Governor JB Pritzker delivered his first State Budget Address today before a joint session of the Illinois General Assembly. State senators and representatives joined together in the chamber of the House of Representatives to listen to the newly elected Governor lay out his budget priorities. The Governor's staff has for weeks laid the ground work on just how dire State finances are. He followed that up today citing the State's $3.2 billion budget deficit and the $15 billion backlog of unpaid bills, further claiming that he will "hold the line on spending". He added that it will take several years to get out of the mess.
However, within the parameters of his revenue and budget plan, several areas of the State budget are recommended to be increased. The Governor recommends that State resources be concentrated into three main areas: education, health and human services, and public safety.
Governor Pritzker pushed for adoption of a "fair tax system" - a graduated income tax instead of our current flat tax structure. Since this will require an amendment to the Illinois Constitution, Pritzker acknowledged that it will take at least 18 months to accomplish this feat.
REVENUES
The Governor proposes to raise $1.1 billion in new revenues for the Fiscal Year 2020 budget, including:
- $170 million from the legalization of recreational use of marijuana
- $200 million from the legalization of sports betting
- $390 million from imposing additional taxes on insurance companies
- $175 million from a new Delinquent Tax Payment Incentive Program
- $94 million from closing income tax "corporate loopholes"
- $65 million from increasing taxes on cigarettes and E-cigarettes
- $20 million from a new tax on plastic bags
- $6 million from eliminating the tax credit for private school scholarships
EDUCATION
The budget proposes to increase funding for both K-12 education and higher education, including:
- $375 million increase for the evidence-based funding formula
- $100 million increase for the Early Childhood Block Grant
- $3.5 million for a match for the new federal "birth-to-5" program
- $5 million increase for Career and Technical Education
- $250 thousand increase for Educator Misconduct investigations
- 5% increase for universities and community colleges
- 12.5% increase for Monetary Assistant Programs (MAP) grants
PENSIONS
The plight of the severely underfunded State pension programs was highlighted as well. Plans are to:
- Direct part of the new income tax revenues to making additional payments to the State pension systems above the statutory amount
- Find new assets for the pension systems
- Issue a new pension bond
- Make the optional pension buyout program permanent
- Restructure the current pension payment ramp to reduce annual State obligations
NEXT STEPS
The Illinois Constitution requires the Governor to propose an annual balanced budget. However, the General Assembly is charged with approving an appropriations bill that is sent to the Governor for his consideration. Past practice has been that the Governor's budget plan is the starting point for budget discussions. However, legislators are apt to make changes based on local legislative priorities.
Both the House and Senate have appropriations committees that hold hearings, draft budget bills, and ultimately send budget bills to their respective chambers for a vote. Though the current makeup of the legislature will likely be favorable to the Governor's agenda, expect some back and forth over the next few months among the Office of the Governor, House leadership, and Senate leadership. Ultimately, by the end of May, a bill (or bills) will be agreed upon by the majority party in the House and the majority party in the Senate that will largely resemble what was laid out in the Governor's speech today.
