Illinois lawmakers are one crucial step away from ending the record state budget impasse following a flurry of activity on Independence Day that saw the Senate override Gov. Bruce Rauner‘s vetoes of a tax hike and spending plan.
The measures now await action in the House, where 15 Republicans broke ranks with the governor over the weekend to approve the budget package and stave off further destruction to universities, social services and possibly the state’s credit rating.
Democratic House Speaker Michael Madigan, the Republican governor’s chief nemesis in a budget battle that’s consumed state government for more than two years, said he expected the package of bills to eventually become law.
When and if that would happen is another question. Just 54 of 118 House members were in town Tuesday. That wasn’t enough to do any official business, much less attempt an override, which would require 71 votes to be successful.
While some House Democrats said they expected an override vote to be held Thursday, a Madigan spokesman said nothing is “firm.”
Rauner did not appear in public Tuesday and has not taken journalists’ questions for weeks. He announced his veto via Facebook.
“I just vetoed Speaker Madigan’s 32% permanent income tax (rate) increase,'” the governor said on his Facebook page, with an accompanying image showing him using his veto stamp on a large pile of paperwork.
Last week, as a special session was underway before Saturday’s start of a new budget year, Rauner took to Twitter to try to build pressure for a deal.
“At my desk preparing for a balanced budget to arrive,” the governor’s Twitter account said, alongside a picture of Rauner sitting at his desk. “Lawmakers need to come together & get this done for Illinois. Time is running out.”
The budget sent to Rauner got votes from both Democrats and Republicans, but he still vetoed it because it didn’t include his economic agenda. The governor’s contradictory social media statements illustrate the politics at play in the historic budget impasse.
While both sides say publicly that they are eager to end the stalemate, neither wants to shoulder the blame for raising taxes to do so. And while each side has appeared content to let the budget impasse play out until the other side caves, neither wants to be known as the one responsible for tanking Illinois’ credit score as New York ratings agencies have threatened to downgrade its debt to junk status.
Rauner has long cast himself as reluctantly willing to approve tax hikes, but only alongside other items on his wish list, including a property tax freeze and changes to workers’ compensation, which he says will spur job growth and change the state’s economic trajectory.
The Democrats who control the legislature have resisted Rauner’s agenda, contending that it would hurt the middle class. In recent months, Democrats have approved legislation that speaks to Rauner’s agenda items, but the governor contends they’re watered down versions of what he’s seeking.
By vetoing the budget legislation, Rauner is able to say he acted to protect taxpayers from a tax hike. Lawmakers who vote to override him risk being blamed when voters feel the pinch to their wallets.
That’s why Madigan and Democratic Senate President John Cullerton had spent the first two years of the impasse insisting that any tax hike would have to include Republican votes. But mounting pressure for a deal, felt most intensely by Downstate lawmakers whose districts are home to universities that have been hit especially hard by the budget impasse, caused rank-and-file House Republicans to break from the governor on Sunday.
The Senate did not see a similar revolt Tuesday. Just one Republican joined 35 Democrats in voting for the income tax increase and then to override Rauner’s veto hours later. Thirty-six was the minimum number required for each.
Two Senate Democrats voted no: Sen. Julie Morrison of Deerfield and Sen. Tom Cullerton of Villa Park. Both likely will face tough re-election challenges. Democratic Sen. Bill Haine of Alton, who has been undergoing treatment for blood cancer since February, traveled to the Capitol to vote for the plan.
“Every dollar that we throw onto the backlog of bills is a dollar the next generation has to pay for even though we got to spend it,” Righter said. “That’s simply wrong, and that is the basis for which I support this.”
Righter dismissed questions about whether he would face retribution from Rauner in the form of a primary challenger, saying he informed the governor’s office and Republican leadership of his decision. Righter is not up for re-election in 2018.
“I enjoy as much as anyone the sometimes caricature the media likes to paint of the governor as this angry, vengeful guy,” Righter said. “I’ve spoken with the governor’s office, I spoke with my leader, Bill Brady, and both were very respectful, they understood very well that I had to represent my district.”
The Senate votes came after an earlier breakdown of talks between the two sides.
For months, then-Senate Republican leader Christine Radogno of Lemont had worked to cut a deal with John Cullerton, but their efforts proved unsuccessful after Rauner became involved and made a series of demands that Democrats rejected. Chief among those was a refusal to sign on to a permanent income tax increase unless lawmakers also put in place a permanent property tax freeze, which Democrats said was politically popular but could wreak havoc on the budgets of local schools and governments that rely on those dollars.
Radogno stepped down with Saturday’s start of the new budget year. Her leadership post now belongs to Sen. Bill Brady of Bloomington, who acted as a go-between for Rauner’s office during those talks.
