After two long years without a budget, the state of Illinois finally has one, even if it took an income tax increase to get there.
Last week the Illinois General Assembly overrode a veto by Gov. Bruce Rauner to pass the budget and increase the personal state income tax rate to 4.95 percent from 3.75 percent. The corporate income tax rate will jump to 7 percent from 5.25 percent.
“It’s been a long slog, but I’m relieved that we finally have a responsible balanced budget in place,” said state Senator Don Harmon (D-Oak Park), who serves as president pro tempore of the Senate and chairman of the Senate’s executive committee. “It’s not the end of our work by any means, but it provides immediate stability to the state that it sorely needs.”
In a rare vote on the 4th of July, the Senate barely met the three-fifths requirement to override a veto when 35 Democrats and one Republican, Dale Righter from Mattoon, voted 36 to 19 to override Rauner’s veto. Two days later, the state House, with not a vote to spare, overrode the veto on a 71 to 42 vote with 10 Republicans crossing party lines while six Democrats, all from very competitive districts, voting to sustain Rauner’s veto.
Harmon said getting some Republican support for the tax increase was a critical factor in finally ending the stalemate and passing a budget.
“Republicans in the General Assembly broke from Rauner,” Harmon said. “They stopped doing his bidding and started doing what was best for their districts and what was best for the state. This was a difficult budget to negotiate; it required bipartisan contribution to the effort both in terms of the substance of the budget package as well as the votes for it.”
After two years of standoff between Republican Rauner and the Democrat-controlled state legislature, the state Senate got the ball rolling in May by finally passing a budget and tax increase.
“I think the Senate deserves some credit for beginning this conversation at the end of last year in laying out a framework for a bipartisan agreement on a balanced budget,” Harmon said. “The final package is very similar to the package that passed out of the Senate in May, so I’m pleased the work we did was not done in vain.”
The budget calls for a 5 percent across-the-board cut in state spending with a 10 percent cut for higher education spending, amounting to about a $3 billion reduction in state spending in absolute terms.
But critics of the tax hike claimed that the budget contained no significant structural reforms.
One aspect of the budget deal will probably eventually result in additional spending by local school districts. The bill calls for the creation of a new option for a hybrid pension plan for state employees and public school teachers outside of Chicago that will include a 401(k) type portion that is estimated to save the state about $500 million.
It will take some time for such a plan to be developed, but when it is created, the state will pick up much less of the employer contribution to the Teachers Retirement System Pension Play than it currently does.
The new budget calls for an increase of $350 million in state aid to K-12 schools but that is on hold for now because of a law that made the dispersal of state aid to education contingent upon a separate bill to change the state formula.
In general, the bill would direct more state aid to poorer school districts while ensuring that no school district would receive less state aid than it currently does, both concepts that Rauner says he supports.
“We’re waiting for some indication as to whether or not the governor is going to sign it,” Harmon said of the hold up in presenting the bill to the governor. “He stated that he supports 90 percent of the bill, but still plans to veto it, which is a very odd position to take in government or in Springfield.”
State aid payments to local school districts are supposed to go out to local school districts in August.
“This requirement that we adopt an evidence-based funding model before the school payments can be made didn’t originate with us,” Harmon said. “It was part of Governor Rauner’s budget package.”
If Rauner vetoes the bill, the General Assembly will try to override the veto Harmon said.
“I’m confident that, given hundreds of districts would do better, some of my Republican colleagues would support it,” Harmon said.
