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Tax hike, budget OK’d; Illinois averts shutdown
Illinois Correspondent
SPRINGFIELD, Ill. — Illinoisans can draw a deep breath after a series of dramatic votes over the extended July 4 weekend holiday that led to the state’s first full budget plan since July 1, 2015. After attempts to override vetoes by Gov. Bruce Rauner were successful last week, significant shutdowns in some state operations were averted.
K-12 public schools that faced the possibility of closing will instead open on time in August.
A handful of state universities, such as Eastern Illinois University in Charleston and Chicago State University, would have struggled to keep their doors open. They’ll now start school on time in August.

And a complete stoppage on July 1 of state-overseen road projects employing some 30,000 people without a new budget instead have now continued unabated.
That’s all due to an income tax hike and spending plan approved by the state’s Democrats, who hold a strong majority in the House and a veto-proof margin in the Senate, along with an assist from a small number of Republicans.

While six other states entered the July 1 fiscal year with budget stalemates as well – including New Jersey and Maine – Illinois’ fiscal condition was considered by bond rating officials as the worst, by far.

But the tax hike and budget doesn’t get the state out of the woods: Moody’s immediately released a statement that essentially said Illinois faces long-term financial problems, and the agency may still place the state’s bond rating at junk status within two months.

Illinois began the fiscal year with nearly $14.7 billion in unpaid bills, some dating back to October 2015, and it built up a deficit last year alone totaling $6.1 billion.

The key tax hike, an increase in the individual income tax from 3.75 to 4.95 percent – with the corporate rate going from 5 to 7 percent – is expected to generate about $5 billion annually. Rauner, who sought reforms such as a statewide property tax freeze and term limits for all state officials, supported a temporary tax hike.

House Speaker Mike Madigan, who argued against implementing non-budget reforms as part of approving a spending plan, pushed for a permanent tax hike.

Most political observers put the blame for the state’s lack of a budget for two years squarely on the feud between Republican Rauner and Democrat Madigan, and the bad blood continued after the votes, vetoes and override votes since July 1. In a letter to bond agencies after the House vote, Madigan referred to the state’s situation as the “Governor’s budget crisis.”

The day before the House voted to override his veto, Rauner said, “What we have is a continuing failure by elected officials in Springfield on both sides of the aisle. It’s been led by Speaker Madigan for 35 years. This is more of the same. Our system is broken.”

After the override, he added, “This is not just a slap in the face to Illinois taxpayers. This is a two-by-four smacked across the foreheads of the people of Illinois.”

The vote to pass the tax hike legislation in the House was 72-45, while the override vote was 71-42; 71 votes were required in both cases. Senators voted 36-19 for the tax and the override, the bare minimum needed for passage.

The accompanying budget plan totals approximately $36 billion, about $3 billion less than what the state spent during the last fiscal year. Spending last year was pieced together through a stopgap budget in December and a series of court orders requiring payments to pension funds and other creditors.

Included in the budget plan are notable benefits to the state’s farming industry,  including an additional $5 million for the University of Illinois extension; an increase from $1.8 million to $5 million for ag education statewide; and an increase from $5 million to $13.5 million for the state’s Soil and Water Conservation Districts.