Gov. J.B. Pritzker proposed a $40.7 billion state budget Wednesday — virtually flat from the current level — but dressed it up by dangling the prospect of a $1.4 billion revenue boost if voters approve a radical income-tax overhaul this fall.
The second-year Democrat presented a fiscal outline that would boost spending in key areas. For example, he proposed a $350 million annual increase in K-12 education promised by a 2017 funding change.
But Pritzker is holding $150 million of that “in reserve,” to be used next year if the state constitution is rewritten to uphold a graduated tax on larger incomes. He said the new tax structure, if approved in the November election, would produce $1.4 billion more in revenue in the second half of the fiscal year that begins July 1.
“Because this reserve is so large, it inevitably cuts into some of the things that we all hold most dear,” Pritzker said in speech to a joint session of the General Assembly. “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.”
That didn’t stop the administration from positing the budget as a $42.1 billion blueprint, a 3.8% increase from the current year, despite the fact that reaching those numbers requires Pritzker’s graduated income tax structure, whose rates increase as salaries increase.
Other spending items which he’s holding in “reserve” are 5% increases for both university and community college spending totaling $70 million, $40 million extra for school programs such as special education and transportation, Medicaid provider rate increases, an entire class of state police cadets, and money to stave off a state government hiring freeze that could take effect on Dec. 1 if the constitutional amendment fails.
It’s a list a successful campaigner such as Pritzker can use to promote the amendment, telling taxpayers that important programs can be restored if they approve the tax change, a fiscal Sword of Damocles. Deputy Gov. Dan Hynes said earlier Wednesday that the strategy is simply a factual presentation of a budget that takes into account fiscal uncertainties.
House Minority Leader Jim Durkin, a Western Springfield Republican, called it “a clever way of holding it over people’s heads.”
“I don’t think we should be doing that to people in Illinois, and particularly people who are in sensitive positions, whether in healthcare or education, to say, ‘We’re going to hold back on our funding, get behind my graduated income tax,” Durkin said.
Pritzker maintains his “fair tax” would mean most taxpayers would pay the current 4.95% rate or less. Those making over $250,000 would pay incrementally more, topping out at 7.9%, producing the additional revenue.
One spending boost not tied to that extra revenue is $147 million more for the Department of Children and Family Services following a year in which an investigation found that 123 children who died last year had been in contact with the agency. Pritzker’s would hire more employees to reduce caseworker workloads and boost hotline staffing among other initiatives.
There are other areas of increased spending not held in reserve. While 40% of the hoped-for K-12 general school spending increase is contingent on the November vote, the governor has set aside $51 million to boost funding for programs such as special education and transportation, $16 million to ease a widespread teacher shortage and $50 million more for the needs-based Monetary Award Program, with 15% of the money reserved for students attending the state’s popular community colleges.
“The governor’s budget proposal is an important starting point in a process that will require many tough decisions,” House Majority Leader Greg Harris, a Chicago Democrat, said in a statement.
The annual spending albatross, employee pension funds, which have a $138 billion funding gap because of years of neglect, will get the required $8.6 billion infusion this year — one-fifth of the state’s general spending. There’s at least $50 million to put into the state’s rainy day fund, whose one-time $276 million balance dwindled to $3.6 million during the 2015-2017 budget stalemate between Democratic lawmakers and former GOP Gov. Bruce Rauner.
Senate Minority Leader Bill Brady, a Bloomington Republican, said the proposed plan is more than the state can afford, calling it a plan “full of false promises that relies on him getting his tax increase.”
Pritzker’s tactics were compared to Rauner. In 2017, when opposing Senate caucuses were negotiating a deal dubbed the “grand bargain” to end the budget drought, Rauner was roundly criticized for filling a $4.6 billion hole in his proposed budget with lump-sum projected from closing that deal, which never materialized.
Democratic state Treasurer Michael Frerichs, however, said Rauner built a non-existent grand bargain windfall into immediate spending. He said Pritzker’s message was clear that he’s holding back additional spending unless the tax switch occurs. “That is the responsible way of doing it,” Frerichs said.
The Illinois Legislative Black Caucus, which gathered on the Capitol’s second floor for a post-speech review, was resolute that lawmakers must find the $350 million, if not more, regardless of the November vote’s outcome.
“We must prioritize education for the great equalizer that it is,” said Rep. Will Davis, a Homewood Democrat who sponsored the 2017 education funding overhaul. “Our message to the governor is that this funding level must be realized.”