The state’s budget impasse is at a critical moment. With a May 31th deadline to pass a new budget looming, numerous plans have sought to solve Illinois’ crushing dilemma. But that’s not for lack of proposals: blueprints to crack the crisis have come from politicians like Governor Bruce Rauner and Democratic House Speaker Michael Madigan as well as nonprofits like the Civic Federation and University of Illinois’ Institute of Government and Public Affairs (IGPA). Here’s how the plans tackle each major issue.
Spending Cuts: How Much and Where?
Where most plans seem to agree is in regards to cutting spending. Rauner’s proposed budget calls for $2.7 billion in “politically tricky” cuts, according to the Tribune. More recently he has thrown his support behind Republican Sen. Bill Brady’s plan, which includes $3.8 billion. The Civic Federation and IGPA also call for spending cuts of a similar magnitude.
Democrats have largely assented to the Governor’s overall level of funding (about $37 billion), if not to the particular programs Rauner would slash. In particular, they hope to avoid cutting support for Medicaid. Their latest proposed spending bill, passed through the Senate this week, includes $3 billion in cuts.
Income Taxes: Hikes for Individuals and Corporations
Given the depths of Illinois’ debts, almost any balanced budget necessarily includes tax increases. But the various plans disagree about which taxes must be increased and by how much. The Democrats’ grand bargain bill pertaining to these taxes has already passed the Senate, and calls for increasing the income tax rate from 3.75 to 4.95 percent and the corporate tax rate from 5 to 7 percent. In total, the Democrats’ bill would generate some $5.4 billion in revenue.
Other proposals from the IGPA and Civic Federation also include tax spikes hovering around 5 percent, calling for income tax rates to jump to 4.75 and 5.25 respectively, while corporate tax rates increase as well (to 6.65 and 7).
Property Tax: Frozen, but for How Long?
Rauner contends that he won’t sign any tax reform bill that doesn’t include a permanent property tax freeze, a provision which hasn’t made it into any of the grand bargain proposals. Democrats have offered to compromise with a short-term property tax freeze, but Republicans insist that the freeze be at least as long as the income take hike. With neither side willing to budge, it’s unclear how the Democrats’ tax bill will get past Rauner’s desk.
Sales Tax: More Services Added
Most proposals also call for broadening the sales tax base by applying it to more businesses. Illinois’s current sales tax applies to few service-based businesses, which make up an ever-larger portion of the state’s economy. By applying the sales tax to everything from pest control shops to private detective firms, the state could generate additional revenue.
While both the Civic Federation and IGPA call for broadening the sales tax to many more services, Democrats, under intense lobbying pressure, have pared back the list of additional businesses which would be subject to sales tax for the first time. As a result, the bills passed so far create little additional revenue from changes to the sales tax.
School Funding: Can Inequities Be Fixed?
Some of the most contentious issues center on providing money for local school systems. In particular, Illinois has an inequitable formula for funding school districts, and various budget proposals aim to fix that. The major sticking point is Chicago Public Schools, which receives by far the most money from the state but is also the only district responsible for paying its teachers’ pensions. A plan from the Democrats would address some of the systemic inequality in the funding and have the state pick up some pension costs over time. Meanwhile, Rauner has criticized the proposal as a “bailout,” and it’s not clear whether he will veto it.
Other Issues Tied to the Budget
Rauner has called for a variety of policy changes as part of his overall “Turnaround Agenda.” These range from term limits to restrictions on political contributions by unions. This package of changes is mostly ancillary to the budget debate, but Rauner has at times insisted on passing at least some of the proposals in order to sign the tax bills that would resolve the crisis. Democrats, who receive a great deal of support from unions, are reticent to make any such changes.
With the timing tight, the last remaining issues center around taxation. Cutting spending alone, as Rauner has advocated, leaves the state around $5 billion short of a balanced budget. Yet with the Republicans eager to tie property tax freezes to the income tax hikes, there may be little room for compromise.
12 months ago