Budget postpones tax debate until after election

By Jamey Dunn

The Senate approved the budget bills passed by the House earlier this week, essentially delaying the debate over a tax increase or deep cuts until after the November election.

This session, lawmakers had the challenge of crafting a budget with about $2 billion less revenue because the temporary income tax increase will begin to step down halfway through next fiscal year. The only options seemed to be deep cuts, new revenue or some combination of the two. Democrats eventually presented a third option, which relies on borrowing from special funds and increasing the state’s backlog of overdue bills

Chicago Democratic Sen. Heather Steans, who sponsored some of the budget bills in the Senate, said that the state could make it through the entire fiscal year on the spending approved today. “This budget is a full-year budget that can be executed for a full year without requiring any sort of a revenue vote. No tax increase is required for this budget.” But she said that if lawmakers do not approve any new revenues before the end of Fiscal Year 2015, many programs, such as in-home care for the elderly, would have to be cut. “We are going to have a huge issue that we cannot contend with without either mass cuts or revenue.” Steans said that there are about $700 million in new projected budget pressures that “are not probably totally funded” under the plan.

Republicans accused Democrats of setting the state up for a budget emergency, so they can push through an extension of the tax increase after the election. “This is an irresponsible budget seeking to create a crisis because you failed at convincing the people this year that there’s a sufficient crisis to require a tax increase. So now, you’re taking another stab at creating a crisis by making this huge cliff,” said Sen. Matt Murphy, a Palatine Republican.

Democrats say that they picked the least harmful option that was politically possible. “This maintenance budget allows us to provide level funding for key priorities and services. The effect of the budget is to avert doomsday cuts by deferrals, borrowing and increasing our backlog of bills,” Senate President John Cullerton said in a prepared statement. “Admittedly, this budget reverses some of the progress that we have made in recent years. Since we passed the income tax increase in 2011, we have paid down $3.6 billion in old bills and fully funded our ballooning pension payments. We have paid off $8 billion in pension debt. We have saved billions with responsible budget cuts and that demonstrated that we can be good stewards of taxpayer dollars.”

They FY 15 budget relies on $650 million in borrowing from state funds outside of the general operating budget. It would flat fund most areas of the budget with a slight increase in K-12 education. It would give larger agencies some lump sum appropriations so that they can have the flexibility to try to patch any holes that might spring up. The budget bills:

• House Bill 6093 contains K-12 spending.
• HB6094 contains higher education spending.
• HB 6095 contains general operating services spending.
• HB 6096 contains human services spending and required spending, including pension payments.
• HB 6097 contains public safety spending 
• HB 3793 contains capital projects, including school construction, and about half of the back pay owed to state workers. 
• Senate Bill 220 contains budget implementation provisions 
• SB 274 contains the authority for inter-fund borrowing and lawmaker’s pay. A mechanism in the bill would keep Gov. Pat Quinn from being able to cut off legislative pay, a move he made to try and push lawmakers to act on pension reform last summer. The bill would also put a freeze on legislative pay increases. 

Gov. Pat Quinn called the plan “incomplete” in a written statement he released after the Senate passed the spending bills. “The General Assembly didn't get the job done on the budget. ... In March, I submitted a balanced budget plan that continued paying down the state's bills, protected education and public safety and secured Illinois’ long-term financial future,” the statement said. Quinn called for an extension of the tax rates in his budget address earlier this year. “Instead, the General Assembly sent me an incomplete budget that does not pay down the bills but instead postpones the tough decisions. I will do my job. I will work to minimize the impact of cuts in vital services while continuing to cut waste and maintain our hard-won fiscal gains. There’s more work to do to continue moving Illinois forward.” 

Steans and Park Ridge Democratic Sen. Dan Kotowski, who also sponsored budget bills, would not say if they intended to revisit the income tax rates after November. But they did say that they believe more revenue is needed. However, on the topic of the tax rates, Cullerton did not mince words. “In order to return to [the state’s] path of fiscal progress, we will have to bring revenues in line with our growing liabilities. While a vote on our tax rates has been deferred, rising costs and pressures will force the issue at a later date.” Cullerton has said that he has the votes in the Senate to keep the current income tax rates of 5 percent for individuals and 7 percent for corporations. But House Speaker Madigan said that he was a long way off from being able to pass an extension of the rates in the House. If lawmakers do not opt to extend the current rates, they will step down to 3.75 percent for individuals and 5.25 percent for corporations in January.

Republicans took issue with giving Quinn the power to sweep funds in an election year. They also cried foul over areas of spending in the budget, such as money going toward a summer jobs program to prevent violence. The governor has recently come under fire for the Neighborhood Recovery Initiative (NRI). The program was funded primarily from discretionary funding that Quinn could access. NRI was the subject of a scathing audit that found that the program did not use a competitive bidding process to select the providers and dole out grants but instead relied on recommendations from Chicago aldermen. Documentation from providers implementing NRI was seriously lacking and at least $2 million was never accounted for. Contracts for NRI were agreed upon just before the 2010 election and Republicans have accused Quinn of using the program as a “political slush fund.”

Democrats argued that the problems in the program have been cleaned up and that violence prevention continues to be an important priority. They criticized Republicans for not presenting their own detailed plan for coping with the loss of revenue in FY 15. “There’s no place to really pretend in this budget. It is what it is. It’s very straight forward it’s very clear,” said Kotowski of the plan. “It’s clear where the pressures exist. It’s clear the actions that we’re taking to live within the means already provided by taxpayers.”

In his traditional end-of-session floor speech, House Speaker Michael Madigan noted that lawmakers have been faced with many tough issues in recent years. “This has been a difficult session, a very difficult session. Over the last few years, nothing seems to be simple; nothing seems to be easy. It’s just one difficult complicated issue after another.”

The legislature is not scheduled to return for fall veto session until November 19th.

Roads and bridges capital bill
The Senate sent a “mini” capital bill with road and bridge constructions projects to Quinn’s desk. House Bill 3794 calls for $1.1 billion in construction spending, $1 billion of which would go to road and bridge projects included in IDOT’s 5-year plan. The remaining $100 million would go to local street repair projects.

The bill does not list projects because they would be determined by IDOT. The department would prioritize projects that are ready to go in the summer construction season. The money for construction would come from funding sources approved as part of the 1999 Illinois First capital program. Borrowing for the plan has been paid off, but the increased fees and taxes remain. The Senate approved the bill with no debate.

House approves increased revenue estimate for next fiscal year

By Jamey Dunn


The House approved an increased estimate of the revenue the state will bring in next fiscal year. The new projection will match the spending that the chamber has approved over the last few days.

In February, the House passed a revenue projection of $34.495 billion with no opposition. Today, that projection was revised up to $35.352 billion over the opposition of Republicans in the chamber. In recent years, the House has approved a revenue estimate and then approved a budget based on that estimate. This year, things happened the other way around. “The process is kind of bass-ackwards here,” said Rep. David Harris, a Republican from Arlington Heights. “We have spent the money, so now we have to come up with a revenue estimate to meet the spending.”

A large portion of the difference between the estimates comes from $650 million that would be borrowed from funds outside of the state’s general operating budget. (For more on these special funds and how they play into the budgeting process, see Illinois Issues, April 2012.) Republicans argued that using money borrowed from other funds means that the state would have to raise more revenue to pay the money back later. “This is an unbalanced budget; this is a fund sweep; and this is a future tax increase,” said Rep. David McSweeney, a Republican from Barrington Hills.

 Marion Democratic Rep. John Bradley, who sponsored the resolution, noted that there are not enough votes to pass legislation maintaining the current income tax rates, which are due to begin stepping down in the middle of next fiscal year. The chamber also voted down a budget with no new revenues and deep cuts. “We are trying to cobble together a budget to get through the next fiscal year, and the next governor, whoever that may be, has got a real fiscal cliff to deal with,” Bradley said on the House floor. “But this budget—this budget—gets us through the next year without the devastating cuts that people were against and without the tax extension that people were against.” Bradley called upon his colleagues to “be realistic” and pass what he called the most responsible budget possible “in this climate given the fact that everybody’s against everything.”

House votes to restore Medicaid cuts, pay old bills and fund construction projects

By Jamey Dunn

The Illinois House voted Wednesday to restore several cuts to Medicaid and to tack more than $1 billion in spending onto the current fiscal year’s budget.

Senate Bill 741 would rollback several Medicaid program reductions that were cut under sweeping Medicaid reforms approved in 2012. The bill would restore podiatry services and preventative dental care for adults. It would lift the four-prescription limit for people with “severe mental illness.” It would also remove the limit on the number of physical therapy sessions patients can access. The bill allows for more funding for programs that care for children with extensive medical needs, such as those on ventilators. “We are restoring this simply because we have found out from experience that these cuts actually did not save us money. They cost the people of the state of Illinois more money, and they brought suffering and hardship to families. They brought overutilization to our emergency departments and interfered with the delivery of health care to other patients in need,” said Chicago Democratic Rep. Greg Harris, who sponsored the bill. The restorations would cost $221 million upfront. However, the spending would bring in federal matching funds, so Harris said the net cost would be about $125 million in general revenue funding.

Opponents questioned rolling back changes to Medicaid that were put in place to ensure that the system remained sustainable at a time when the state was pushing billions of Medicaid bills from one fiscal year into the next. The reforms now bar the state from shoveling Medicaid bills into future fiscal years. “How are we going to pay for that, and how are we going to sustain the system for the people who need it most?” Rep. Patricia Bellock asked on the House floor.

