Illinois budget post-mortem: What remains, what made it, what didn’t make it

Jose SanchezBetter Government Association

Jul 18, 2017

Illinois has a budget after 2 ½ years. While the income tax increase has dominated the news, there’s more that got done — and didn’t — that you need to know about. Here’s a breakdown of the important information you need to know.

What remains to be done

Education funding will be Illinois’ next big battle. Despite a budget being passed, K-12 schools will not receive full funding until a new funding formula is adopted. This means schools might not open in the fall, or, if they do open, might not stay open very long. SB1, a bill that originally was part of a “grand bargain” Senate Democratic and Republican leaders created, passed both chambers, but has not yet been sent to Gov. Bruce Rauner. Recently, Rauner asked the bill be sent to him so that he can use an amendatory veto to remove a portion of the bill that pays some of Chicago Public Schools’ pension obligations. The governor says the veto would result in school districts receiving more money. His office created a website that lists the additional amount of money that school districts would receive under his plan.

SB1 creates an evidence-based formula that will determine funding for school districts. It creates a tiered model that determines the order and funding amount school districts should get. Both Democratic and Republican proponents of evidence-based funding believe it’s an improvement that needier school districts eventually would receive more money than wealthier districts, while those districts would not lose any state funding. But Rauner and some Republicans say SB1 includes a bailout of some CPS pension obligations. School begins in August for most children and Rauner will have 60 days to act once if Senate Democrats send the bill to him.

Pension debt remains and the budget allows yet another delay in the amount that was to be paid to pension funds in the new fiscal year. As highlighted in Crain’s by Joe Cahill, pension contributions will decline by $1.5 billion this year as a part of the final budget. Illinois’ pension debt is worst nationwide at $130 billion. Reducing the contribution means pension funds will receive less money to use to gain interest and pay down that debt. In other words, not only is the can kicked farther down the road, but we’ve dug ourselves into a deeper hole.

Government streamlining wasn’t a key focus of the final budget, but it was part of the grand bargain. In the end, SB3 passed and has been sent to Rauner. SB3 would extend government reduction powers to all counties, enabling them to dissolve local government units within their boundaries. Currently, this only applies to DuPage, Lake, and McHenry Counties. It also would allow for further consolidation of other smaller government units.

What made it

Tax increases. The personal income tax rate increase from 3.75 percent to 4.95 percent, along with the corporate income tax rate increase from 5.25 percent to 7 percent is in the final budget and was an amount determined in the Grand Bargain. A soda tax and sales on some services were removed, but closing some corporate tax loopholes that affect the petroleum industry remain. Some of the new revenue gives the governor’s office the ability to borrow money to allow the state to begin tackling its massive $15 billion bill backlog and pay off bills with high interest penalties.

A handling charge also will be collected by the Illinois Department of Revenue for collecting taxes imposed by local governments; for example, the Cook County sales tax. As Greg Hinz explains, the fee will be 2 percent and it will mean a tax hit and less money for local governments.

Reports also began to circulate that a gas tax increase also had been added to the budget, but that’s not exactly accurate. There is a new tax, but it only applies to gasohol, not gasoline, reported Rich Miller of Capitol Fax.

What didn’t make it

Gaming expansion was not part of the final budget, despite it always being raised as a way to help solve our revenue woes. SB7 passed the Senate and was sent to the House, where it died in committee. The bill would have allowed five new casinos to be built in Chicago, Lake County, the south suburbs, and northern suburbs. It also would have allowed video gambling at racetracks.

A property tax freeze was not included in the budget, despite Rauner repeatedly saying it was needed in order for him to approve tax increases. SB13 was originally part of the grand bargain and would have frozen property taxes statewide in 2017 and 2018. Many educators and advocates have expressed concern that a property tax freeze could erode funding for education, while proponents believe it would bring relief to homeowners and other property owners.

A minimum wage increase was part of the grand bargain, however, SB2 was not included in the final budget. The bill wasn’t voted out of committee and did not pick up support like many of the other bills in the grand bargain did.

Workers’ compensation reform seemed like a hot topic going into budget negotiations, but SB12 did not gather support like some of the other grand bargain components did. The bill would have reduced the rate paid to injured workers and limited access to medical treatment. Along with a property tax freeze, workers’ compensation changes were one of the key items, along with a property tax freeze, Rauner had insisted upon before he would sign tax increases.

Noteworthy subtractions and additions

PENSIONS
  • Legislators adopted recommended cuts by the Governor, reducing pension contributions by $801 million.
EDUCATION
  • An increase of $743 million was given to K-12 education to begin implementation of the evidence-based funding model. If Rauner does not sign the legislation, however, this money cannot be released to schools.
  • An increase of $50 million went to early childhood education. Illinois received an $80 million grant from the federal government for early childhood education, requiring the state to contribute $50 million.
  • An increase of $38.5 million to fully fund bilingual education. During FY17, bilingual education had been funded at 59% of the previous year.
  • Cuts to operations and programs total $118.6 million.
LOTTERY
  • Funding for lottery winners is set at $1 billion.
HUMAN SERVICES
  • Domestic violence shelters are fully funded at $18.6 million, while community health treatment is fully funded at $136 million.
  • Full funding is restored for people with developmental disabilities for dental, respite and epilepsy services at $12 million.
  • Community addiction treatment services receive $95 million in funding.
  • Cuts to operations and programs total $460 million.
CRIMINAL JUSTICE AND VIOLENCE PREVENTION
  • Adult Redeploy, a criminal rehabilitation program, is fully funded at $10.2 million.
  • Cease Fire is fully funded at $4.6 million.
  • Cuts to operations and programs total $29 million.
TRANSPORTATION
  • The RTA free and reduced-fare program is fully funded at $17.5 million.
  • PACE Paratransit is fully funded at $8.4 million.
OTHER
  • Cuts to higher education and general services total nearly $500 million.
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