CHICAGO — Democratic Gov. J.B. Pritzker’s reelection-year budget proposal on Wednesday will dangle the prospect of delivering relief on food, gasoline and property taxes to Illinois voters in a spending plan buoyed by an improved state financial outlook and federal coronavirus relief.
Despite recent credit upgrades and higher-than-expected revenue, however, Illinois still faces massive pension debts and other long-term fiscal challenges. And rising inflation and turmoil in the stock market raise the possibility of stronger economic headwinds ahead as the federal government eases off the stimulus programs that helped states avoid some of the most dire forecasts from the early days of the pandemic.
In a combined budget speech and State of the State address, Pritzker will face a dual task: outlining his spending plan to kick off negotiations in the Democratic-controlled Legislature, and making the case to voters that his handling of the state’s chronically shaky finances, his pandemic public health policies and his efforts to reach out to long-neglected minority communities have earned him another four years in office.
Through his tax relief proposal, Pritzker, a billionaire who earlier this month wrote a $90 million check to support his reelection effort, will be attempting to show he understands the squeeze inflation — an issue Republican campaigns are hammering across the country — is putting on the average person.
“The governor believes it’s important to focus on the cost of groceries, the cost of gas and the property tax burden and bring relief to families across the state,” Deputy Gov. Andy Manar, one of Pritzker’s top budget aides, said in an interview.
Pritzker’s nearly $1 billion tax relief proposal, which requires legislative approval and wouldn’t take effect until the state’s new budget year begins July 1, would suspend the 1% sales tax on grocery items, freeze the scheduled inflation-based increase to the gasoline tax, and offer homeowners a property tax rebate of up to $300.
Because the sales tax on groceries goes exclusively to local governments, Pritzker will propose that the state make up the difference, at an estimated cost of $360 million. The governor’s office estimates the state would forgo about $135 million in revenue for transportation improvements by freezing the gas tax and would pay $475 million in property tax rebates to homeowners.
While he declined to give a complete overview of Pritzker’s plan, including how much revenue the state expects to collect in the coming year or what total expenditures would be in the proposed operating budget, Manar said the governor will present a balanced proposal Wednesday to lawmakers. The current operating budget is roughly $42 billion.
“We’ve restored fiscal stability to the state budget,” Manar said. “We have balanced budgets. We have paid off debts, and we’ve controlled spending and caught up on our bills.
“That has not been the easiest task over the past several fiscal years. But the governor remains committed to introducing, negotiating and passing balanced budgets that meet his priorities and priorities of the people of the state.”
The task of stabilizing the state’s finances during the pandemic has been bolstered by multiple waves of federal relief money, but Wall Street ratings agencies have acknowledged the progress made during Pritzker’s term. Last summer, two of the three major ratings agencies upgraded the state’s credit for the first time in more than two decades, though it remains the lowest rated of all 50 states.
For the first time in recent memory, the state is paying its bills within a normal 30-day cycle, and earlier this month, it made the final payment on $3.2 billion in coronavirus emergency loans taken from the Federal Reserve, two years ahead of schedule.
David Merriman, an expert on state finances at the University of Illinois at Chicago, said that while the state’s fiscal condition certainly has improved in recent years, a good deal of the credit can go to actions taken by the federal government and to a booming stock market.
At the end of the current budget year, Illinois expects to have about $3.6 billion remaining from the $8.1 billion it received from President Joe Biden’s American Rescue Plan. So far, ratings agencies have given credit to Pritzker and lawmakers for spending the one-time windfall on items that won’t create ongoing obligations, though Republicans in the Legislature’s minority have raised objections about how those decisions have been made.
How the remaining money is spent will be one of the crucial elements of Pritzker’s proposal, Merriman said.
“To me, the big issue that I’ll be listening for is the extent to which the federal money is being spent ... in sustainable ways, or is it promising things that once the federal money dries up we won’t be able to continue and will leave big holes,” he said.
State Sen. Elgie Sims of Chicago, a lead budget negotiator for the Senate Democrats, said spending the federal relief money responsibly is a top priority.
“We’ve got a big opportunity with these resources to address areas that we’ve not been able to address,” Sims said, pointing to one-time expenditures on infrastructure projects, health care initiatives and violence prevention efforts.
Violence prevention and public safety also are expected to play a key role in Pritzker’s budget proposal, as Republicans have sought to use rising crime rates and the criminal justice overhaul approved last year as a campaign cudgel against Democrats who control both chambers of the Legislature and all statewide offices.
“It’s a daily issue that people are waking up and reading about,” said state Rep. Tom Demmer, the House GOP’s budget point man and a candidate for state treasurer. “People are, themselves, or their loved ones, being directly impacted as (a) victim of a crime. And the governor’s talked about additional money that he’s put into these programs, but what are the results? Why are we not seeing the budget rhetoric from the governor match up with the actual results that people are dealing with every day?”
Pritzker signed an executive order last fall declaring gun violence a public health crisis and pledged $250 million toward anti-violence programs, including $100 million in the coming year.
At an unrelated news conference last week, the governor touted previous efforts that included funding for a new Illinois State Police crime lab, hiring more state troopers, adding more cameras and increasing patrols on Chicago expressways, while hinting at more to come.
“That is taking place even now. We’ve got to do more. There’s no doubt about it,” Pritzker said. “We need more cameras. We need more police. It’s why you’ll be hearing more about what my intentions are.”
Manar declined to offer more specifics about what additional plans for violence prevention and public safety will be included in Pritzker’s budget proposal.
“The totality of all of the proposals, including violence-prevention investments, all of that will be laid out on Wednesday,” Manar said.
Republicans also have hammered Pritzker and the Democrats for not yet proposing a plan to deal with the state’s $4.5 billion outstanding debt to the federal unemployment insurance trust fund, largely racked up when unemployment surged during the early days of the pandemic.
Illinois and other states have asked the U.S. Treasury Department to freeze interest on the debt — which has been accumulating at a rate of 2.27% since Sept. 6, but the federal government has yet to respond.
“This budget should absolutely address that debt,” Demmer said. “That debt is directly a result of COVID and the economic closures and shutdowns that we had during COVID.”
Other states used a portion of the federal relief money to repay those debts, he said.
“If the governor does not prioritize repayment of unemployment debt, we’re going to see a huge tax increase on every single employer in the state of Illinois,” Demmer said. “And we’re going to see (a) reduction in benefits for every single person on unemployment.”
An effort to address that issue is “well underway,” Manar said, without offering more details.
“We would expect that effort to produce a proposal that could be presented to the General Assembly for approval in the (current legislative) session,” he said.
The governor’s proposal is the start of a monthslong negotiating process that typically culminates with the passage of a budget in late May or early June. This year, with the primary election moved to June 28 and renovations scheduled at the Capitol, lawmakers are scheduled to adjourn April 8. But so far they’ve met in Springfield for only a single day, with other in-person days canceled over concerns about the latest COVID-19 surge.
And even with Democrats in full control of the Legislature, there’s no guarantee of full support for everything Pritzker proposes.
In an interview last week on Illinois Public Media’s “The 21st Show,” Senate President Don Harmon, an Oak Park Democrat, was asked about the possibility of providing some relief to taxpayers, such as suspending the sales tax on groceries, as Pritzker will propose.
“We could do it, but we wouldn’t provide a lot of relief for struggling families. ... We don’t want to do something that is flashy showbiz but doesn’t provide real relief to people” Harmon said.
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