Those who have advocated to restore the cuts argue that they do not save the state money in the long run because Medicaid patients are forced to skip preventative care but later call on the system once their health deteriorates into an emergency situation. Chicago Democratic Rep. Mary Flowers said that a lack of dental care means missed wages when Medicaid patients stay home from work with tooth pain and missed opportunities when dental problems, such as missing teeth, keep them from making a good first impression at job interviews. “Access to dental services—like filling, cavities, root canals, dentures—means that the most vulnerable in our state will not need to suffer from unnecessary pain,” she said. 

Harris also sponsored House Bill 6060, which would add $1.8 billion in spending during the current fiscal year. Around $1 billion would go toward paying down old bills, and $600 million of that would go to Medicaid, triggering federal matching funds. The backlog stands at about $4.7 billion now. The money comes from new revenue that came in this year above projections for Fiscal Year 2014.

The House also reapproved ongoing capital construction projects for next fiscal year and tacked some new spending on, while they were at it. The new spending includes:

• $13 million for sewage treatment and water projects. 
• $10 million grant to the Uptown Theatre in Chicago. 
• $40 million for school construction projects outside of Chicago. 
• $35 million to Chicago Public Schools for school construction projects. 
• $50 million for back pay to state employees in the departments of Public Health, Human Services, Corrections, Juvenile Justice and Natural Resources. The money would cover about half the cost of deferred raises that the state owes employees. 
• $50 million for the Chicago teachers pension fund. 

 Chicago Democratic Rep. Barbara Flynn Currie, who sponsored HB 3793, said that the money for the additional spending would come from revised revenue estimates for Fiscal Year 2015 and funds left from the sale of the state’s 10th casino license.

 The measure did not have a standard committee hearing and came to the floor just hours after the amendment that contains the spending was filed. “We need to pass this bill if we want to make good on the commitments and promises we have earlier made,” Currie said of the spending that was part of the ongoing capital program. Republicans called the vote on the more than 1,000-page-bill rushed and argued that they did not have time to know what the legislation contained “We’re making a substantive vote with very little time to vet this vote,” said Downers Grove Republican Rep. Ron Sandack. “We seem to continue to do the wrong thing the wrong way, so I guess that’s consistency if nothing else.” 

House Speaker Mike Madigan also released his hold on the House budget bills approved yesterday, and they have been read into the record in the Senate. That means that the Senate could technically pass the budget and—as many in the Statehouse have been speculating—the spring session could adjourn a day early on Friday. However, such rumors always run rampant at this time of year. And so far, that possibility falls into the rumor category.

Budget "middle road" paved with short-term fixes

By Jamey Dunn

The House passed what some have dubbed a “middle of the road” budget, which keeps many areas of state government funded at current levels.

Under current law, the state will lose nearly $2 billion in revenue next fiscal year when the income tax increase begins to roll back. The income tax rates are set step down from 5 percent for individuals to 3.75 percent and from 7 percent for corporations to 5.25 percent half way through Fiscal Year 2015. Earlier this month, the House voted to approve a nearly $38 billion budget, which would have required an extension of the current income tax rates to fund. However, House Speaker Michael Madigan later said that there were not enough votes in his chamber to extend the current rates. The House then rejected a so-called “doomsday budget plan,” with only five members voting in favor of the bill. That proposal would have made deep cuts to education and human services.

On Tuesday, the House approved with little debate a budget that would spend about $35 billion and not require an extension of the tax rate. After the bills passed, Madigan used a parliamentary procedure to block them from going directly to the Senate. Senate and House Democrats are working together on the plan in the hopes of getting it through both chambers before the regular legislative session is scheduled to adjourn at midnight on Saturday.

Debate on the bills was lacking in the House in part because lawmakers on both sides of the aisle were uncertain about the details of the budget. For example, none of the key budgeting players in the chamber were able to give a definitive answer on the total spending number for the plan. All the responses were between $35 billion and $36 billion, but nobody knew the number spot on.

The bills were worked out in House budgeting committees, but many Republicans on those committees said they were not included in negotiations. Complaints aired by Republicans on the floor were primarily about the process and not the specifics of the budget itself, which they say they got this morning. “This is not a good budgeting process when you don’t know what you’re talking about. You don’t know what you’re advancing,” said Rep. Ron Sandack, a Downers Grove Republican.

“I guess that the speed-reading classes that you’ve taken are paying off over there. Thank God. But the process has been a complete joke,” Elmhurst Republican Rep. Dennis Reboletti said to Democrats on the House floor. “You do this every year, and then you’re surprised that we’re not working with you, or that we’re angry or frustrated.” Democrats said they tried to include Republicans, but that many did not attend meetings held budgeting committees yesterday. They say that because Republicans have been unwilling to vote for budgets in recent years, they likely would not have been in favor of the plan, no matter what the process.

Those Democrats who crafted the proposal were able to keep the budget relatively flat by tapping into some well-worn creative budgeting tactics, such as delaying payment for some spending obligations, adjusting revenue estimates up and borrowing from funds outside of general spending. Democrats say that the moves freed up about $2 billion. Most of the tactics are short-term solutions or one-time sources of funding. Republicans, who had previously accused Democrats of exaggerating how painful a budget would be to try to pass an extension of the income tax rates, reacted with sarcasm to the plan unveiled today. “Magically, hundreds of millions of dollars extra have been found. Shocking. I am so surprised that now we’ve looked under the couch cushions and found a little bit of extra walking-around money to sprinkle around the budget,” Reboletti said.

But flat funding does not mean that the budget picture is rosy. The bill backlog would grow substantially and there would be layoffs under the plan, according to those who worked most closely on it. “As the year goes on, things are going to get tighter and tighter in our departments,” said Rep. Greg Harris, who chairs the House human services budgeting committee. Harris said that the budget would likely increase the state’s stack of unpaid bills by “a couple billions of dollars” and would result in “thousands” of layoffs of state workers. The backlog is expected to be about $5.6 billion by the end of the current fiscal year.

The House breaks down the budgeting process into general areas of K-12 education, human services, general services, higher education and public safety. The only of these areas that would see a funding increase would be K-12 education, which would go up $167 million over the current fiscal year. The increase would be needed to keep General State Aid to schools prorated at just under 89 percent and to pay for student assessments that are part of the state’s transition to the Common Core curriculum standards. While K-12 education will see a slight increase, Homewood Democratic Rep. William Davis, who is the chair of the House K-12 education budgeting committee, said that it is not enough to meet the need in many Illinois schools. “Is this the budget that I wanted? Absolutely not,” he said. General State Aid to schools has not been fully funded for the last three years.

Harris said that as the fiscal year wears on, state agencies would start to feel the squeeze of trying to stick to flat funding, while the cost of doing business grows. He said that services required by law our under court orders would likely start to crowd out other programs. “It’s going to be after January 1 that you see the problems beginning to add up.” Harris said that if nothing changes, the budget would be in an even worse place in Fiscal Year 2016. “Next fiscal year, we’re going to be in a terrible spot because next year we will have lost a full year’s worth of revenue.”

Sugary drink tax fizzles out

By Caitlin Rydinsky 

Another potential revenue source hit a wall at the Statehouse today as a House committee rejected a proposed tax on sugary drinks.

House Bill 0397 calls for a one-cent-per-ounce tax on sugary beverages. Sponsor Rep. Gabel, an Evanston Democrat, said the bill could potentially raise more than $600 million to ease the state’s loss in revenue from expiration of the temporary income tax. Supporters hoped that increased tax could also help to reverse obesity and health- related issues  by prompting residents to drink fewer sugary beverages. The legislation called for the tax revenue to be used for physical and health education in schools and childcare centers, as well as walking paths and other community initiatives.

The bill failed by a wide margin in the committee, with only two of seven members voting in favor. Opponents argued that the tax would be hard on low- and mid-income families and would jeopardize jobs in the soft drink industry. Mark Denzler, chief executive officer of the Illinois Manufacturing Association, said, “You can’t raise the revenue without losing jobs.” The manufacturers and beverage industry raised concerns that a tax would impact stores and cause Illinoisans to go nearby states to avoid the cost. Denzler said, “If you raise the tax, and this is a tax increase by $2.88 on a case of soda, you will see consumers not necessarily changing their pattern of what they buy, but where they buy.”

Supporters said although the bill failed, they will continue efforts to pass such legislation. “Though we wish the outcome of the hearing had been different, we are glad this bill has started a public debate on the health impacts caused by sugary drinks. The fight will continue for a healthier Illinois,” said Elissa Bassler, executive director of the Illinois Alliance to Prevent Obesity, in a written statement. “The issues regarding obesity-related health impacts such as diabetes, heart disease and stroke are not going away, and we are committed to reversing the obesity epidemic in Illinois.”

Backers of the tax said that it would not limit consumers' ability to have a beverage they want, but it could encourage them to make healthier choices. They argued that while jobs might be lost in the soft drink industry, the legislation would promote growth in other sectors, such as health care and wellness. “I understand the concerns of the tax applied, but I also really want to emphasize the cost and the pain that obesity and diabetes have caused in so many working families,” said Gabel. “Particularly low-income families who don’t have proper medical care and insurance. They end up losing their legs, and so, I think we have to weigh in on these things as well as the creation of jobs in other industries.”

