SPRINGFIELD – Lawmakers approved a state operating budget shortly before 2 a.m. Sunday, but despite the passage of the document, nothing about the next fiscal year is black and white.

The state is depending on a broad package providing federal monetary aid to states passing through the U.S. Congress, or, failing that, borrowing up to $5 billion from the U.S. Federal Reserve at an interest rate of approximately 3.8 percent.

“Well there’s no doubt that we’re going to have to revisit the budget if the federal government doesn’t come through,” Gov. JB Pritzker said when asked if the state had a plan for a revenue stream to pay back the borrowing. “I think all 50 states are going to have to be revisiting their budgets if the federal government doesn’t come through.”

Pritzker took questions in his office at the Capitol on Sunday morning, about nine hours after the General Assembly adjourned on just its fourth day of legislative session since March 5.

The $42.8 billion budget keeps spending roughly flat from a year ago despite revenue for next year decreasing by an unknown number of billions and the potential of even further economic devastation should COVID-19 see a resurgence in the fall that coincides with a virulent flu season.

“The budget the General Assembly has sent to my desk acknowledges that massive economic disruption leads to difficult decisions,” Pritzker said.

Democrats, upon the bill’s passage, said in times of economic crisis, government needs to continue to spend instead of balancing the budget on the backs of the less fortunate.

Pritzker echoed the argument Sunday.

“There was a strong look at, you know, what could be cut,” Pritzker said. “Remember, though, this was all in the frame of a vastly increased need by families, workers, individuals all across the state.”

Republicans, however, called the budget balanced only on “a wing and a prayer.”

In House debate Saturday, Rep. Tom Demmer, R-Dixon, the GOP’s chief budget negotiator in the House, said there were billions of dollars, including some from the federal CARES Act, to be spent at Pritzker’s discretion with only limited guidance included in the budget.

“The ability for an administration to engage in emergency rulemaking and have control of more than $7 billion of state funds, with only broad strokes, broad umbrellas of programs and allocations for those dollars, I think should give members of this body pause,” Demmer said.

Rep. Gregory Harris, D-Chicago, said during debate the fact that the Legislature passed a full budget instead of a lump sum appropriation showed that it was exercising more oversight than other states were doing for their governors.

But Demmer said the governor’s emergency rulemaking track record – that he sought authority to implement misdemeanor fines for businesses disobeying his stay-at-home order – shows he didn’t earn the public’s trust when it comes to rulemaking.

“This talk about earning the authority, nobody knew a pandemic was coming,” Pritzker said when asked about Republican objections Sunday. “There’s just no way that anybody had any clue that we would be in this situation that we’re in right now.”

He said he would “do anything, give anything” to go back to a pre-COVID-19 level of normalcy.

“But here we are,” he said. “So, I think that there is a recognition anyway that we’re gonna have an unusual year here.”

Asked if he would be comfortable with the authority the Legislature has afforded him being wielded by his former Gov. Bruce Rauner, a Republican, Pritzker said, “no, that’s why I ran against him and beat him.”

“I’m going to try very hard to operate, as I have by the way, with transparency, letting everybody know what we’re doing and also why we’re doing it. And the biggest thing is listening to the science and the data.”

In regard to transparency, Pritzker said the way this year’s budget was negotiated was not ideal. The measure and everything else passed in the four-day session was negotiated by working groups of lawmakers without official avenues for public input.

“I will say that although the public wasn’t able to come in to hearings that the Legislature had, their representatives from both sides of the aisle were in fact in the working groups, it wasn’t a one-sided set of working groups, there were bipartisan groups working on these things.”

Sometimes those groups sought executive branch input, sometimes they didn’t, he said.

While Republicans went into the special session calling for a vote on the governor’s Restore Illinois five-phased business reopening plan and some sort of check on his executive authority and ability to continuously extend disaster proclamations, no such vote occurred.

The closest thing to oversight was passed in a broad-ranging COVID-19 response bill that created a 14-member commission of eight Democrats and six Republicans that would work with the Department of Commerce and Economic Opportunity to discuss the reopening plan.

The commission would be scheduled to release its first report on the reopening plan on July 1, at which time the state could already be entering the fourth phase of the plan.

Republicans called the commission “window dressing.”

“Well, the Legislature has chosen not to be involved in many of the decisions that needed to be made by the executive branch,” Pritzker said when asked about the commission. “And I think, you know, when you think about it – That’s why you have an executive branch in an emergency, I can act quickly. The executive branch can act quickly.”

While he said the General Assembly could not have met quickly enough to have input on his decisions early in the emergency effort, Pritzker said he was hoping the General Assembly would have gathered “much earlier” than last week.

On one particular measure, he said he believed the Legislature fell short. He had asked lawmakers to approve a measure allowing for monetary fines of businesses defying his stay-at-home order.

“I am very disappointed, I think it was a complete abdication of responsibility on the part of the Legislature,” he said, noting the director of the Illinois State Police asked for a measure providing such authority.

“None of us want to exercise the ability to take away someone’s license that’s been given to them by the state to do business. Nobody wants to shut down a business. What we were looking for was a way to issue a citation,” he said.

He said the state would have to “look at other mechanisms” for such enforcement, but he did not say what they are.

The governor said he is also looking at ways to implement the next phases of the plan and is considering issuing a fourth consecutive 30-day disaster proclamation.

“We want to make sure we can implement the Restore Illinois plan, and that we’re taking care that the health and safety of the people of Illinois is paramount, so we’re looking at it,” he said.

The governor also announced the release of broad guidance for industries reopening under phase 3 of his plan. That is viewable here: https://www2.illinois.gov/dceo/pages/restoreILP3.aspx.

