Pressure on Pritzker, legislature over budget, marijuana, sports betting and new income tax structure, but pork may hold things together

Lawmakers return to Springfield on Tuesday facing a five-week deadline to resolve a host of controversial issues that form the centerpiece of new Democratic Gov. J.B. Pritzker’s agenda and first state budget.

In play are Pritzker’s plan to ask voters to change the state constitution to replace a flat-rate income tax with a graduated-rate tax, as well as his proposals for more immediate sources of new revenue from legalized marijuana and sports betting. Also in consideration are new or additional taxes on plastic bags, cigarettes, vaping products and video gambling operators, which along with other budgetary tricks would help balance state government spending for the fiscal year that begins July 1.

Any one of those issues could create a problem for the governor and for legislators trying to meet an end-of-May adjournment deadline. But there is one traditional glue that could hold together the myriad interests that have the potential to derail Pritzker and the Democrat-controlled legislature. That is a capital bill — a multibillion-dollar public works program that gives lawmakers tangible evidence to voters back home that they are getting something in return for their tax dollars.

“Not a lot of time left, a lot of tough votes to take. Again, let me remind you: fair (income) tax, bag tax, recreational marijuana tax, gaming tax, capital bill,” state Sen. Martin Sandoval, the Chicago Democrat who chairs the Senate Transportation Committee, said at a recent hearing in Elgin.

But that means coming up with a funding source for the other part of the infrastructure bill — building construction and maintenance. Identifying a dedicated revenue source for each element of the capital plan — transportation and building construction — is essential to selling the bonds needed to pay for the projects.

There have been talks about funding building projects, known as “vertical infrastructure,” through taxes on legalized marijuana and sports betting. That, however, would take away money that Pritzker has dedicated to other parts of his budget.

The governor’s budget blueprint calls for $170 million in tax revenues from the legalization of recreational marijuana. Shortly after defeating Republican Gov. Bruce Rauner in November, Pritzker told WFLD-Ch. 32 that marijuana legalization was “something we can work on nearly right away.”

Talks on a variety of fronts have continued, and supporters say they are close to presenting a comprehensive marijuana program. But it faces numerous challenges: from lawmakers wanting the state to slow down legalization efforts for further study; from law enforcement warning that no test exists for driving while impaired by cannabis; from current growers under the state’s medical marijuana program; and from debates over fine points like how many plants a person could grow at home.

The issue also is complicated by Pritzker’s vow that legalized marijuana would have an economic component to help the West and South sides of Chicago, which have been heavily affected by prosecutions for illegal marijuana use and possession.

Pritzker’s budget also counts on $212 million in revenue from legalizing sports betting in Illinois. Despite efforts to separate sports betting from the larger issue of gambling in Illinois, the two have become intertwined with current gambling locations — from casinos and racetracks to video operators — wanting in on the action and major sports leagues wanting a first-in-the-nation take.

Brady, the Senate GOP leader, said supporters of sports gambling want it to be part of a “comprehensive approach” that includes casino expansion to long-talked-about areas such as Chicago — which Mayor-elect Lori Lightfoot supports — plus the south suburbs and Rockford.

But previous stand-alone casino expansion efforts have failed because various gambling interests were unable to reach agreement.

Sports betting and marijuana are but two revenue-generating components to fill a budget hole in Pritzker’s proposed spending plan. Also part of his plan is a statewide tax on plastic bags, which has not received widespread support, and a 32-cent-per-pack increase in the current $1.98-per-pack cigarette tax that would raise an additional $55 million. He also would apply the state’s wholesale tobacco tax to e-cigarettes, which would generate an additional $10 million.

Pritzker also wants $89 million from a higher tax structure on successful video gambling terminals; $75 million by reducing a deduction retailers take for collecting state sales taxes; $94 million by decoupling the state income tax from a federal tax break for foreign income; $175 million from an amnesty-type program for delinquent tax filers; and $6 million by phasing out a private-school scholarship tax credit program enacted as part of a plan to improve public school funding.

But Pritzker also wants to free up some budget flexibility by creating and extending for seven years a new ramp for state payments to Illinois’ massively underfunded public employee pension system. Critics, including some unions, contend the move mirrors previous legislatures and administrations that failed to make required pension payments, leaving the system underfunded by more than $130 billion.

Then there’s the hallmark of Pritzker’s campaign for governor, the plan to change Illinois from assessing income taxes from a flat rate to a graduated rate that levies higher rates as earnings increase.

Such a plan requires a change in the state constitution and would have to win the support of 60 percent of the members of both the House and Senate to go before voters for ratification on the 2020 ballot.

Democrats have supermajorities in both chambers, though passage seems much more likely in the Senate than in the House, where some new members elected from traditionally GOP-leaning suburban areas may be reluctant to vote for such a change.

Already there appears to be a general reluctance among some Senate Democrats to vote on a capital bill until the General Assembly addresses the income tax change.

It all adds up to a potentially chaotic end-of-session workload for lawmakers.

“Under normal circumstances, I would say that that’s very ambitious,” said state Sen. Andy Manar, a Democrat from downstate Bunker Hill who’s served since 2013 and previously was chief of staff to Senate President John Cullerton.

“But we’re not faced with normal circumstances in our state today. We have deep, deep challenges in Illinois,” he said. “And so, that requires things that may otherwise not be what observers would call the norm.”

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April 27, 2019 at 05:18AM

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