House working on less severe tax-rollback budget plan

By Jamey Dunn with Caitlin Rydinsky contributing 

After an austere budget bill failed miserably on the House floor on Friday, House Speaker Michael Madigan said that Democrats would craft a more workable budget without an extension of the current tax rates.

The proposal failed with only five voting “yes” and 107 members voting against it. All the votes in favor of the $34.8 billion budget came from Democrats. The so-called doomsday budget would have cut education by $570 million and human services by $365 million from the current fiscal year.

Republicans decried the proposal as a stunt and not a legitimate effort to cut the budget in a responsible way. “I think it was something that was another ploy, a tactic, that is in the game plan of the speaker. We’ll have to wait and see what the real meaning was behind that vote,” said Bloomington Republican Rep. Dan Brady, who serves on the House higher education budgeting committee.

Madigan said he was not surprised that most on his side of the aisle rejected the plan. “Democrats generally are not interested in reducing government and providing less government help for people. They’re not interested in that, and so [the] democratic vote on the budget this morning should not be a surprise.” He said that Democrats on the budgeting committees in the House will meet to try and work out a plan that can pass in both chambers and be signed by Gov. Pat Quinn. “My expectation is at the end of the day, there will be at least 60 Democrats, maybe more, that will be supporting a budget which will continue to provide a good level of state services to the people of Illinois without the extension of the income tax increase.”

As the law stands, the income tax rates would step down to 3.75 for individuals and 5.25 for corporations half way through Fiscal Year 2015. A rollback of the rates would take an estimated $1.6 billion in revenue with it. Gov. Pat Quinn and Democratic legislative leaders have said they support for an extension of the rates, which are 5 percent for individuals and 7 percent for corporations. But Madigan told reporters this week that there are not enough Democrats in the House who support keeping the current rates.

One way that plan without a tax rate extension might avoid deep cuts is by reducing the amount of money the state uses to pay down its backlog of overdue bills. Such a move would likely result in schools, social services providers, doctors and others who do business with the state having to wait longer to be reimbursed for their services. The backlog is expected to be about $5.6 billion when the current fiscal year ends on June 30. That number is down from the peak level of $9.9 billion in 2010. In some cases, those owed money by the state where waiting for six months or longer to be reimbursed.

Such a move could earn the plan opponents from both parties. “I know that the amount of the unpaid bills that the sate has outstanding is of concern, not only to me but to other legislators as well, and any budget plan is going to have to have a component that pays off a substantial amount of that debt,” said Rep. Sam Yingling, a Democrat from Round Lake Beach. “I think difficult decisions are going to have to be made. Everybody knows that the state of Illinois has lived far beyond its means for a number of years, and now the state is going to have to come to grasp with the fact that it can’t afford everything its been funding. So difficult decisions are going to have to be made, and not everybody is going to be happy with those decisions.” Yingling does not support an extension of the current tax rates.

Madigan said Friday that he still supports extending the current income tax rates, but he said that getting it done is another matter. He says that only 34 members of his caucus are in favor of extending the current rates. “I’m going to continue to work for the extension of the income tax increase because my view is that the state does need more money to support the programs that are offered by the state, but 34 is a long way from 60.” Madigan said that he does not plan to send Quinn a lump sum budget or pass bills that do not match the revenue coming in, forcing the governor to make cuts.

“There’s certainly not the votes for the tax increase,” said Rep. Jack Franks, a Marengo Democrat. Franks opposes extending the current tax rate. But he says that he thinks there could be an option in between the doomsday option voted down today and the $38 billion in spending the House approved last week. Madigan put a hold on those budget bills, so they did not go over to the Senate after passage. “I think there’s a happy medium; at least there should be a compromise and I’m hoping in the next few days we’ll get closer to it.”

Still, some are hoping that House Democrats will come around to the idea of keeping the income tax increase. Weekend session has been canceled, so lawmakers from both chambers will presumably head back to their districts for the next two days. “I think that the members, at least in the House, need to come to their senses and realize that you can’t adequately fund education without adequate resources to do so,” said Homewood Democratic Rep. William Davis, who chairs the House’s K-12 education budgeting committee. “Hopefully, members will take the weekend, come to their senses and realize that we need to come back sit down and have real conversations about the priorities of the stat of Illinois and then discuss what it’s going to take to fund those priorities.”

If the House can did pass a budget somewhere in the middle, the real challenge of getting support from the Senate and Quinn would begin. Senate President John Cullerton has said that he has the support to pass an extension of the rates, and Quinn has been lobbying house members hard for a tax vote. Getting more liberal Democrats in the Senate to vote for a budget that cuts or even funds services at a flat level but delays payments to schools and vendors could be difficult.

Quinn based his budget proposal on extending the rates, expecting the sometimes-stubborn governor to back track on the budget during a close election could be unrealistic. Part of Quinn’s proposal also included a $500 rebate for home owners to defer their property tax costs—an initiative the governor was no doubt hoping to tout on the campaign trail.

 Franks said of Quinn: “If there’s no additional revenue coming in, then he can’t spend any extra money. I think he may not like it, but it is going to be what it is.” He added, “Nobody’s going to like the budget.”

Madigan tells House committees to craft a tax-rollback budget

By Jamey Dunn

House Speaker Michael Madigan said Wednesday that a proposal to extend the current tax rates is short by nearly half the votes it would need to pass. Madigan said he told budgeting committees to draft a plan that assumes the rates will begin to step down next fiscal year.

As the law stands, the rates would step down to 3.75 for individuals and 5.25 for corporations half way through Fiscal Year 2015. A rollback of the rates would take an estimated $1.6 billion in revenue with it. Gov. Pat Quinn and Democratic legislative leaders are advocating for an extension of the rates, which are 5 percent for individuals and 7 percent for corporations.

House Democrats took a test vote on the extension behind closed doors this afternoon. Madigan said just 34 of them voted in favor of extending the current tax rates, while 30 voted “no.” A handful of Democrats did not take a stance. The proposal needs 60 votes to pass in the House, and the House Republican caucus has already taken a stance against it. “Obviously it’s a very difficult vote. It’s coming at a difficult time,” Madigan said after the caucus meeting. The plan also includes a annual $500 rebate for home owners, which Quinn has pitched as property tax relief.

Last week, the House passed spending that assumed the rates would be extended. Madigan said he has asked the chairs of the chamber's budget committees to work with committee members and present new budget bills without that revenue as soon as possible. “Our plan and our goal is to work toward the preparation of an alternative budget to the one that was adopted by the House a few days ago.” 
Budgeting committees in both chambers have already held hearings on what the fallout of such a budget might be. The potential outcomes have been framed as dire and include: the closer of state prisons and the release of inmates with little to no monitoring; the layoff of thousands of teachers; the elimination of child care for many low-income families and in-home care for many seniors; the closure of all forensic labs in the state and the layoff of hundreds of state troopers. The governor also presented a budget based on the current law, which he dubbed his “not recommended budget.”

“Things are very fluid,” Quinn's spokeswoman Brooke Anderson said of Madigan's vote count. “The not-recommended budget includes radical cuts that would harm schools, students and our most vulnerable residents.” Quinn has been meeting with House Democrats individually this week to try and persuade them to support the extension.

Madigan said he thinks it is possible that some House Democrats may change their minds about the tax vote once they see what the cuts without it would look like. “As far as I’m concerned, I’m going to continue to work for the governor’s proposal. I presume the governor is going to continue to work for the proposal. However, the clock is running, and we’re getting closer to the end of the month.” The regular session is scheduled to at midnight on May 31. A budget passed after that time would require a supermajority. However, after January (and after the November general election) the requirement goes back down to a simple majority.

Madigan said he plans to ask Senate Democrats to work with the House on a version of the budget that assumes the current tax rates. A spokeswomen for Senate President John Cullerton said that Senate Democrats will collaborate with the House. But she says they would likely not be willing to pass any plan that is based on an extension of the current rates if the extension is not approved, too. “We have the votes to renew our tax rates. There is strong opposition to passing a budget that doesn’t match available revenues,” Rikeesha Phelon said in a written statement. “If the House is unable to pass revenue, we will be forced to develop budget outlines that may be balanced [but] will be insufficient to meet our budget pressures. It won’t be pretty.”

Opponents to extending that rates claim that Democratic leaders are making the budget picture look worse than it would need to be in order to gain support for their plan. “The Democrats’ approach this entire spring has been to try to create as dire a picture as possible,” said Palatine Sen. Matt Murphy. “You can make it a lot more plausible that you can fund core services and still allow the tax rate to go back down as the Democrats promised it would, but they don’t want people to see that. They don’t want that argument out there because they want to continue to get the money that they’ve been getting.”

Madigan said he has not put forth any other potential revenue sources. He also said that a capital construction plan is not moving forward at this time. Quinn has called for a new capital bill because the current one will run out soon. Capital construction projects may also be a lure for Democrats who are on the fence about extending the tax rates. “In my discussions with members, some of those members talked about capital projects. I didn’t,” said Madigan.

Madigan: tax extension is "significantly" short of votes needed to pass

By Jamey Dunn with Caitlin Rydinksy contributing  

House Speaker Michael Madigan said that an extension of the current income tax rates is “significantly” short of the votes needed to pass in his chamber despite Gov. Pat Quinn addressing a House Democratic caucus meeting Monday evening.

