Democratic Gov. JB Pritzker proposed a $39 billion state budget Wednesday that aims to tame Illinois’ house-on-fire finances with new money from legalized recreational marijuana, cigarette taxes and sports wagering, and cutting short-term pension costs.
In a crisp, 35-minute speech, Pritzker described his first budget plan as governor as a clear-cut departure from the acrimonious and dysfunctional fiscal policies of his Republican predecessor, Gov. Bruce Rauner, who presided over a two-year budget impasse.
“Budgeting will not be done any more by taking the state hostage, or by court orders, consent decrees and continuing appropriations but instead by debate and compromise and a return to regular order,” Pritzker told a joint session of the General Assembly.
Pritzker, whose administration forecast a $3.2 billion deficit without new revenues or spending cuts, said the budget he is proposing for the 2020 state fiscal year that begins in July is “more constrained than I would like.”
“The budget I present to you today is an honest proposal. The costs are not hidden. The revenues I propose are not out of reach. The hole we need to fill is not ignored,” Pritzker said, drawing applause from Democratic lawmakers.
“This budget proposal reflects some of my most deeply held values – and the hopes of voters who sent us here – but tempered by the knowledge that we must hold the line on spending in the context of the revenue available and the diminished condition of our state government,” he said.
Much of the budgetary salvation Pritzker wants to see enacted hinges on the long-term enactment of a graduated income tax that would impose higher tax rates on the wealthiest Illinoisans. But that change to the state’s constitution first requires approval from the state legislature and from voters, and the earliest it could be enacted is late 2020.
Pritzker has repeatedly refused to divulge the new tax rates he envisions as part of a graduated income tax plan, and he didn’t offer specifics Wednesday. But in his speech, the governor said he intends to “immediately begin negotiations” with House and Senate leaders on rates.
“It will take 18 months to get it done, but it’s worth the wait so we can save working families hundreds or thousands of dollars per year,” Pritzker said. “A fair tax will change the arc of Illinois’ finances forever.”
For the short-term, Pritzker wants to ease financial pressures on the state treasury from ever-escalating pension costs associated with state retirees. Under existing law, the state is on the hook for more than $9 billion this coming fiscal year to stay on track with a long-range funding plan for the state’s five retirement systems.
That accounts for roughly a quarter of state operating costs. Pritzker wants legislative approval to recalibrate Illinois’ existing long-term funding plan for pensions to reduce annual payments by $878 million annually – a move that Republican critics decry as a kick-the-can-down-the-road fiscal policy.
He also wants to borrow $2 billion to immediately infuse into the state’s five retirement systems and commit $200 million annually from the as-yet-unpassed graduated income tax plan. As he did repeatedly during his campaign for governor, Pritzker also reaffirmed his stance against reducing pension benefits for existing state retirees or those now enrolled in state pension plans.
“We must attack our pension liability from many angles all at once. And we must be consistent and persistent in this battle,” he said. “Some will criticize this approach. There are those who will say that retirees should lose the benefits they earned. The [Illinois] Supreme Court has made it clear that that is illegal. There are others who would raise taxes on middle class families today. I say middle class families have paid enough.”
Another fiscal black hole Pritzker targeted in his speech is the state’s nearly $8.1 billion unpaid bill backlog. He is proposing $1.5 billion in borrowing to be applied to unpaid health insurance bills that are accruing late-payment interest at a rate of one percentage point a month. The governor wants lawmakers to change those late-interest penalties to more generous terms for the state, aides said.
Pritzker’s budget outline proposes a $630 million increase in education spending, including $100 million more for early-childhood programs, $375 million more on K-12 spending and a $50 million increase for low-to-moderate college students who are enrollees in the state Monetary Award Program.
Pritzker also said he favors a 5-percent funding hike for the state’s public universities and communities colleges, which faced crippling funding cuts under the two-year state budget impasse.
The governor’s education plan also includes a three-year phase-out of a 2017 private school tax credit championed by Rauner and the Archdiocese of Chicago, among others.
In terms of new revenues, Pritzker sees $170 million in new income from the legalization of marijuana this spring and another $200 million from legalizing sports betting, a potential new cash cow for states authorized by a 2018 U.S. Supreme Court ruling.
Details about both programs remain to be worked out, but the focus on sports wagering appears to deal a death blow — at least for the next fiscal year — to a possible Chicago casino. Pritzker aides said the administration intends to remain focused only on legalized sports betting rather than “getting bogged down in a never-ending debate” about adding casinos across the state.
Other potential new money-makers for the state include a new $390 million tax on health insurers to help cover the costs of Illinois’ Medicaid program, a 5-cents-a-bag statewide tax on plastic bags at retail establishments, a 32-cents-a-pack increase in cigarette taxes and a new statewide 36-percent tax on e-cigarettes.
In a line that drew bipartisan applause, the governor called for passage of an infrastructure package this spring but did not give details on its size or how it would be paid for.
Pritzker’s budget speech did not include any mention of funding for a nearly $250 million reconstruction of the state veterans’ home in downstate Quincy, where the deaths of 14 residents have been linked to Legionnaires’ disease outbreaks. But a top aide told reporters those costs would be bundled into the capital program under consideration this spring. The governor did promise funding for a new 200-bed Chicago veterans’ home.
The legislative prospects for Pritzker’s first budget proposal look encouraging considering Democrats hold supermajorities in both the Illinois House and Senate, and Democratic leaders from each chamber lavished praise on the speech afterwards.
“Amid the challenges we heard spelled out today, we also heard that we now have a governor who recognizes the magnitude of these challenges and will work with us to address them,” House Speaker Michael Madigan, D-Chicago, said in a statement. “House Democrats stand ready to work with Governor Pritzker and our Republican colleagues, bring all options to the table for honest negotiation, make the tough decisions, continue to stand strong and protect critical human services and quality schools, and move Illinois forward.”
Republicans hit Pritzker on his pension plans and on his push for a graduated income tax, though the party’s ability to stop either one or even influence the debate is limited by its sparse ranks in the General Assembly.
“We heard a lot in his speech about more spending, more tax increases and concepts tried in the past,” said Senate Minority Leader Bill Brady, R-Bloomington, in a statement. “And while we as legislators now begin digging into the details, I have grave concerns about the pension plan, and I remain opposed to a graduated income tax.”
Senate President John Cullerton, D-Chicago, called Pritzker’s budget outline “a vital step in the right direction.”
“I give the governor credit for offering specifics. His plan is filled with ideas — real, doable, constitutional ideas,” Cullerton said.
Multiple times during his speech, Pritzker paid homage to one of Illinois’ forgotten governors, Democrat Henry Horner, and linked their struggles as chief executives of the state.
Horner was the state’s first Jewish governor who presided over the state during the Great Depression and also was the namesake for the now-razed public housing project on Chicago’s West Side.
Pritzker noted how Horner, despite the strains of the worst economy in the nation’s history, was able to increase school funding, establish unemployment insurance and pensions for retirees, oversee a public-works program and beef up public health services.
“He knew what I know,” Pritzker continued, “that the state of our state has always been strong because of the values of our people, not the value of our coffers.”
Dave McKinney covers Illinois state politics and government for WBEZ. Follow him @davemckinney.