Pension plan delays tax hike vote, for now

By Bethany Jaeger, with Jamey Dunn and Hilary Russell contributing
The latest scheme for the General Assembly to get closer to a balanced budget is to borrow money to fully pay the state’s contribution into the public employee pension system and to free up about $2 billion to help stave off deep cuts to human services.

This on a day when more than 5,000 advocates, parents and children rallied at the Capitol with Gov. Pat Quinn to urge an income tax increase to help fight those cuts. Top Democratic legislators indicated today, however, that they would not vote for an income tax increase this week. And if they did, there wouldn’t be enough support among Democrats to approve it without Republican votes. The GOP remains united against a tax increase, at least, officially. Some Republican members in both chambers have privately said they could support a tax increase but have stuck with their caucuses.

Senate Minority Leader Christine Radogno said that Republicans are not ready to vote for an income tax increase and described the projected cuts to human services as a “cynical ploy,” adding that spending reductions could be spread fairly across all areas of state government.

The idea to issue pension obligation notes, which we wrote about earlier this week, poses a less politically risky option. The short-term borrowing plan would be repaid within five years and would fund the state’s $4 billion contribution into the public employee pension system for the fiscal year that starts July 1.

It’s generally agreed that the plan would free up about $2.2 billion, which the General Assembly would put into the general revenue fund and give the governor, essentially, a blank check. The ball would be in Quinn’s court, then, to cut or to plug where he saw fit.

“This is more discretion than we’ve ever given any other governor, simply because the times require it,” said Rep. Frank Mautino, assistant majority leader from Spring Valley.

He said the pension obligation notes would combine with previously approved authority to sweep extra money (Senate Bill 1433) out of dedicated funds and to refinance other state debt (SB 1609). All three revenue sources combined would allow the spending authority to come within $2 billion of the governor’s proposed budget. Quinn wanted authority to spend $28 billion. The latest plan would authorize about $26 billion, meaning he would still have to cut back spending.

The legislature could vote on the pension plan Wednesday, according to Mautino.

A vote on Quinn’s proposed two-year tax hike, however, would not happen until the governor provided a list of specific cuts he would make if he didn’t have new tax revenues to spend, according to several House Democrats. His temporary tax increase would generate about $4.5 billion. But there’s still debate about the size of the budget deficit, said Rep. Art Turner, deputy majority leader from Chicago.

“The biggest issue right now is just trying to put the bean counters together to come up with what’s the agreed number,” he said. “So then from there, we can … say, ‘What’s going to be the number that we have to use in terms of the cuts?’”

A Republican, Rep. Richard Myers of Colchester, said he’d be willing to look at a tax increase if he knew where the money was specifically going to be spent.

Comptroller Dan Hynes added to the debate with a letter to the governor. He wrote: “I believe that part of your difficulty in obtaining votes for an income tax increase is the fact that the public is confused about how much money is really needed to fix the deficit. Legislators are, therefore, understandably reluctant to vote for an ever-changing proposal for an ill-defined problem. In a sense, we have all been given a false choice: raise taxes by $4 [billion] to $5 billion or cut human services by the same amount.”

He proposed starting over, operating on a 60-day budget to keep services going while the legislature found more ways to cut spending. He cited across-the-board cuts to contracts, grants and agency spending. And then he suggested such new revenue sources as an expansion of the sales tax, building new casinos and increasing cigarette taxes. All of those proposals came up during the spring legislative session but failed to advance in both chambers.

Senate Democrats point to their version of an income tax increase, which also would offer property tax relief and an expansion of the sales tax. Senate President John Cullerton said his caucus already took the hard vote on House Bill 174 last month and that it’s up to the other caucuses to make the next move. “Anything is negotiable, as long as we keep the principles in mind that we need to balance our budget and not have these draconian cuts that all the people surrounding the capital are complaining about today.”

Cullerton added that his caucus would not vote on the governor’s desired “recall” provision until Quinn enacted campaign finance reforms approved by the legislature last month. The House already approved the recall provision, which would allow voters to decide whether to change the state Constitution so they could recall the governor at the time. The provision awaits final action in the Senate.

The rally
By Hilary Russell and Jamey Dunn, with Bethany Jaeger contributing
The secretary of state’s office confirmed that more than 5,000 people attended the rally coordinated by numerous social service providers and public employee unions. Police temporarily blocked more people from entering the Capitol out of safety concerns, said Henry Haupt, spokesman for the secretary of state.

The temperature rose as participants chanted, “People before politics,” “Do the people’s work,” and “No budget cuts.” Signs advocated for everything from substance abuse treatment services to early childhood education and autism. The anecdotes were endless.

For instance, Michelle Lefrere, who has epilepsy and volunteers with Springfield’s Epilepsy Resource Center, said without an income tax increase, the doors to the center would close June 30. Having used the center since the age of 9 and turning 40 next year, she said: “There will be no counseling, no recommendations to doctors, no job placement. There won’t be any help for people with epilepsy in Springfield or the certain communities. There won’t be any money for research.”

After the rally, Quinn remained optimistic that the legislature would vote on a tax increase by June 30, the end of the fiscal year. In any case, he said, “I am not going to preside over a dismantling of the fundamental human safety net that we are proud of in Illinois.”