The post Despite budget approval, much is in limbo after session first appeared on SJO Daily.

By JERRY NOWICKI
Capitol News Illinois
jnowicki@capitolnewsillinois.com

SPRINGFIELD – State Republican leadership is pushing for a vote in the upcoming legislative session to remove a graduated income tax amendment question from the November general election ballot.

“Times have changed dramatically since this initiative was first put forward,” Senate Minority Leader Bill Brady, R-Bloomington, said Monday in a video news conference. “But never more has our state’s economy been challenged than it will be, and is today.”

But Gov. JB Pritzker has said the revenues anticipated from the graduated income tax – estimated at more than $3.5 billion in its first full fiscal year before the COVID-19 pandemic – are now more important than ever amid uncertainty created by the spread of the virus.

The economic fallout from the pandemic and associated shutdowns has led to projected state revenues for next fiscal year plummeting by billions of dollars. Pritzker said at his news conference Monday that the tax, which would be in effect for only half of the next fiscal year, could bring in more than $1 billion in state revenues.

The ballot question

As it stands, it is up to the voters if the state’s constitutional requirement of a flat income tax will be scrapped to allow higher income tax rates charged on greater levels of income. Support from a majority of those voting in the Nov. 3 election or three-fifths of those voting on the ballot question will be needed for the amendment to pass.

While it took three-fifths of each the state House and Senate to put the amendment question on the ballot, only a majority vote in each house would be needed to remove it.

“As to the likelihood of a vote being taken or a decision being made like that, I can’t speak to it,” Pritzker said during his Monday COVID-19 briefing. “I can only say … that the GOP wants to keep people from voting on this, keep people away from the ballot box, says something about their lack of confidence in their position.”

Pritzker has already invested millions of his estimated $3.4-billion personal fortune to promote the ballot measure, which was one of his cornerstone campaign promises.

When asked during the videoconference Monday why voters should not be allowed to decide the measure, House Minority Leader Jim Durkin, R-Western Springs, named several other constitutional amendments that are backed by Republicans but have not advanced in the Legislature.

“Why won’t we allow the voters to vote on a fair map amendment? Why won’t we allow voters to vote for pension reform? Why won’t we allow for any type of constitutional protection of property tax owners? How about a constitutional amendment on ethics reform? There’s no balance in the state,” he said. “That’s why this one party has absolutely lost any type of reason or the ability to understand what is clearly at stake in Illinois government. What I just mentioned are more important to people in Illinois than to fulfill a campaign promise by the governor.”

The rate structure

The current flat tax is 4.95 percent on all income earners in Illinois, but if the amendment passes, a new rate structure that has already been passed by the General Assembly will take effect in January 2021. For all but the top bracket in that proposed structure, each varying tax rate would apply to a specific margin of income.

The rates for single and joint filers would be 4.75 percent on taxable income from $0 to $10,000; 4.9 percent from $10,001 to $100,000; and 4.95 percent from $100,001 to $250,000 – meaning everyone earning below that amount annually will pay a modestly lower effective rate than they do under the current flat tax.

The rate is 7.75 percent for joint filers on income margins from $250,001 to $500,000 and for single filers from $250,001 to $350,000. The rate is 7.85 percent for joint income margins between $500,001 and $1 million and single filer margins between $350,001 and $750,000.

Joint filers would pay the maximum rate of 7.99 percent on all income once their taxable income tops $1 million. For single filers, that rate takes effect on all income when it exceeds $750,000.

The structure would also increase the state’s property tax credit from 5 percent to 6 percent, and create a maximum $100 per-child tax credit for couples earning less than $100,000 and single persons earning less than $80,000.

It would also raise the corporate tax rate from 7 to 7.99 percent, not including an existing corporate property replacement tax of 1.5 to 2.5 percent that is not changed by the already-approved measure.

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The arguments

While Republicans cited the COVID-19 pandemic as a new development necessitating new action on the amendment, the arguments on both sides remain generally the same as before the pandemic.

Chiefly, the Republican argument is that the tax rates that would become law upon the passage of the amendment are a “phony promise” from Democrats, who the GOP says will have an easier time raising taxes in the future because they will be able to vote on tax hikes for smaller portions of the public rather than an across-the-board hike which a flat tax requires. The actual vote threshold for a tax hike in the General Assembly would remain unchanged at a simple majority.

“Why should the Democrats who run the state be trusted with a check for any more revenue?” Durkin asked in the Monday video conference. “And when the revenue projections continue to fall as they already are, the same politicians will make more of their phony promises and start raising taxes…The recession caused by this pandemic will turn into a never-ending depression in Illinois with the progressive tax.”

Tax hikes, they say, will drive people from the state and hurt small businesses which are already reeling from the pandemic and associated stay-at-home orders. Income from the graduated tax, they also argue, will fluctuate more and is less reliable for budgeting purposes.

Proponents say 97 percent of Illinois taxpayers earn below $250,000 per year and would therefore pay less in taxes under the proposed structure. The raised revenue, they say, is necessary to pay Illinois’ pension obligations and continue to invest in state services.

Proponents also argue that businesses registering as pass-through S Corporations and sole proprietors making less than $250,000 would benefit from the new rate structure with smaller tax burdens.

“The Fair Tax promises tax relief to small businesses and middle-class families,” Senate President Don Harmon, D-Oak Park, said Monday in a statement. “I don’t know why in the middle of a pandemic they would try to take that option away.”

But Brady said the focus should be on making the business climate friendlier in Illinois.

“We can and will rebuild the state’s economy,” he said. “But this graduated income tax threat just gives more to worry about when we need people focusing on how they can rebuild their businesses, how they can go back to work, how they can begin rebuilding the economy of this state.”

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