne by local governments and is clearly punitive toward municipalities,” Brad Cole, CEO of the Illinois Municipal League said in a statement. “Does anybody think this is a good time to cut the city of Chicago’s revenues by tens of millions of dollars a year?”

The plan also includes transferring mass transit costs from sales tax to the state’s Road Fund, to take in an additional $175 million.

The Illinois Chamber of Commerce panned two of the revenue proposals, calling the cap “nothing more than forced borrowing of funds from Illinois businesses to finance government,” and the collection discount reduction “a stealth tax on our retail sector.”

Pension overhaul

Pritzker’s budget team is also aiming to hasten the state’s pension funding ramp with an eye toward landing another credit upgrade from Wall Street ratings agencies.

Since 1994, the state has been on a slog toward filling the gap in the grossly underfunded system to 90% by 2045. Pritzker’s team is adjusting that goal to reach 100% funding by 2048 — closer to pension goals set by many other states.

The governor’s team says they can make that happen in part with savings from paying off two other major bonds issued by the state over the next decade. Pritzker will need legislative approval for the pension proposal.

The $52.7 billion in spending amounts to an increase of about 2% compared to last year’s plan. Officials on Wednesday morning called the plan a “more austere budget than in recent years” — which also maintains a promise of fiscal responsibility. Republicans noted spending plans in Illinois, led by Democrats, keep growing.

There will undoubtedly be sticking points for some of the governor’s priorities, including funding for migrants and the health care costs for the undocumented.

The governor’s budget includes $181.7 million to continue to care for newly arriving migrants, and $629 million to continue providing health care benefits to undocumented people aged 42 and up who would otherwise qualify for Medicaid.

Those issues drew swift rebukes from Republicans.

Illinois House Republican Leader Tony McCombie, R-Savanna, said the proposal places a burden on small businesses and is sorely lacking in reforms.

“We can’t tax our way into success. We need to have actual structural and tax reform, and we don’t see that,” McCombie said. The Republican leader also questioned whether the sports betting tax hike will be paying for “pork projects” for Democrats.

Illinois Senate Minority Leader John Curran, R-Downers Grove, argued Pritzker “just proposed raising taxes on every Illinois family struggling to make ends meet to fund the non-citizen welfare state he created.

“We have made it clear that the citizens of this state are our priority, while today, the Governor made it clear they’re his piggy bank. Our focus will remain on providing meaningful financial relief to the people of Illinois,” Curran said in a statement.

Education dollars

Education funding would include $350 million towards the state’s school funding formula — although advocates have been warning they would put up a fight for more than that. The total K-12 funding under the governor’s proposal totals $10.8 billion in general funds.

The proposal also includes $400 million for year two of Pritzker’s Smart Start program, which aims to add 5,000 new slots and expand access to early childhood education. It also includes $13 million to launch a Department of Early Childhood.

The governor proposed a much more modest increase in funding for state grants for low-income college students than in previous years. Last year he secured a $100 million increase for the Monetary Award Program, or MAP grant, and this year advocates had called on him to request $50 million more. But he’s asked lawmakers to approve just $10 million more for the state financial aid program, which would bring total funding for MAP grants to $711 million.

The proposed budget creates a $12 million child tax credit for lower-income families with children under age 3, for a credit of about 20% of the taxpayer’s state earned income.

The spending plan sets aside $175 million for the state’s “rainy day” fund, an emergency piggy bank that has gone from nearly insolvent in 2017 to $2.3 billion by next year, if passed by the General Assembly.

The budget also includes $10 million in federal funds to erase $1 billion in medical debt for Illinois residents — the first in a three-year plan.

Budget negotiations are expected to continue through the end of May, the deadline for lawmakers to pass a spending plan.

Contributing: Lisa Kurian Philip, WBEZ