Quinn met with House Democrats behind closed doors for more than two hours Monday. The governor is advocating for an extension of the current income tax rates of rates of 5 percent for individuals and 7 percent for corporations. As the law stands, the rates would step down to 3.75 for individuals and 5.25 for corporations half way through Fiscal Year 2015. Supporters of extending the current rates argue that allowing the rates to sunset would cause devastating cuts to education and other core areas of state government. As part of his tax plan, Quinn also wants to send an annual $500 property tax rebate to homeowners in the state. “I think we need to make sure that we properly invest in our schools. Our state over relies right now on property tax to fund education. I think we have to do better. We have to use a tax based on ability to pay, the income tax, to properly fund our schools. I spoke about that quite a bit in the caucus,” Quinn said after he addressed the Democrats.

Upon exiting the meeting, many Democrats described it as “cordial” and said that their colleagues had plenty of questions for Quinn. Rep. Elaine Nekritz, a Northbrook Democrat, described the caucus meeting as “tense.” Nekritz said she would support an extension of the current rates if it was coupled with some larger budget reforms, such as the creation of a rainy day fund. “We have a variety of opinions and thoughts on the direction that we ought to be taking, and there was a lot of that aired,” Nekritz said of the caucus. “This is a very very difficult decision for members, so I think that it just creates tension.”

Madigan said that he is working to pass the tax rates extension solely with Democratic support. No Republicans voted in favor of the temporary increase when it was approved in 2011. House Minority Leader Jim Durkin said that he does not plan on putting any votes on an extension of the rates. “Our caucus is firmly against it.” Durkin said that Republicans would make a tax vote a campaign issue for Democrats running for reelection. “It’s kind of a defining issue between the parties,” he said. “Remember, this [tax increase] was temporary three and a half years ago.”

Madigan said that Quinn worked hard to present his case, but he doesn’t know yet if any minds were changed. “I thought he did an excellent job of presenting his position, arguing for his position, taking questions. He took every question. He answered every question. He got very animated on a lot of his answers because, at times, he wasn’t hearing what he wanted to hear,” Madigan said. “I think it’s significant that there was opposition expressed from all sectors of our caucus. I’m going to continue to work to find 60 Democrats to vote for the governor’s bill. We are significantly away from 60 today.” When asked how he would get the votes, Madigan said, “It’s going to take a great deal of persuasion.” He refused to answer questions about possible alternative revenue sources or what would happen with the budget if he cannot get the votes for the extension.

Quinn’s tone was more optimistic. “You’re always building a majority on any issue; it’s a building of a majority to get to 60. I think we’re doing our very best to get that majority. I think my philosophy in life is hope for the best and work for it. So, we’re working real hard on getting those 60 votes in the House of Representatives. Obviously, we have to keep on working until we get there.”

Lawmakers who are likely targets of lobbying efforts from Quinn and Madigan were coy when approached by reporters after hearing Quinn’s arguments. Rep. Sam Yingling, a Democrat from Round Lake Beach, would not comment when asked about his reactions as he excited the meeting. Yingling is signed on as a cosponsor of a bill that would roll back the tax rates to the levels they were at before the increase. Another suburban Democrat, Rep. Fred Crespo, said his constituents are “very concerned” about the possibility of the tax rates being extended. Crespo, who is from Hoffman Estates, has previously opposed extending the rates. “There’s a lot of conversations going on, and we’ll just have to wait and see,” said Crespo. “You know, every day’s a different day.”

House approves budget bills without revenue source to cover costs

By Jamey Dunn

The House today approved budget bills for next fiscal year that would spend billions more than the amount of revenue the state would bring in under current law. UPDATE: House Speaker Michael Madigan has filed a motion that will effectively prevent the more than 70 budget bills passed today from automatically going to the Senate. Madigan told the Chicago Tribune that the move was needed in case the House wanted to further amend the bills. 

Earlier in the spring session, both chambers voted on a $34.4 billion revenue projection. Now many House Democrats are backing a plan that would require more. Spending was broken down into more than 70 bills. This gave lawmakers the chance to strategically pick and choose what areas of the budget they wanted to vote to support. It also made for more than 9 hours of debate. Republicans spent much of the time crying foul. They argued that the spending bills are unconstitutional because they were approved without matching revenues. The state’s Constitution calls for a balanced budget. “We are voting today for an unconstitutional budget, plain and simple,” said House Minority Leader Jim Durkin. “The state of Illinois needs to live within its means, and we must stop this reckless pattern of insane spending.”

Rep. Ron Sandack, a Downers Grove Republican, described the process as “a shame, a sham and something I am embarrassed to be a part of.” During the debate for almost every bill, Republicans decried voting for spending that they say would require making the temporary tax increase permanent. The current income tax rates are 5 percent for individuals and 7 percent for corporations. As the law stands, the rates would step down to 3.75 for individuals and 5.25 for corporations half way through Fiscal Year 2015. At one point during the debate, Durkin used a procedural move to try to force an end to the day’s session and slow down the process, but his motion was voted down. Democrats criticized Republicans for not presenting an alternative budget plan. “Here’s our plan. Stop spending money,” Sandack said in response.

Democrats who supported the legislation argued that lawmakers should move the appropriations bills through the process while the revenue side of the budget is still in the works because the end of session is rapidly approaching. Adjournment is scheduled for May 31. “There’s some discussion going on the revenue side. Obviously that’s not going very well,” said Hoffman Estates Democrat Rep. Fred Crespo, who presented several of the bills on the floor today. “There’s less than a week and a half left is session, and we need to come up with appropriations.”

The Democrats who presented the bills on the floor acknowledged today that the budget would need more revenue to support the plan, but they were careful to focus on their individual bills and not talk about the tax increase on the floor. Chicago Democratic Rep. Greg Harris, who chairs the human services budgeting committee, said that lawmakers must make the responsible choice to take care of those in need, such as the elderly and the disabled. He added that the funding levels would also be necessary to comply with state and federal law and several court orders that require certain services be provided.

Some Democrats opposed some or all of the spending. “You’re asking us to spend $4 billion more than what our revenue estimates indicate. You’re asking implicitly and tacitly for a tax increase. So a vote for this budget, is also a vote for a tax increase,” said Marengo Democratic Rep. Jack Franks, who was a vocal opponent of the temporary tax increase when it passed in 2011. “If we’re going to do that tax increase, let’s be honest about it. Let’s vote for it today. Let’s see if they’ve got the votes up for it, and let’s do it. Once we know what the revenues are, then we should be talking about the budget.” But Franks said he has his doubts about whether an extension of the tax rates could pass. “There’s no consensus here on raising taxes. ... We’re promising imaginary money that does not exist.”

Meanwhile, House Speaker Michael Madigan said yesterday that he is lobbying for an extension of current rates. There is also a package of changes to business taxes in the works. So the final revenue plan could be a combination of several things in addition to the income tax. Madigan said yesterday he was open to rolling back the corporate income tax rates as part of a larger “balanced package.”

Gov. Pat Quinn said today that he has been lobbying members of both parties in both chambers for a “responsible budget.” Quinn told reporters at an event in Cicero today: “The month of May is all about getting a responsible budget that invests in the future, invests in the classroom, making sure we have world class education, making sure we have [the] proper amount of money for our health care.” Quinn’s staff said that he was in Springfield meeting with lawmakers before he went to the event. “We’ll get a responsible budget, if we work together and work hard,” Quinn said. “That’s what I’m committed to, morning noon and night, getting a responsible budget that doesn’t go back in time, back to a time where Illinois had all kinds of fiscal problems.”

The plan approved today was largely based on Gov. Pat Quinn’s budget proposal, which calls for an extension of the current income tax rates. The rates are scheduled to begin stepping down in the second half of next fiscal year. The plan would increase spending for K-12 and higher education, as well as human services. The spending includes several line items specifically requested by Quinn, including increased funding to the Monetary Assistance Program (MAP) for low-income college students, additional funding for maternal and early childhood health programs, money to turn two shuttered youth centers into special treatment centers for mentally ill and substance addicted adult inmates and raises for home health care workers.

Still, the plan would not fully fund General State Aid to schools. GSA has been prorated for the last three years. The legislation passed today would fund GSA at 90 percent. Some Republicans argued that if there is going to be a tax increase, more of the money should go to education. The line item for transportation would be funded at 83 percent. “We’re spending more money than at any time in history and the question is where is the money? Cause it doggone sure is not in education,” said Rep. Chad Hays, a Catlin Republican. “Where is the money? This process doesn’t add up.” Lewiston Democratic Rep. William Davis, who is chairman of the House K-12 education budgeting committee, said that K-12 education would be getting a bigger chunk of revenue than other areas of the budget. “Tell me someone in this chamber who doesn’t run on some education platform—that they support education and want to see it fully funded? I think we all agree on that. But I think the reality is that there are always some limitations. We don’t have an unlimited pot of resources that we can use.”

In order to make it to Quinn's desk, the bills would still have to clear the Senate, where Democrats who work on the budgeting process have said they are reluctant to approve spending without the funding to match. Senate President John Cullerton has said that he has the votes to get the tax extension through his chamber, but he wants to wait and see if it can pass in the House first.

Several factors at play in tax vote

By Jamey Dunn

The House plans to vote for spending before it takes up the issue of revenue, but a vote on extending the current income tax rate is just part of the budget picture.

House Speaker Michael Madigan said today that he hopes to first pass the spending portion of the budget, which would presume an extension of the temporary income tax. He said that the move is needed to help lobby lawmakers to approve tax rates needed to fund the budget. “Our purposes in advancing the budget first is to set the bar against which we will work to convince people to vote for the revenue.” House committees approved budget bills today that are based largely on Gov. Pat Quinn’s recommended budget.

