After a two year absence, Illinois now has a budget

They said it could not happen, and it almost didn’t, despite a hazmat scare that closed the capital temporarily, Illinois now has a budget, after a two year absence. With the all clear, there was a vote of 71-42 by the House on the revenue bill, giving relief to fears that there might be a third year without one. Lurking behind that fear was also a desire to avoid the much dreaded junk bond status that Moody's Investment threatened to slap on the state, without it.

The override means that the state has a budget plan for the first time since the first of July 1, 2015.

Before the champagne corks are popped, the sobering news is that there is now going to be a substantial hike in the personal income tax rate, and that of corporations, both of which are unlikely to bring smiles to those who will pony up to pay it.

Adding to the drama was the temporary lockdown that “ended about 3:30 p.m. at the Illinois State Capitol. The hazardous materials situation apparently was sparked by someone throwing a substance at the governor’s office, and other areas of the Capitol,” reported the Chicago Sun-Times.

Upping the ante was the revelation by State Rep. Steve Andersson, among the 15 of the House Republicans who crossed over to vote in support of the measures, in an initial vote on Sunday, who “told lawmakers that he’s been receiving hate mail and death threats for his vote.” Game to the end he remarked, “If I have to take a couple of days of that I will be happy to do so,” to end the impasse, he said.

Other lawmakers, like Keith Wheeler, of Oswego, suggested that the votes were like putting lipstick on a pig, and exclaimed, “It’s time for us to get real,” Wheeler said. “It’s time for us to get to work and get reforms into actual statutes.”

The plan was that lawmakers were to “take up an override of three budgetary bills, including a revenue bill which will hike the income tax rate to 4.95 percent — a rate Rauner once supported — in order to help jump-start funds to the state.”

That portion increases the 3.75 percent personal income tax rate to 4.95 percent to generate about $4.3 billion. The corporate tax rate goes from 5.25 percent to 7 percent,and is expected to bring in about $460 million.

On Sunday, “the revenue bill passed with 72 votes . . .  including 15 House Republicans,” and the state Senate moved quickly to override Rauner’s vetoes on Independence Day, in a move that had Rauner erupting on Facebook that the move was a permanent tax hike, and that the school funding was a bailout for Chicago schools.

All things being not equal in this messy, and partisanship battle, “Moody’s Investor’s Services on Wednesday offered a stark reminder, placing the state’s current rating of Baa3 “on review for possible downgrade.”

In contrast two other agencies last week, S&P and Fitch praised the passage of the budget bills as progress. Still, says Moody’s, “despite the progress toward budget balance” in the legislative package, “… the plan appears to lack concrete measures that will materially improve Illinois’ long-term capacity to address its unfunded pension liabilities.”

Lacking funds, there was a backlog of unpaid bills totalling $14.5 billion dollars, and most of it owed to “social service agencies and public universities whose funds have dried up without a budget, there are some missing holes to fill, including funding for education. The $36.5 billion spending plan includes an additional $350 million to go toward a school funding formula,” noted the Times.

During the impasse, Illinois colleges, and universities, were substantially affected, especially Chicago based Northeastern Illinois University, which was forced to do layoffs to meet budgetary demands.

On Thursday NEIU released the following statement, from Interim President Richard Helldobler: ” With the passage of the Illinois budget, Northeastern Illinois University can finally after more than two years refocus its efforts from survival to building and enhancing an exceptional environment for its students. We have been tested by adversity, and we have affirmed the strength of Northeastern Illinois University during these extremely difficult times. Our University community, which includes more than 9,500 students, appreciates all those in Springfield who have worked in a bipartisan way and funded our future by supporting public higher education.”

Still on the plate is an evidence based school-funding formula, for elementary and high schools, promulgated by Democrats with a pending signature by the governor, which is unlikely to be had considering what is sure to be his wrath on the override, and the absence of his “turnaround agenda”, which called for among other things, substantial changes in collective bargaining, and also a property tax freeze that Democrats said would hurt schools in lower income neighborhoods.

The governor has said he’ll veto that bill, but the Dems “say they plan to send the bill to his desk soon and will try to override his veto. That means schools won’t get money from general state aid funds without a school formula bill either signed or overridden.”

It would also would mean another return to the capitol, this summer, and a second round of overrides; offering another protracted, and bitter, battle of the words between the governor and leaders such as Speaker of the House Michael Madigan.

The big hole is still the twinned horrors of the near $15 billion in unpaid bills, the state has accumulated, (that legislators say will be paid with loans and cash reserves), and the biggest elephant in the chamber, unpaid pensions since there’s is not enough money to fund the government employee pension system.

While there will be a sigh of relief, for some, it will most likely be mixed, the law of unintended consequences still bearing out with the weakened budget for schools, and the pension hole.

Add to those is the large tax increase, on an already burdened electorate, with much of the state paying higher than normal rates; and in Chicago, which has faced two intensive property taxes, and possibly a third, this may be a bitter pill to swallow.

Recently, there was a stay on the penny per ounce sugary soft drink tax, proposed by Cook County Board President Toni Preckwinkle, by a local judge, but many residents are now faced with the reality that Illinois is becoming more and more expensive to live in, especially for Chicagoans.