No tax increase in slimmer Illinois budget, reliance on fed aid

Gov. J.B. Pritzker on Wednesday presented a slimmer state budget with no income tax increases but a reliance on federal relief from the COVD-19 pandemic, transfers from other funds and elimination of hundreds of millions of dollars of corporate tax breaks needing legislative approval.

Pritzker, a man devoted to, and sometimes guided by, Illinois history, delivered a combined State of the State and budget address remotely from the Illinois State Fairgrounds. There, amid a pandemic, he awakened the echoes of the field hospital set up in 1918 to care for overflow victims of the devastating Spanish Flu — and to foreshadow a less-than-rosy financial picture.

The $41.6 billion operating budget for the fiscal year that begins July 1 is a 4.2% decrease from its predecessor.

"I won’t pretend that these tough decisions don’t have a human impact, because we are operating within one of the most bare-bones government infrastructures in the country," Pritzker said. "While the right-wing carnival barkers have used our state as a laboratory to undermine essential public investments, the fact of the matter is Illinois state government spends less money per person than the majority of states in this nation."

Opponents have reason for skepticism. The proposal is a far cry from the dire predictions doled out last fall by members of the administration who were campaigning for Pritzker’s top priority, a graduated income tax that hit the wealthy harder and which he promised would generate $3 billion more a year without increases in the share paid by 97% of taxpayers. The administration claimed that without the amendment, which was defeated handily, the state spending would demand a tax hike on all payers or across-the-board reductions of up to 20%.

Nonetheless, the blueprint, which on paper turns what was projected in November to be a $3.9 billion deficit in the fiscal 2022 spending plan into a $122 million surplus, makes significant adjustments to Illinois fiscal policy that must withstand legislative scrutiny.

Funding for elementary and secondary education is flat, and would not get the $350 million annual boost pledged in a 2017 school-funding overhaul. But Pritzker aides said education spending would be supplemented by expected federal dollars from a COVID-19 relief package before Congress.


The plan also depends on getting $932 million extra by ending tax breaks for corporations or by "decoupling" from federal tax breaks in those areas. This includes $30 million from reinstating the corporate franchise tax, which Pritzker eliminated in his pre-pandemic first budget of 2019 at the behest of minority Republicans who appreciated his willingness to listen.

Cigarette tax revenue intended to finance the ongoing, $45 billion Rebuild Illinois capital construction plan will be diverted to general spending for a year. Municipalities’ share of state income tax will be pro-rated at 90% of the distributive formula — it’s fully funded in the current budget — but Pritzker aides say at least some of the loss to cities and counties would be made up by more tax money following corporate tax-break closures.

Republicans were wary this week before the presentation by Pritzker, whom they have pestered for information about spending and possible cuts in various agencies. Democrats have challenged Republicans to offer their own ideas. But Republicans say they can’t do that without a more open process, particularly compared with last year, when the Democratic-controlled Legislature delegated spending power to Pritzker.

"We cannot continue to allow Gov. Pritzker independently to provide budget spin to try to support further tax increases, or to make the kinds of threats that we saw in order to push forward a tax increase that Illinois voters overwhelmingly said ‘no’ to," said Rep. Tom Demmer of Dixon, the House GOP’s budget negotiator.