Republicans say that the move “puts the cart before the horse.” Elmhurst Republican Rep. Dennis Reboletti said that businesses and families do not make their budgets by first deciding what they would like to buy and then figuring out how to pay for it. “We know what our income is. We make decisions based off of that. We don’t assume that we can buy a new house because we hope to have more money, but not have the additional revenue to pay for it.” Many Republicans argued today that a vote on a budget that spends more than the state expects to take in under current law would be unconstitutional. “It is on its face blatantly unconstitutional,” said Catlin Republican Rep. Chad Hays. “Who on planet earth budgets in this fashion? This is simply not done anywhere by anybody.”

 But Chicago Democratic Rep. Greg Harris, who is chairman of the House human services budgeting committee, said that moving spending bills along is all part of the process and that the order in which it happens is not as important as getting the whole job done. “There are a lot of pieces of the budget which we have to pass,” said Harris. “I think we have until midnight on the 31st of May to reconcile all of this.” He said that if lawmakers can determine what services they think the state should deliver, then when it comes time to make revenue decisions, they can avoid asking for more than is needed. Harris was clear that he does not think that the state can get by on the current revenue projections that allow the income tax to begin stepping down in the second half of Fiscal Year 2015. Harris called the step down “a terrible financial cliff that we would drive the families of Illinois right off of.”

Republicans argue that Democrats are making the budget scenario under the current rates look muckh worse than it would need to be. “We on our side of the aisle feel very strongly that we can craft a workable budget without devastating extreme irresponsible cuts or reductions. We can craft a responsible budget without having the continuation of the tax,” Rep. David Harris, a Republican from Arlington Heights.

The House is expected to start taking votes on spending bills tomorrow. As Democratic leadership in the chamber works to get the support to stop the income tax rates from stepping down, other issues will likely come into play.

Rep. David Harris said that he expects that a comprehensive business tax reform package will emerge before the end of the month. Harris serves on a House committee that has held hearings over the last year on the business tax climate in the state. (House Speaker Michael Madigan presented a bill with changed to the EDGE tax credit to that committee today. See this blog post for the details.) Madigan said to the committee this morning that he would be willing to allow the corporate income tax rates to roll back if the proposal was tied to other changes. “I’m prepared to advance that bill, but as part of a balanced package,” Madigan told the committee.

Business friendly tax breaks tied to an extension of the income tax rates, or possibly just the individual income tax rate, would serve several political purposes. They could provide cover for Democrats who vote for a tax increase as part of an overall “tax reform” package. They could possibly be used to lure Republican votes on the income tax extension. More likely, Republican “no” votes on business friendly concepts could be used for negative campaign advertising and mailers before the November general election.

But Rep. David Harris says that he believes that the business tax plan will be separate from an income tax vote. He says that he thinks that the package would address such issues, as the franchise tax, incorporation fees and tax credits for manufacturers when the buy equipment. “I think it will be separate from the tax rate bill,” he said. Harris said that if it is tied to extending income tax rates, he does not think any Republicans would vote for it. “I think if it’s a business related package, they’re going to want some Republicans on the package,” Harris says. “I don’t consider an extension of the income tax [to be] tax reform.” He said that any business tax tweaks would likely be revenue neutral. So if some tax cuts are made larger or some taxes eliminated, other tax breaks may be scrapped or reduced. Some would call it closing tax loopholes. Harris, however, would not call it that. “Let’s not call them loopholes. Let’s call them, perhaps, exemptions or credits that we now give that may no longer be beneficial or helpful, or they don’t achieve the public policy that we initially intended them to achieve.”

Mark Denzler, vice president and chief operating officer of the Illinois Manufacturers’ Association, said that he thinks that the work on a business tax package is a mix of policy and politics. “I think it’s a combination of both. I think there’s some legitimate changes being made.” Denzler said that he has not seen a plan yet. “We’ll just see how things play out. We’ll have to look at a final package. ... I think that there can be some positives for the business community.” But he said that coupling an extension of the tax rates with some tax sweeteners for businesses would fall short of being a game-changing move when it comes to the state’s fiscal policy. “Ultimately, we think we need comprehensive tax reform. Making the income tax increase permanent and adding a few tax incentives is a little bit more of a Band-Aid quite frankly to the whole problem that Illinois faces.”

A few more tax issues could also end up in the mix. In his budget address, Quinn called for property tax relief and an incremental doubling of the Earned Income Tax Credit. Both of these options could be used to soften the blow of a tax rate extension and potentially pull some reluctant votes on to it. Under Quinn’s plan, homeowners would lose their current property tax credit and it would be replaced with a flat $500 refund for each owner occupied property. Quinn’s budget office estimates that such tax relief would cost $1.3 billion annually. The current credit costs about $600 million. While some homeowners currently get a tax credit that is larger than $500, Quinn’s staff said that 92 percent homeowners would be better off under his proposal. Quinn’s plan would also increase the EITC from 10 percent of the federal credit to 20 percent at a rate of 2.5 percentage points per year. The increase would cost more than $200 million annually once it reaches 20 percent. At the time of the address, Quinn and his staff were aggressively packaging his pitch to make the tax increase permanent as a reform of the state’s tax system. His proposal also included a five-year budget “blueprint” that calls for spending caps, a rainy day fund and cutting the state’s bill payment cycle down to 30 days.

When all else fails, pork spending—I mean, local construction projects—may also be an option to get votes on a tax rate extension. Democrats acknowledged today that they are also working on a capital construction bill. Quinn has been calling for a capital bill because the current plan, which was the first in 10 years, is about to run out. While Statehouse observers are always (justifiably) skeptical of the way that capital projects appear to be leveraged for votes, nobody can deny that work on Illinois roads and bridges is necessary and that many state facilities are in dire need of maintenance. What the funding stream for a capital bill would be is unclear at this point. Republicans warned today that it could come with more taxation. “There may be additional taxes out there to accommodate some of our other unmet needs,” said Hinckley Republican Rep. Robert Pritchard.

 Madigan told reporters this morning that he is working the roll call for an extension of the tax rates. He said that he is not trying to strong-arm lawmakers. “We’re not in the business of issuing threats. ...We don’t engage in tactics like that. We try to work with people, persuade people, cajole people,” Madigan said. “We talk in terms of their view of where the sate should be, what the state should be doing for its citizens.” Madigan said.

When asked how many voted he still needed, he said that he was not to the point of knowing exactly how many members he still needs to persuade. While Senate President John Cullerton has predicted that session could adjourn early this year, Madigan indicated today that might not be the case. “There’s two and a half weeks left in the session. And we’ll be here. We’ll be on our job,” he said.

Senate waiting for House support on graduated income tax vote

By Jamey Dunn

Democratic leaders in the Senate do not plan to move forward with a graduated income tax proposal unless there is indication that plan could pass in the House.

Senate President John Cullerton said that he is supportive of the proposed constitutional amendment. But he said he plans to “wait and see” what the House does on the issue because it likely has less support in that chamber. A spokesperson for Cullerton later clarified that he would consider a vote if there was indication that the House would approve the measure.

Oak Park Democratic Sen. Don Harmon, who sponsors the amendment, reportedly planned to call it for a vote this week. Supporters of the amendment are almost out of time. For Harmon’s Senate Joint Constitutional Amendment Resolution 40 to make it to the ballot under the current legislative schedule, it would need to pass in the Senate tomorrow and in the House on Thursday. The final deadline to approve constitutional amendments is May 4, but as of now, both chambers are scheduled to wrap us session this week on Thursday.) Harmon was not available for comment.

Constitutional amendments require the backing of three-fifths of both chambers. House Speaker Michael Madigan told reporters last week that a progressive income tax amendment was “significantly short” of the support needed to pass in the House. The proposal has no public support from Republicans, so all the Democrats in the House would have to vote for it. Rep. Jack Franks, a Democrat from Marengo, is a cosponsor of a resolution opposing a graduated income tax. There is a graduated income tax amendment in the House, too. But it is not as far along in the process as the Senate amendment after it failed to make it out of the House Revenue and Finance Committee in March.

Cullerton said today that his chamber would also take a wait-and-see approach on extending the current income tax rates. “We have two different budgets that we are contemplating.” Cullerton said one version includes an extension of the current rates. The other would allow the tax increase to begin its sunset in 2015 and would require substantial cuts. He said that since Madigan is still working to get the votes for it in the House, a tax rates extension should start in that chamber. “We will wait and see which of the two budgets we have to work with.” When asked if Democrats could vote in favor of the cuts that would be needed to allow the income tax rates to go down, Cullerton said: “It will be difficult, but we have to pass a budget.”

As lawmakers head into the last month of spring session, which ends at midnight on May 31, Cullerton says he hopes that the support can be mustered to pass an increase in the state’s minimum wage. He said that he thinks there is broad backing among voters for such and increase. “Now, the question is whether or not we have the votes for it here.” Madigan said last week that he is also still working to round up the votes needed to pass a minimum wage increase. A possible plan B of putting the issue to voters through a nonbinding referendum has also been floated. If the majority of voters cast a ballot in favor of a minimum wage increase as part of an advisory referendum, it would not actually change wages in the state. But the results of such a vote might help those in favor of an increase in their lobbying efforts. “We’re going to try to see if we can pass the bill, and if we’re short maybe we need to get public input through a referendum question. That would be an alternative if we don’t have enough votes to pass it,” Cullerton said.

