By Meredith Wilson
Gov. Bruce Rauner presented a balanced budget to the Illinois Legislature on Wednesday that did not include a single tax hike.
The proposed state budget for fiscal year 2016 is $31.5 billion, a decrease of 21 percent from the $38.2 billion agencies reported needing for fiscal year 2016, known as the maintenance rate. Revenue is expected to drop from $34.1 billion from fiscal year 2015 to $32 billion, a tightening of 6.5 percent. Fiscal year 2015 ends June 30.
The governor said during his budget speech that reform must be enacted before new revenue can be discussed.
“Before we ask the people of Illinois to pay more to fund state government, we must ensure taxpayers are getting value for their money,” Rauner said during the budget address. “Asking for more of the taxpayers’ hard-earned money without fundamentally reforming the structure of state government would further erode public confidence and accelerate our decline.”
Government services, higher education and local governments were among the areas subject to the most drastic cuts.
Richard Dye, an economist at the University of Illinois, said the decision not to include new revenue is in line with Rauner’s values.
“This is how a conservative, pro-business Republican would balance a problem,” Dye said.
“I think he has properly characterized the magnitude of the problem and has offered his priorities as to how to solve the problem,” Dye added.
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Illinois faces significant economic issues: $111 billion in unfunded pension obligations, $12.7 billion in bond debt principal and $6.5 billion in unpaid bills inherited from previous years. The projected operating deficit is $6.7 billion. Illinois has the lowest bond rating in the country, and agencies have threatened to downgrade the state again.
Rauner had given few hints as to his economic plan prior to delivering his budget proposal. During his campaign, he promised not to push for an income tax hike. He also discussed expanding the sales tax base to include services, freezing property taxes and creating an economic climate that would be favorable to businesses.
In his budget, Rauner proposed freezing property taxes and reiterated his commitment to a pro-growth environment for business. He did not address expanding the sales tax base, however.
When asked why Rauner didn’t include sales tax base expansion in his budget, a revenue-generating option the governor has supported in the past, David From, Illinois state director for Americans for Prosperity, said that forcing the legislature to take responsibility for all tax hikes would strengthen the governor’s negotiating position.
“The legislature might have seen the revenue, taken the revenue and moved on. I think Rauner was trying to make a point,” From said
Dye thinks the legislature will ultimately adopt a budget that looks significantly different from the one Rauner proposed.
“This is the opening bid in a negotiation process. As an attention step it makes sense. As a prediction of the final budget, I don’t think this will make sense,” Dye said.
Rauner’s budget proposal includes cutting $600 million in funding for local governments and $1.5 billion in funding for Medicaid. Rauner proposed a pension reform plan that would save $2.2 billion in fiscal year 2016.
“Our top priority for financial reform must be our pension system. That is true regardless of the Supreme Court’s decision on SB 1,” Rauner said.
The state Supreme Court will hear oral arguments in March on whether SB 1, a pension reform law, is unconstitutional. The Court’s decision will likely set a precedent for future attempts at pension reform.