Brady praised the “bipartisan participation that this chamber has shown over the last several months,” but asked for voting to be delayed to try to reach a final agreement that incorporates changes sought by Rauner, including a property tax freeze and changes to the state’s workers’ compensation system.
“It’s regrettable that I stand today not capable of supporting this package,” Brady said. “Not necessarily because what’s in the package is bad but because it is incomplete.”
Sen. Toi Hutchinson, a Democrat from Olympia Fields who carried the tax legislation, noted that the package before lawmakers was the product of several years of negotiations and incorporates ideas from both sides. The tax rate is lower than Democrats initially wanted due to pushback from Republicans, and the spending plan includes across-the-board cuts Democrats have historically opposed.
“We could not get as far as you wanted us to go, and I understand that,” Hutchinson said in floor remarks directed at Brady. “In some areas, we did way more than we wanted to do. We’d like you to understand that.”
Under the tax portion of the budget, the personal income tax rate would increase from the current 3.75 percent to 4.95 percent, which would generate roughly $4.3 billion. An increase in the corporate income tax rate from 5.25 percent to 7 percent would bring in an additional $460 million. Some of the money could be used to cover the cost of borrowing to pay down unpaid bills, Democrats said.
The legislation also would reinstate the research and development tax credit, which would expire in 2022, and increase the earned income tax credit for low-income families. It also would end several corporate tax breaks, including those for companies that operate on the continental shelves or shift production out of state.
An accompanying spending plan, which the Senate also quickly approved 39-14, would have the state spend a little more than $36 billion, about $4 billion more than it currently takes in from taxes. The plan includes across-the-board cuts of 5 percent to most government agencies, and a 10 percent cut for higher education.
The spending plan also boosts funding for elementary and high schools by $350 million. But the entire K-12 portion of the budget is contingent upon a separate bill that changes the formula for doling out state dollars to schools. Democrats passed that legislation but have yet to send it to Rauner, who’s called it a Chicago “bailout” and threatened to veto it.
In his Tuesday veto message, Rauner asserted that the budget package was $2 billion out of balance. His office says the legislation counts $500 million in savings on pension costs that aren’t guaranteed and fails to account for $1.5 billion in spending from the budget year that ended Saturday. That money would have to be paid out of the current budget year funds, Rauner’s team contends.
“I think that it would be fair to say that since the governor has not had a budget for almost three years, there were a lot of things that we spent money on that we did not have an appropriation for,” said Rep. Greg Harris, D-Chicago.
Lawmakers also approved a third bill to implement the budget, and that includes a provision Mayor Rahm Emanuel sought to require new hires to pay more into the city municipal workers and laborers retirement funds and also increase the amount taxpayers contribute to those plans.
Madigan recently had asked the governor to sign a separate bill on the city pension issue as part of budget negotiations, but now the concept will become law if the House overrides Rauner’s veto on the budget measure.
Emanuel, for his part, tweaked the governor as the budget bills were on the way to his desk.
“I applaud state lawmakers from both parties for doing what the governor has been unwilling to do throughout his tenure: doing their jobs and taking the difficult but necessary steps, in a bipartisan fashion, to put Illinois back on track,” Emanuel said in a statement.
The activity at the statehouse after years of dysfunction was enough to delay the state’s credit rating from being cut to junk status by Wall Street ratings agencies Monday, though they warned that much rides on a final approval of the budget package. Even then, S&P Global Ratings warned that long-term damage has already been done.
“Even with a budget, however, it’s likely that Illinois’ finances would remain strained and vulnerable to unanticipated economic stress,” the agency said. “In addition to having accumulated record amounts of payables, the state’s university system has been deprived of state funding since January 2017. If a budget is enacted, the degree to which it closes the state’s structural deficit, provides a pathway for addressing the backlog of unpaid bills, and its impact on cash flows, will be important factors in our review of its effect on Illinois’ credit quality.”
Tim Killeen, president of the University of Illinois, thanked lawmakers for voting for the budget package. The plan restores much of the funding schools did not receive for the last six months, but includes a 10 percent cut moving forward.
“We hope the lessons learned during this long and difficult impasse will help restore long-term stability and provide predictable funding year after year so we can plan our future and expand our impact on the public good,” Killeen said in a statement.
The budget also includes roughly $365 million that will be used to refund universities and colleges that fronted scholarships for low-income students for the first half of this year. Another $400 million is set aside to pay for the scholarships, known as monetary award program grants, for the upcoming school year that begins this fall.
While grateful for the funding, officials note that the uncertainty that plagued higher education in Illinois for the last several years led some students to put off their plans to attend school, or look at options out of state.
Lynne Baker, spokeswoman for the Illinois Student Assistance Commission, also noted that students attending schools that could not cover the cost of the scholarships during the impasse often had to take out additional loans or take fewer classes to save money.
“There’s a loss that you can’t really account for,” Baker said.