What to watch: budget edition

By Jamey Dunn

Illinois lawmakers have had a two week break from the capitol, but they are scheduled to be back in session on Tuesday. As those who watch the legislature closely know, the action typically doesn’t truly get geared up until this point. But soon enough we will be immersed in the blur of activity that is May at the Statehouse. Here are some things to watch for on the budget front.

The General Assembly has until midnight on May 31 to approve a budget with a standard majority. After that time, any bills passed require a three-fifths majority to have an immediate effective date. Crafting a budget is not going to be easy this year. The temporary income tax approved in 2011 is set to begin its phaseout in the second half of Fiscal Year 2015. For months, heads of state agencies, lobbyists, public university presidents and others have come before budget committees to lay out what they say would be the dire consequences of the cuts that would be needed if the tax rates drop. Mass layoffs, facility closures, threats to public safety, spikes in K-12 class sizes and deep cuts to programs that provide care to seniors or children, have all been cited in the doom and gloom presentations. 

Meanwhile, Republicans argue that the state’s budget outlook is being framed as worse than it really is. They say that Democrats are pushing a doomsday version of the budget to lay the ground work for making the temporary income tax permanent. “The Democrats’ approach this entire spring has been to try to create as dire a picture as possible,” said Palatine Sen. Matt Murphy. “You can make it a lot more plausible that you can fund core services and still allow the tax rate to go back down as the Democrats promised it would, but they don’t want people to see that. They don’t want that argument out there because they want to continue to get the money that they’ve been getting.” Democrats passed the increase without Republican support in 2011. It seems likely that if the want to extend the rates, they will have to go it alone again. House Speaker Michael Madigan told reporters this week that the votes aren’t there to pass it in his chamber. He said that extending the tax would be a “difficult role call.” “Every person in the legislature is going to be called upon to make a budgetary decision — either a reduction budget or an as-is budget or a slight-increase budget,” Madigan said. “And they’ll be called upon to vote for the money to support the budget that they want.”

Gov. Pat Quinn advocated for extending the current rates in his budget address. He also wants to give homeowners a $500 tax credit that he has dubbed property tax relief. Madigan and Senate President John Cullerton quickly backed the governor’s call for keeping the current rates.

A potential extension of the income tax rates is not the only tax talk legislators are going to have in the coming weeks. The sponsor of a proposal to allow the state to have a graduated income tax has said he plans to call his proposal for a vote next week. Oak Park Democratic Sen. Don Harmon’s Senate Joint Constitutional Amendment 40 would overturn the current provision in the state’s Constitution that requires Illinois to have a flat income tax. The plan would not set the rates for such a tax, but Harmon and other supporters have issued proposed rates framework. If the amendment makes it through both chambers, it would appear before voters on the general election ballot. But that seems unlikely. Harmon may be able to get the amendment through the Senate, but Madigan said that it is “significantly short” of the support needed to pass on the House. Two constitutional amendments — one that would voters from discrimination and another that would strengthen the role of victims in the judicial process — have already been approved by lawmakers and will appear on the November ballot.

Proposed tax changes relating to business in the state could also be on the way. A House committee has been focusing on the tax climate faced by Illinois businesses. The group has been taking testimony on the issue for months, but has yet to publicly present any ideas.

Before the break, a Senate committee approved a plan to change the way that the state funding is doled out to schools. Senate Bill 16 would focus more heavily on the financial need of districts. The proposal would also eliminate the individual block grant that is given to Chicago schools, something Republicans on the committee have supported. The plan would also require more spending transparency at the district level. The committee debate became heated when Republicans accused sponsor Sen. Andy Manar, a Bunker Hill Democrat, of rushing the process. The Illinois State Board of Education is working to produce numbers that would show how the changes in SB 16 would affect each school district. Republicans say that they do not want to vote on the plan until they have that information.

Manar said that lawmakers from both parties agree that the current funding formula does not work. “The idea that we can have a few premier school districts in the state that exceed every expectation ... and have an incredible number that lag behind and call that a win in the state system is not a win in my book.” The ideas behind the legislation came from a report complied by a bipartisan committee that spent more than a year considering the topic. However, Republicans say they were not involved in drafting SB 16. Manar hopes that there will eventually be bipartisan support for the bill. He says he introduced it when he did to spur debate. “We could have waited until the last week of May, negotiated behind closed doors, popped a bill out and then had a vote. That’s not the way to do this,” Manar said. 

A gaming expansion always seems to be on the table as the end of spring session nears. But getting it done is a difficult task. Putting together a bill that will make all the powerful groups involved happy, or at least not irate, is a balancing act, so is figuring out how to spread around the potential revenues in a way that will please or at least appease lawmakers. And even when gambling expansions have passed, Quinn has vetoed them. This time around, the governor has made some positive comments about expanding gambling. “You’ve got to have strong ethical standards, and I think they need to be enforced, and it has to be done by the independent Illinois Gaming Board,” Quinn told reporters in early April. “I think we have kind of ironed that out. I think we’re on the right path.” The governor has said in the past that he would not support an expansion unless the revenues went to fund education. 

Blue Island Democratic Rep. Robert Rita is sponsoring a bill that would allow for the creation of new casinos, including one in Chicago, and slots at horse racing tracks. However, when compared to past proposals, Rita’s bill would scale back the number of slot machines racetracks could have. Rita has another version that would only create a Chicago casino. The racing industry opposes both. It also seems that Chicago Mayor Rahm Emanuel will not throw his weight behind a Chicago casino plan at this point. Emanuel is echoing past statements from Quinn, saying that he will not focus on a casino until the city’s underfunded pension systems are addressed. The General Assembly already approved changes to the systems for city workers. Emanuel also wants changes to stabilize the systems for teachers, police officers and firefighters. Before they passed changes to the state’s pension systems, Quinn warned lawmakers not to be distracted by the “shiny” object of gaming legislation.

Check back for a guide on bills to watch as legislators make the final push toward the end of spring session.

Quinn calls for making temporary income tax increase permanent

By Jamey Dunn with Caitlin Rydinsky contributing 

Gov. Pat Quinn called on lawmakers to make the temporary income tax increase permanent during his budget speech today.

“The truth is, while we've taken some difficult steps to balance the budget, the issue of expiring revenue this year is a real challenge that will require another hard choice,” Quinn said in his speech to lawmakers today. Quinn presented a budget that he says reflects the severity of cuts that would be needed if the current income tax rates, which are 5 percent for individuals and 7 percent for corporations, were allowed to step down in 2015. Under current law, the rates would go to 3.75 for individuals and 5.25 for corporations half way through next fiscal year. The reduction would take more than $1.5 billion in revenues with it. Quinn also presented an alternative budget that would include revenue from extending the tax rates, and it is this second plan that the governor advocates for. “Our plan is specific, concrete and responsible. It balances the budget and doesn't shirk our responsibility to our veterans, to our children, to our working families and to our most vulnerable citizens,” he said. 

Quinn offered property tax relief and an incremental doubling of the Earned Income Tax Credit as potential sweetener that might help the income tax proposal go down with voters. Homeowners would lose their current property tax credit and it would be replaced with a flat $500 refund for each owner occupied property. Quinn’s budget office estimates that such tax relief would cost $1.3 billion annually. The current credit costs about $600 million. While some homeowners currently get a tax credit that is larger than $500, Quinn’s staff said that 92 percent homeowners would be better off under his proposal. Quinn’s plan would also increase the EITC from 10 percent of the federal credit to 20 percent at a rate of 2.5 percentage points per year. The increase would cost more than $200 million annually once it reaches 20 percent. Quinn and his staff are packaging his pitch to make the tax increase permanent as a reform of the state’s tax system. His proposal also included a five-year budget “blueprint” that calls for spending caps, a rainy day fund and cutting the state’s bill payment cycle down to 30 days.

The governor's Republican opponents say he is going back on the promise of a temporary tax increase. “Pat Quinn first promised the working people of Illinois he wouldn’t raise taxes by 67 percent. He broke that promise, taking away nearly a week's worth of pay for Illinois families. Then he promised his tax hike would be temporary. Today he broke that promise too and is doubling down on his failed policies,” Republican candidate for governor Bruce Rauner said in a prepared statement. “After five years of Pat Quinn’s failed leadership, we have record tax hikes, outrageously high unemployment, massive cuts in education and there’s still a giant budget mess in Springfield. It’s now or never to save Illinois. We can balance the budget without more tax increases, if we create a growth economy, and restructure and reform our broken government. That’s what I’ll do as governor.”

They claim that Quinn and other Democrats are trying to make the fiscal situation look worse than it truly is to justify keeping the current tax rates. So what people need to remember at the end of the day [is], it’s still a tax increase. Your income tax is going to go up from where it should have been come January 1,” Senate Minority Leader Christine Radogno said. She said that Quinn’s property tax relief plan is not all it's cracked up to be because it would eliminate the current property tax credit that homeowners already receive. So they would not get $500 in addition to their current break, but in place of it.

