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Pritzker presents budget without income tax hike, hopes to close corporate loopholes despite previous agreements

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SPRINGFIELD, Ill. – Gov. JB Pritzker is proposing a budget of roughly $83 billion in spending and revenue for Fiscal Year 2022. While many departments could see funding remain flat, Pritzker guaranteed a significant boost to agencies hardest hit by the pandemic.

The governor shared a clear message Wednesday: families won’t see a tax increase. However, Illinois businesses could meet a different fate. The administration projects $41.7 billion in revenue for FY22. Of course, income taxes make up nearly 50% of that number.

Illinois could spend $41.6 billion in that same period, according to the Governor’s Office of Management and Budget. But, Pritzker hopes the state could save roughly $932 million by ending corporate tax “loopholes” this spring. He said that is the best option instead of taking money away from those struggling the most.

Pritzker administration graphic explaining each corporate loophole.

“We aren’t going to treat people who have been decimated by this pandemic as roadkill,” Pritzker said. “Those most in need in our most desperate times deserve our help, and we cannot fail them.”

The Chicago Democrat said he had bolder plans for the state’s budget. Still, Pritzker stressed the government must make hard decisions just like families have over the last year.

“Right now, we need to pass a balanced budget that finds the right equilibrium between tightening our belts and preventing more hardships for Illinoisans already carrying a heavy load,” Pritzker said.

Republicans fight back

Republican leaders blasted the idea of Pritzker eliminating several tax incentives he agreed to in 2019. House GOP Leader Jim Durkin said Illinois already left businesses owners “grasping at straws” to keep their businesses alive following Pritzker’s executive orders.

“Gov. Pritzker is now proposing a tax increase on all of them saying they are just loopholes,” Durkin exclaimed.

The Western Springs native feels this is a form of payback since Pritzker’s graduated income tax campaign failed.

“Easy to blame Republicans. Well, governor, I’ve got some news for you,” Durkin said. “The graduated tax failed because Democrats, Republicans, and independents – a tripartisan effort of voters – said no.”

Illinois Comptroller Susana Mendoza doesn’t agree with Durkin’s logic. She says Republicans shouldn’t “cry foul” after leading campaigns against the progressive tax plan.

“We’ve been saying from the very beginning that it’s math. Math should never be considered payback,” Mendoza explained. “There is either enough money coming in to meet basic obligations or there is not.”

Senior budget officials told reporters Wednesday that the General Assembly will need to approve each of the changes to corporate tax incentives. This will likely be one of the biggest debates for budgeteers before lawmakers present their plan this spring.

Rep. Tom Demmer (R-Dixon) said Republicans in both chambers are ready to engage in Appropriations committee hearings.

“But, we demand transparency from the governor’s office, agency directors, and department heads about what realities they’ve identified in their budget, where we can find cost efficiencies, and spending reductions,” Demmer explained.

Education funding dilemma

Meanwhile, the governor explained he would protect the state’s most vulnerable with increased funding for the Departments of Children and Family Services, Public Health, and Human Services, among others. Pritzker said he is also keeping his promise that schools won’t lose funding due to the pandemic. Yet, the governor noted Illinois is relying on more federal funding to protect the current K-12 spending levels.

“No schools will have to reduce spending,” Pritzker said. “They can instead focus on meeting the needs of students who have tried to learn in a chaotic and trying time.”

The Democrat hopes school districts will use the federal funds to follow President Joe Biden’s plan for safely returning to in-person learning. Senate President Don Harmon (D-Oak Forest) noted his caucus is always interested in finding education resources. “This year will be no different,” Harmon added.

However, Senate Majority Leader Kimberly Lightford shared concerns about the plan for education funding. While the Maywood Democrat appreciated the $543.7 million set aside to protect the Early Childhood Block Grant, she wants bigger conversations about dollars for K-12 education.

“If we follow this plan, it will be the second year in a row that we don’t fulfill our commitment to increase funding to Illinois public schools,” Lightford said. “I understand this is a difficult budget year because of the pandemic, but our kids and teachers in low-income communities cannot and should not have to wait forever to see the funding increases they were promised.”

The administration proposed the State Board of Education distribute the $569.5 million provided through the federal Elementary and Secondary School Emergency Relief (ESSER) funds from the CARES Act. Schools could receive $2.25 billion of additional relief from a follow-up stimulus plan.

“Live within a real budget”

Senate Republican Leader Dan McConchie (R-Hawthorn Woods) says Pritzker has to face reality.

“He has no real concept of what it means to live within a real budget and make real choices based on real money and totally rework the budget, embrace the reforms that are required right now to put ourselves on a sustainable track going forward,” McConchie said.

Pritzker asked Republicans for their budget solutions two months ago. However, the governor said he was met with silence. Leaders of both parties will now debate the “right” moves until lawmakers vote on the budget in May. Mendoza says this will be an extremely challenging budget year for everyone, especially without extra revenue coming in.

“This isn’t an issue of spending unwisely, as much as people may want to believe that. That’s more of a political talking point. It’s like trying to manage your household and you just don’t have enough money to pay for food. That’s kind of where we’re at right now,” Mendoza explained. “I have a $9 billion backlog, if you include the borrowing that we’ve done. Those things require us to live within our means. But it’s difficult to do so when you have $3 billion less coming in than what you need just for basic government services.”

Decisions rooted in equity and empathy

House Speaker Emanuel “Chris” Welch agrees lawmakers and the governor have tough decisions ahead. The Hillside Democrat said those discussions must include equity and empathy. Welch supports Pritzker’s plan for a stand-alone $60 million funding bill to help the Department of Employment Security. He also noted the significant budget improvements for veterans’ homes and job training efforts.

“To do this, we need to close corporate tax loopholes that have made it easy for them to avoid paying their fair share. All said, one thing is clear: we need federal assistance,” Welch noted. “For the past year, state and local governments have been hit with a host of new expenses as a result of COVID-19, such as testing, mitigation efforts, and vaccine distribution. I’m glad we finally have an administration that takes this seriously and understands that this is not a red versus blue issue.”

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Mike Miletich

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