For nearly two years of his campaign, now-Gov. J.B. Pritzker pointed the finger at Republican Gov. Bruce Rauner for holding the state’s budget hostage for his political agenda.
Now, the Democratic governor may hear accusations coming his way.
Pritzker’s second-year budget includes putting nearly $1.4 billion in reserves, including funding for education — unless his preferred graduated income tax amendment passes this November.
In a sense, there are two budgets — one in which Republicans and Democrats alike will call balanced. But there’s another — included in the 2021 budget book and discussed in lawmaker briefings — that includes the fictional world of a graduated income tax.
“This budget responsibly holds roughly $1.4 billion in reserve until we know the outcome in November. Because this reserve is so large, it inevitably cuts into some of the things that we all hold most dear: increased funding for K-12 education, universities and community colleges, public safety and other key investments,” Pritzker said in his speech. “But as important as these investments are, we cannot responsibly spend for these priorities until we know with certainty what the state’s revenue picture will be.”
Asked about any potential cuts to state agencies, administration official said they are always open to hearing about any cuts that can be made.
It includes putting $150 million in reserves, instead of toward the school funding formula, which was heralded by lawmakers as a way to finally get schools funded at more adequate and level footing.
Senior administration officials Wednesday morning said the budget is balanced without those additional revenues. The real world budget includes $40.69 billion in revenue and $42 billion in spending. But the budget states that if the graduated income tax does not pass, certain appropriations will not take effect, and other transfer and borrowing will be used to maintain a “balanced state budget.”
Rauner in 2017 signed the measure intended to put new money for education into the state’s poorest and neediest districts — and to try to ease the state’s reliance on local property taxes to pay for schools. The system had enabled wealthier communities to pump more money into public education while poor districts fall further behind.
Since it was passed, the state has allocated $350 million for both the 2018 and 2019 budgets. For the 2020 budget, which ends on July 1, the state allocated $375 million.
This year’s budget would hold $150 million, and give schools $200 million, unless the graduated income tax passes.
The governor’s administration Wednesday said the school funding formula included a “target” of $350 million a year towards education, not a requirement.
Other budgetary reserves include holding $55.6 million for increases in university operations; $14.9 million for community college operating grants; $40.3 million for school district mandated categorical lines; $27 million for College Illinois! and $20 million for school maintenance capital program. That’s a total of $307.8 million.
The reserves also include $482 million towards healthcare and human services; $602 million for public safety and $3.5 million for an Illinois State Police cadet class.
In a footnote on the reserve page, it notes the allocation of new funds for pensions, $100 million, and $50 million toward the Budget Stabilization Fund, or the rainy day fund, would also be on reserve.
Other than the reserves, there is a $150 million surplus, which would go towards the state’s bill backlog.
The inclusion of the tax is not a huge surprise. Last year, the Governor’s Office of Management and Budget report concluded there are “few alternatives” if the “Fair Tax” amendment isn’t enacted, including a 15% cut to essential services such as education funding and public safety. Or “the state would need to raise taxes on all households — not just the wealthiest Illinoisans — by 20 percent under the existing flat tax,” the governor’s office said.
If the graduated income tax passes in November 2020, the rates would go into effect on Jan. 1, 2021 and would provide a half year of revenue to the state for the fiscal year 2021, the report notes. The governor’s office estimated the tax change to generate about $3.6 billion in the first year after implementation.
Pritzker in June signed legislation that included the graduated income tax rates, setting the stage for an amped up public awareness campaign via two dark money groups.
To go into effect, the graduated tax requires a change in the state constitution. The Legislature passed a voter referendum that will appear on the ballot next November.
The income tax measure the governor signed would tax income between $250,000 and $500,000 at 7.75%. Income from $500,000 to $1 million would be taxed 7.85%, and income over $1 million would be taxed 7.99%. Senate Democrats changed up the governor’s rate plan slightly in separating rates for single and joint filers, an issue many brought up when Pritzker unveiled his preferred rates. The corporate tax rate within the package was also raised to 7.99%.
Pritzker’s budget also includes a $147 million increase in funding for the Department of Children and Family Services to boost staffing and increase support for investigations.