House Minority Leader Jim Durkin said after Quinn’s speech, “the Democrats who run this building do not tell the truth about taxes and spending.” He said that spending has increased in recent years. Quinn’s staff is quick to point out that the governor never made any promises about whether he would seek an extension of the tax increase. They say that Quinn has signed budgets with billions of dollars of cuts to discretionary spending, but overall spending totals have increased some years because fixed costs, such as the required payments into the pension systems, have gone up. His campaign issued a statement this morning claiming that Rauner’s “budget plan” would result in devastating cuts to education. Rauner has yet to give details on his vision for the budget, other than saying he wants to the tax increase to roll back and that he is not prepared to take the possibility of taxing retirement income off the table. Quinn said today that he would not support taxing retirement income or charging a sales tax on many “basic” services, such as haircuts.

In his speech, the governor tried to walk a fine line between highlighting the improvements he says have happened during his time in office and making the case that the budget situation is still unstable enough to justify hanging on to the current tax rates. “Illinoia is in stronger financial position now then we were five years ago because of the hard choices we have made,” Quinn said today. Time will tell if this strategy will resonate with voters. Not surprisingly, a recent poll from the Paul Simon Public Policy Institute at Southern Illinois Carbondale found that 60 percent of voters oppose making the tax rates permanent. However, the majority of respondents liked major state services and were opposed to cutting them. Voters were also opposed to taxing retirement income or increasing sales taxes. The only new revenue source that more than half of those polled supported was expanding gambling. 

Democratic lawmakers said today that they do not think voters are really aware of the progress that has been made in terms of the state's budget. “I think voters do not grasp how much progress has been made. It’s unfortunate to me that one budget address will not necessarily emblazon that in people’s minds,” said Northbrook Democratic Rep. Elaine Nekritz, who was one of the key players on recently passed changes to the state’s pensions systems. But she said that while voters may not be as aware of some of the things, such as pension reform and cuts to Medicaid costs, that have been done to help the state climb out of its budget hole, the bond rating agencies that determine the state’s credit rating do seem to have taken notice. “We are getting there. It took us a long time to get in, and I always said it’s going to take us a long time to get out.” Nekritz noted that the property tax relief in Quinn’s plan has the potential to be very popular with voters. “The number one thing I hear from constituents back home is (complaints about) their property taxes.”

The chairmen of House budgeting committees, which are considering deep cuts for their areas of the budget, said they were glad Quinn came out strongly for more revenue. “I have always not shied away from the revenue conversation so I am encourage that the governor wants to look at ways to bring new revenue or additional revenue to the state,” said Lewistown Democratic Rep. William Davis, who is chairman of the House education budgeting committee. He said that K-12 education is currently facing a $900 million cut. Davis said he supports the concept of coupling tax relief for low-income workers and homeowners with a call for new revenue.

Marion Democratic Rep. John Bradley, who is chairman of the House revenue committee, said that he does not think that an extension of the tax rates has enough support to pass in his chamber at this point. “That’s going to be a difficult issue. That was a tough vote before. So I think a lot of people will keep an open mind to it but that’s a long way from happening right now.” He said that lawmakers should be open-minded about Quinn’s ideas. “He threw it out there, and I give him credit for putting ideas out there. So now the legislature will move forward.”

Quinn’s proposal has the backing of the legislative leaders in his party. “I would commend the governor for his political courage and honesty,” House Speaker Michael Madigan told Illinois Public Television’s Jak Tichenor, host of Illinois Lawmakers. Madigan said that he “demanded” property tax relief be included in a proposal to make the tax rates permanent. “I plan to support the governor’s position on the extension of the income tax increase,” said Madigan. “If we wish to continue to provide the level of services which we’ve become accustomed to for education and other purposes, then the income tax increase should be extended.” However, Madigan said he still supports his own “tax on millionaires” to fund education. The proposal is a constitutional amendment that would place a 3 percent surcharge on any income over $1 million. Madigan said he expects that the tax issue will be “resolved” before the spring legislative session ends.

Bradley said that his committee plans to move ahead with Madigan’s millionaire tax proposal “right away.”

 “I think the governor made a really bold stand basically saying ‘we’re going to keep the taxes the way they are, but we’re going to give back a whole bunch of money in property tax relief,’” Senate President John Cullerton told Tichenor. He said the proposal takes the state’s high property tax rates into consideration while also deferring “draconian cuts.” Cullerton said he did not expect Republican support, which he called “unfortunate.”

Judging from the reaction to Quinn's speech from across the aisle, Cullerton’s prediction seems dead on. “The governor is more interested in making the argument that if there is not another massive tax increase that school children would be thrown into mobile homes and would be dying in the streets. That’s the governor’s arguments here. It’s an argument of hysteria. I think the governor, his first job is not to run for governor and create a campaign based on class envy, it’s to govern,” said Sen. Dale Righter, a Republican from Mattoon. He said that Quinn should do a line-by-line review of the budget to find savings. “I think he is going to discover in his own budget there are a lot of areas that he could save money and in then the words he speaks on lower income and middle income Illinoisans can actually come to prevision. Because he will find out he doesn’t have to take more money from families.”

Waiting in the dark for doomsday

By Jamey Dunn

Gov. Pat Quinn is not releasing details ahead of his budget speech tomorrow, but Republicans say they expect him to paint a picture that is more negative than it needs to be.

UPDATE 3/26/2014: The Chicago Tribune has reported that Quinn plans to propose making the temporary income tax increase permanent and offering property tax relief for homeowner. The story cites anonymous sources. Quinn's budget staff refuses to share any details of his plan with the press. His budget office did not give reporters a customary budget briefing that typically takes place the night before the speech. However, his campaign released a statement this morning blasting Republican candidate for governor Bruce Rauner for wanting to roll back the tax increase, an indication that Quinn will advocate for keeping the current rates. His campaign says allowing the tax rates to roll back would be devastating to education, making it seem likely that the governor's speech today will focus on funding schools. “Rauner’s sales pitch to run Illinois like a business would run our state straight into the ground,” Deputy Press Secretary Izabela Miltko said. “It's clear his plan would take a sledgehammer to education, lay off tens of thousands of teachers and leave Illinois’ students at a huge disadvantage. His inability to provide real solutions for our state makes it clear he can’t be trusted to run Illinois.” Quinn is required by law to present a budget based on current statute. But there is nothing stopping him from calling on lawmakers to make the tax increase permanent as he does that, as long as his budget document is not based upon the proposal. 

Quinn is breaking from tradition in a few ways when it comes to this year’s budget. He intends to present a five-year plan to lawmakers tomorrow instead of the typical one-year proposal. Quinn asked lawmakers to give him extra time to prepare his budget, pushing the speech until after last week’s primary. Staff was reportedly still putting final tweaks on it through he weekend. Quinn is facing wealthy Republican businessman Bruce Rauner in the November general election, and politics will tinge every aspect of the rollout of his proposal. Rauner has already released an ad attacking Quinn in anticipation of the budget speech and is expected to come to Springfield tomorrow.

While lawmakers on both sides of the aisle have said that they would support longer-range budget planning, some are suspicious of Quinn pitching a budget that might last longer than his time in office. They see the new format as a possible way to spread out accounting tricks over several years and make what will be a difficult budget for Quinn politically an easier sell. “The governor is talking about completely changing the format that he presents this budget in from the way it’s been done in the past, and I think it is an intentional act on his part to confuse and distract,” said Sen. Matt Murphy, a Republican from Palatine. Republicans said that did not expect to receive an advance briefing on the budget. A press briefing is scheduled for tomorrow after the speech. When asked why they were pushing off the briefing, Quinn staffers said that the 5-year plan could be confusing and they wanted to ensure they would have enough time to answer all of reporters’ questions.

Murphy and the rest of his caucus say that Democrats are trying to make the situation look worse than it could be in order to justify continuing the current income tax instead of allowing them to step down as the are scheduled to beginning in 2015. Murphy said that Democrats started off with a more conservative revenue estimate and are ignoring some money that typical come in, such as revenue from unclaimed property. He also said they could consider transferring less money out of the general revenue fund for other spending, and could make a smaller payment to the fund for state employee health insurance. The insurance fund has been shorted in recent budget years. He said that less money could also be dedicated towards bills because there will likely be more revenue than expected at the end of the current fiscal year, and that could be used to pay down the backlog. “The Democrats’ approach this entire spring has been to try to create as dire a picture as possible,” he said. “You can make it a lot more plausible that you can fund core services and still allow the tax rate to go back down as the Democrats promised it would, but they don’t want people to see that. They don’t want that argument out there because they want to continue to get the money that they’ve been getting.”

He presented a few scenarios, one of which he said would actually give the state $13 million more to spend on discretionary costs and one that would require a $700 million cut. Murphy said that Republicans are not necessarily advocating for all of these ideas, but he says they illustrated that there are more options out there besides devastating cuts or a tax increase. “We’re not suggesting that you do this,” he said. “It’s just an exercise to illustrate that they’re kind of gaming the numbers to create a doomsday scenario.” Some of the options Murphy outlined would require changes to law.

Senate Democrats strongly disagree with Murphy and his party’s take on the budget. “These are real numbers. This is the impact that we see. This is the reality that we’ve been dealing with,” Park Ridge Democratic Sen. Dan Kotowski said at a hearing budget earlier this week. Senate Democrats asked state agencies to present the potential fallout from a 20 percent cut. Kotowski said today of Murphy’s scenarios, “That’s just wrong. If you look at the numbers that we presented, the group health [insurance] number represents the actual costs.” He said that under the budget starting point that is currently being used by lawmakers, total obligations to the health insurance plan are being underfunded. He also said that much of the money that is put aside for overdue bills would go toward Medicaid obligations and capture federal matching funds. He also said that Quinn’s plan to present a five-year proposal is a step in the right direction because it allows the governor to indicate his vision for the future instead of potentially using creative accounting to scrape through one tough fiscal year. He said government should adopt more long-term budget planning tactics, which are commonplace in the private sector. “It depoliticizes the budget process because you’re looking at five years.”

