Gov. J.B. Pritzker on Wednesday will have his first opportunity to show his plans to make good on campaign promises to increase spending on education and a host of social services while also addressing the state’s gaping budget deficit, a mountain of unpaid bills and ballooning pension debt.
A day after scoring a major victory by signing a minimum wage increase into law, the new Democratic governor will deliver his first budget proposal to lawmakers. His administration already has sought to set low expectations for his initial spending plan, pointing out a larger than expected deficit for the budget year that begins July 1 and repeatedly saying it will take several years to set the state on a more sustainable course.
“Tomorrow, I will present a budget that begins to stabilize our state finances while starting to rebuild our human services, our universities and (preschool and K-12) education, and our public safety,” Pritzker said Tuesday before signing the minimum wage bill into law.
“We make no little plans, so stay tuned,” he added.
Here’s what to watch for when Pritzker addresses a joint session of the Illinois General Assembly at noon Wednesday.
Blame the last guy
The Pritzker administration declined to make anyone available to discuss its budget plan ahead of Wednesday’s speech, but it released a report earlier this month that blamed many of the state’s financial woes on the previous governor, Republican Bruce Rauner.
The report, dubbed “Digging Out: The Rauner Wreckage Report,” noted that Pritzker faces a $3.2 billion deficit in the roughly $38 billion budget for next year. That’s a $400 million larger hole than the previous administration predicted before leaving office.
It’s routine for new governors to blame their predecessors for the challenges they inherit, but Rauner’s long-running budget standoff with the Democratic-controlled legislature did exacerbate the state’s already serious money problems. Pritzker is using that history to make the case for taking several years to address those issues.
New spending
While the full scope of Pritzker’s spending plan remains unclear, an administration document shows the governor will propose spending an additional $630 million on education, from preschool through college.
A new statewide formula for funding elementary and secondary education already calls for an increase of $350 million for public schools compared with the current year, but Pritzker wants to add another $25 million.
His budget plan also will call for spending increases of $55.2 million for public universities, $13.9 million for community colleges and $50 million for tuition grants to low-income college students.
He also will call for $100 million in additional spending on early childhood education.
Pritzker signed a wage increase into law Tuesday, which will boost the statewide minimum rate to $9.25 per hour on Jan. 1 and to $15 by 2025. It also will cost the state more money as an employer. The governor has promised his budget will account for the increase but hasn’t provided any details.
During the campaign, Pritzker also promised more spending on an array of social services.
New taxes
Exactly how Pritzker proposes to pay for all that new spending in the coming year remains something of a mystery.
His long-term plan is for the state to shift from the flat income tax structure mandated by the Illinois Constitution to a federal-style graduated system, under which higher earners pay taxes at a higher rate. But that requires a constitutional amendment, which would take almost two years to get on the ballot for voter approval.
In the meantime, Pritzker plans to leave the current income tax rate — 4.95 percent for individuals — unchanged.
Instead of increasing income taxes, he’s looking to tap new sources of revenue. Pritzker has long pushed for legalizing and taxing recreational marijuana and sports betting, and on Wednesday he’ll propose adding e-cigarettes and vaping products to the list of items the state taxes.
How much the administration expects to generate from these sources in the coming year is yet to be seen.
History, however, has shown new revenue sources often take longer than expected to establish and bring in less money than projected. When the state legalized video gambling a decade ago at bars, restaurants and other establishments, for example, it took more than three years to get up and running, and the industry has yet to meet the original revenue projections.
Pension plan
One of the state’s most vexing financial problems is its roughly $134 billion in unfunded pension liabilities, which have continued to grow even as the state has pumped more money each year into its five retirement systems.
Deputy Gov. Dan Hynes, a former state comptroller and Pritzker’s right-hand man on budget issues, outlined the administration’s approach during a speech last week in Chicago. Pritzker likely will reiterate those points in his budget speech.
The plan calls for injecting more cash from a proposed graduated income tax, spreading out pension payments over a longer period, adding $2 billion in debt and selling state assets that could include the Illinois Tollway.
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February 20, 2019 at 05:06AM
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