Tax plan fails while budget plan sails

By Jamey Dunn

In a session day that one legislative leader described as “ a mixed bag,” lawmakers approved a budget deal to keep state facilities open but failed to pass a tax incentive package geared at keeping businesses in the state.

 Legislators returned to the Statehouse today for a single session day that was scheduled for the explicit purpose of approving a tax break plan meant to appease the CME group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, and Sears. Both businesses have threatened to leave the state in recent months.

 But the two chambers were unable to agree on a bill. Yesterday, a House committee approved Senate Bill 397, scaled back version of previous plans that had been floated. However the Senate approved House Bill 1883 this afternoon. (Each chamber amended a bill from the other chamber and added its plan.) The Senate measure mirrors the House version except for a few important areas that became the sticking points that prevented lawmakers from finding an agreement that could clear both chambers today.

 “We just don’t have an agreement yet as far as I know,” said Senate President John Cullerton.

HB 1883, like  SB 397, offers about $200 million in tax breaks to CME and Sears. Both bills also include an extension of the research and envelopment tax credit and a reinstatement of the net operating loss provision in 2012 for losses up to $100,000.

However, the proposal from the Senate offers more tax breaks for individuals. Under SB 397 the earned income tax credit would increase from 5 percent of the federal credit to 7.5 percent in 2012 and 10 percent in 2013. The House version only calls for an increase of 7.5 percent. The Senate plan would link the personal tax exemption to the federal exemption, while the House plan would only tack on a flat $50 to the exemption. The House shot down HB 1883, with 99 “no” votes and only 8 “yes” votes. Cullerton said he doubts that the Senate would approve SB 397 because of the lower earned income tax credit.

Rep. John Bradley, who worked on SB 397, said many in the his chamber think the proposal from the Senate is too costly. He said his plan relies on a tax credit that is being fazed out and would not dip into general revenue funds in the near future. “We had created a package that we felt was sustainable without getting into general revenue funds,” he said. Bradley, a Marion Democrat, said the Senate’s larger earned income tax credit would cost about $50 million more than the House plan annually, and the personal exemption would be about $25 million a year.

Bradley announced on the House floor that he did not have enough support to pass his own plan. “At this point and time,we have reached a temporary impasse. This is not going to happen tonight,” Bradley said.  “We are prepared to come back as soon as there is an agreement and as soon as we are able to work this out in order to save the two companies that are threatening to leave and in order to try to provide relief to working families and relief to small business in Illinois. Unfortunately, that day is not today. Whether it’s tomorrow the next day or next week, we’re prepared to come back as soon as this is settled.”

“I think there’s ample time,” Gov. Pat Quinn said as he was leaving the Capitol this evening to catch a plane. Clearly the House and the Senate are deeply divided on the issue.”  Quinn said he thinks lawmakers should “take a step back.”

He added: “If you’re going to have any kind of tax relief package, it must have significant relief for working families — raising kids, working hard. That’s my fundamental bedrock principle. And unless that happens, there won’t be any action.” Quinn supported the Senate version of the tax plan.

“We are disappointed that today, the legislature was not able to reach agreement and pass a package that will help us remain an Illinois company,” Sears spokesman Chris Brathwaite said in a written statement.  “It is our hope that lawmakers will achieve a compromise very soon as our timeline for making a decision about our future by the end of the year has not changed.  We sincerely appreciate the efforts of many members of the General Assembly over the last several months on our behalf.”

The General Assembly did approve budget changes late this evening that are meant to avert the seven state facility closures and nearly 2,000 layoffs that Quinn announced in September.

Under the new plan, the facilities would remain open through the current fiscal year, paving the way for the governor’s plan to close some state facilities in what he describes as a slower and more deliberative manner.

“[The legislation] will enable us to create a sensible, reasonable, responsive and effective plan for moving people from state operated facilities into the community,” said Rep. Barbara Flynn Currie, who sponsored the budget plan in the House. Currie, a Chicago Democrat, said the proposal would not put state spending over the caps set with the income tax approved in January.

The plan combines money from the governor’s budget vetoes with cash transferred from various state funds and Medicaid reimbursements brought in from the federal government. The total amount of dollars shifted would be more than $270 million, and a strategy called “churning” is projected to bring in an additional $136 million in Medicaid dollars from the feds.  Just over $200 million is slated to keep state facilitates open. Additional money would be spent on human services and other programs that Quinn and some lawmakers did not want to see cut in the budget that was approved in the spring, including:

• $30 million for mental health programs.
• $4.7 million for programs to combat homelessness.
• $8 million for indigent burials.
• $28 million for substance abuse programs.
• $33 million for Monetary Award Program grants for college students.

Opponents voiced frustration over the funds that were not restored. Rep. Roger Eddy, who is a school superintendent in Hutsonville, said it was “unfair” that money for transportation, which has been drastically cut in recent years, was not restored when state law requires schools to provide transportation.  Eddy, a  Republican, said the transportation cut hits downstate school districts harder than Chicago districts, which are mostly represented by Democrats. Eddy said downstate legislators agreed to shift money from funds for spending that did not end up in the final bill. “That money wasn’t used exactly the way we thought it was going to be used.” The plan passed with no debate in the Senate.

Kelly Kraft, a spokesperson for Quinn’s budget office, said Quinn is working to avoid all layoffs announced under his original closure plan. However, she said the state might have to work out agreements with unions for employees who have already been laid off.

“That, I think, was a great victory for the public that we are able to have adequate human services,” Quinn said. “Think back [to] last summer of how dire this was. We were able to, I think, rescue the people of Illinois from a budget disaster.”

Republican Leader Christine Radogno, who called the session a “mixed bag,” said Quinn should have been more actively involved in the tax plan. She said when the two chambers battle over an issue, as they have tended to do recently, Quinn should work to diffuse the situation and find a compromise. She said a deal was not reached today because of "a failure of leadership."