Democrats note that levels of state staffing and core services have been cut in recent budget years, and under the $34.495 billion revenue projection approved by both chambers, that trend would continue. That amount is about $1.5 billion less than the revenue projection approved for the current fiscal year. House committees have already been told what numbers they are working with based on the revenue projection and they are considering 14 percent reductions. Chicago Democratic Rep. Greg Harris, who is chairman of the House human services budgeting committee, said that under the revenue projection his committee would have $719 million less to work with this year. He said that all programs that are not mandated by court orders or other requirements could be eliminated “and then we’ll have to cut 200 million more.” Childcare for low-income parents, in-home care for seniors and addiction treatment and prevention programs would all be on the chopping block. Meanwhile, he said that a proportionally equal cut for education would lead to the layoffs of thousands of teachers. “In order to balance the budget and provide the services and undo our backlog of bills, we need to be responsible in how we budget. That means controlling our expenses, but it also means having necessary revenue.” He said that putting off bills and underfunding obligation is not the way to go.

When asked what he hoped to see from Quinn tomorrow, Harris said: “I would like to see just a really bold and powerful explanation of the fiscal realities that face our state and how we must be responsible to pay down our back log of bills. So we need the revenue to do that, to meet our current obligations and to be sure that we are not cutting aid to education, that we’re not discontinuing meals on wheels to seniors, that we are not cutting substance abuse programs.”

Arlington Heights Republican Rep. David Harris said he hopes to hear the opposite. He says he would like Quinn to say that he agrees with the House’s revenue estimate, which he helped craft as part of the House revenue committee, and that the state can live within that amount. Harris agrees with Murphy that some costs could potentially be shifted to make the situation a little easier and bring the cuts down to a few hundreds of millions of dollars instead of billions of dollars. “Do you mean to tell me that we can’t have a reduction of $700 [million] to $800 million and not run sate government? I don’t buy that.” He said he is concerned that Quinn instead is going to propose some costly initiatives, such as an increase to the Earned Income Tax Credit for low-income workers.

Murphy said he is not expecting much out of the speech tomorrow. “He’s got a real divide in his party about whether to raise taxes or not, and I think he’s going to try to get out of tomorrow without saying anything concrete and hope nobody notices.” He, and other lawmakers, said that he has heard that Quinn's budget office, which originally had a larger revenue estimate than the one lawmakers approved, is revising its estimate down. Murphy reads this as indication that Quinn may follow the Senate Democrats' lead in framing the budget as a “doomsday” scenario.

Rep. Greg Harris said that whatever Quinn presents, his committee will meet the next day to continue with the budgeting process they, and other budgeting committees in the House and Senate, have started.

Rep. David Harris said that so far, Democrats and Republicans in his chamber have been able to work together to agree on a spending number. But once the debate comes down to how to spend the money, things may not remain so amicable. “The fireworks will start on Thursday,” he said.

CapitolView

CapitolView, WSEC-TV Springfield. Host Jamey Dunn (IL Issues) and guests Brian Mackey (IL Public Radio/WUIS) and Nicole Wilson (24/7 News) discuss the recent primary results as well as House Speaker Michael Madigan's proposed millionaire tax.

Democrats make the case for more revenue

By Jamey Dunn

Democrats on key budgeting committees are beginning to build the case for finding more revenue for the next fiscal year’s budget.

A Senate budgeting committee today called upon agency heads to present the potential impacts of a 20 percent cut. The results were dire. The State Board of Education said that if the cut, which would be $967 million, fell on general state aid it would result in the per-pupil foundation level being funded at 65 percent. Currently, Illinois is meeting 89 percent of its statutorily required per-pupil funding. State Superintendent Christopher Koch said that the number of schools on “financial watch” status would more than double. The number of districts that would be deficit spending would jump from 532 to 724 of the state's 860 districts. He estimated that up to 13,400 teachers could face layoff and many schools would have to eliminate all extracurricular activities. Koch said that the cut in funding could also result in a loss of almost $80 million in federal funds, including Title I and Title II funding, which is meant to assist at-risk students.

“We could eliminate our Early Childhood Block Grant and that would only get us about a third of the way to a $967 million reduction in state spending. It would also mean more than 90,00 children would no longer receive early childhood education,” said Koch.

As things stand now, the Illinois Department of Corrections officials said that without a funding increase, three facilities would need to be closed. If those closures happen, the department would have to find room for about 4,000 inmates in its overcrowded prisons or release them. An estimated 900 staff members would be laid off.

IDOC Director Tony Gondinez said that a 20 percent cut would mean that 11 corrections facilities would have to be closed, and 15,500 inmates would be released. He said that the current parole system, which has more than 27,000 parolees monitored by about 350 agents, would be hard-pressed to monitor those newly released offenders. Corrections officials said that those newly released offenders would be “virtually be unsupervised.” More than 3,000 DOC employees would be laid off without offers of transfer to new positions.

Under a 20 percent cut, the Department of Juvenile Justice would have to close two facilities and release 215 youth out of the 800 it has in custody. The department is currently hammering out the details of a court order to improve its education system, mental health care and the safety standards at its facilities. Experts that were called upon to report on these areas found that the department was in violation of state and federal laws. “One of the issues now is whether or not we can provide minimum services with the funding we had,” said acting Director Candice Jones. She said that the department would lose federal funding if it is unable to comply with required staffing ratios.

Illinois State Police Director Hiram Grau said that his agency would have to lay off 450 state troopers, which is 30 percent of the department’s officers. More than 100 cadets would be dismissed from the current class. ISP would have to close all of its forensic labs and layoff all 400 employees. More than 5,000 rape kits would not be processed. Local law enforcement would lose access to forensic analysis. Grau said that the cuts would require the department to respond to “only the most critical calls.” He said that the department is already having issues with response time. In 2013, the Chicago district had 6,399 calls for which it did not have a car immediately available for response. 

Representatives from the Department of Human Services and the Department of Aging said they would have to cut back on services. In home care for the elderly and childcare for low-income families would be on the chopping block. Nursing home inspectors would be laid off. Welfare benefits would be reduced, and the state would have problems implementing the food stamps program. Illinois could lose up to $585 million in fund for the Temporary Assistance for Needy Families program. The state could also potentially loose hundreds of millions in federal matching funds.

The Department of Child and Family Services would eliminate services for 18 to 21 year olds. Acting Director Bobbie Gregg said that those youth would be less likely to finish high school and would no longer receive support from the department to attend college. She said of those in this age group who are cut off from services: “Many of them end up homeless. ... That’s the outcome that we would anticipate.”

Republican committee members derided the hearing, calling it a “dog and pony show” of “Chicken Little scenarios” that blow the state’s budget woes out of proportion. “This doom and gloom scenario that you have paraded everybody in here to provide is actually as far from the reality that we face in putting this budget together as could be,” Sen. Matt Murphy, a Republican from Palatine, said during the hearing. “And frankly, it’s a pretty cynical ploy because it is not reflective of the revenues that we’re going to have and doesn’t have to happen. And yet, you put all these people through this dog and pony show to make it look like this all has to happen to justify the tax increase.”

The Republicans likely are not wrong, at least in part. It does seem that the Democrats are building the case for some form of new revenue, which could potentially be the extension of the tax increase. The House is contemplating giving appropriation committees 14 percent less revenue to dole out in its budgeting process. Chicago Democratic Rep. Greg Harris, chairman of the House human services budgeting committee, said that the state faces “massive budget challenges” for Fiscal Year 2015 because the temporary income tax will begin to step down. In a post to his Facebook page, Harris made the case for more revenue. “We have undertaken major reforms of Medicaid, our state’s pension plans (no savings can be assumed from those changes until court challenges conclude), a plan to pay down our mountain of old bills and reducing expenses. Now is the time to maintain our revenues to protect core education, public safety and human services spending. I will support plans to maintain our revenues, close tax loopholes and shift the burden of taxes from those with the least means to those with the most ability to pay.”

The way a news release from Senate Democrats’ communications staff described the tax step down is telling. While Republicans say an extension of the current rates would be a tax increase, Democrats are beginning to call the automatic step down a tax cut. “Automatic tax break[s] that take effect next year will have a dramatically negative impact on State functions, according to testimony given to a Senate budget panel today,” said the news release.

But with about $1.5 billion in revenue disappearing along with the step down and growing costs associated with statutory obligations, such as Medicaid, which could be more than $1.5 billion, the Senate Republicans’ claims that things aren’t as bad as they seem, ring hollow.

Nonpartisan group The Civic Federation called for a one-year extension of the tax rates and then a gradual step down to avoid unmanaged cuts to the state budget and enable the state to pay off its old bills. This is the same organization that has for years been hammering home the need for changes to the state’s pensions systems.

Murphy and others have taken issue with the projected revenue number approved by the House and Senate because it allows for $400 million in transfers out to education and medical funds. While that money, and other statutory transfers out could, and maybe should, be reassessed, $400 million in revenue is not going to keep the FY 15 budget afloat without some deep cuts and changes to current law. Gov. Pat Quinn is scheduled to present his budget next week. He is required to present a budget based on current revenue and law. While the sky may not be falling in Illinois, the situation is looking  precarious at this point.