Mix of corporate tax closures, flat spending used to fill nearly $3 billion state budget gap


Gov. J.B. Pritzker unveiled his budget proposal for the upcoming fiscal year during a virtual “State of the State” address on Wednesday, closing some corporate tax loopholes and reducing some department’s spending to help fill a nearly $3 billion budget gap.

Missing from Pritzker’s proposed spending plan are an increase in the state’s income tax rate and the “painful cuts” he warned of after his proposed move to a graduated income tax failed to pass in November.

In a pre-recorded speech from the state’s fairgrounds, Pritzker focused first on the impact of the pandemic on the state’s businesses and the “tiny joys” it’s taken away from the state’s residents.

The fairgrounds were the site of a makeshift hospital during the 1918 influenza pandemic — on Wednesday, a little over 100 years later, it’s one of the largest vaccination sites in the state.

The governor expressed hope that with a new president who is “willing to push all the levers of government to increase vaccination supply” the state will “get closer and closer to … [a] return to normalcy” and took aim at Republicans in the General Assembly, saying he asked them two months ago for their proposals to close the budget deficit and he was “met with silence.

“Apparently their idea of bipartisanship ends when hard choices must be made,” Pritzker said.

He also admonished those on the far right who’ve “lobbied against the federal government providing relief to Illinoisans, ignoring the life-changing economic pain of real working families” amid the pandemic, he said.

Gov. J.B. Pritzker delivers a virtual budget and State of the State address from the Illinois State Fairgrounds in Springfield. on Wednesday.

Gov. J.B. Pritzker delivers a virtual budget and State of the State address from the Illinois State Fairgrounds in Springfield. on Wednesday.
Screen image from Facebook recording.

“In essence, they eliminated the fire department, burnt down the house, and poured gas on the flames — and now they’re asking why we’re not doing more to prevent fires,” Pritzker said.

While creating the budget, Pritzker said he started with the “premise that hardworking families should not have to pay more when they’re stretched the most thin.”

“I certainly had no expectation when I became Governor, that we would spend all of this time battling an invisible enemy together,” Pritzker said during the speech. “I had bolder plans for our state budget than what I am going to present to you today. … 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.”

The proposed 2022 fiscal plan, which would go into effect July 1, is comprised mostly of $41.7 billion in revenues for the state’s general fund and $41.6 billion in expenditures.

The budget closes a $2.6 billion budget deficit through keeping spending flat; implementing spending reductions in some 100 departments, including the state’s Department of Corrections; and a mix of closing or minimizing nine “corporate tax loopholes,” which could generate $932 million if approved by the General Assembly, state budget officials said.

Meanwhile, the Department of Children and Family Services would see a 7.9% increase in funding in its 2022 budget so it can continue to hire staff and cover caseload growth in foster homes, the intact family services program, as well as institution and group homes.

Pritzker is also calling for the General Assembly to pass a standalone bill to immediately direct $60 million in funding to the the Department of Employment Security to help meet the “unprecedented demand” the pandemic has created.

The corporate tax changes include reversing the repeal of the Corporate Franchise Tax and setting a $100,000 cap on the corporate net operating loss deduction for three years.

Officials said the cap would not affect 80% of corporations with net operating loss deductions but would generate $314 million in revenue for the state.

Those loophole closures follow Pritzker freezing the implementation of some new business tax credits and calling for state legislators to stop the implementation of federal tax changes to the state’s income tax framework, which could save the state $520 million if adopted.

Reaction to those closures was swift, with the state director of the National Federation of Independent Business saying the group is “disappointed to hear he’s trying to revive his plan to decouple the Illinois tax code from federal legislation allowing small businesses to deduct losses associated with the COVID-19 pandemic.”

House Republican Leader Jim Durkin, of Western Springs, said he was disheartened that Pritzker’s proposal “violated the agreement that he and I made just two years ago” on those tax incentives.

“I can’t help but believe that Gov. Pritzker’s proposal, which goes back on our deal, as some sort of payback because his graduated tax failed and he wants to take it out on Republicans — easy to blame Republicans,” Durkin said. “Well governor I’ve got some news for you: the graduated tax failed because Democrats, Republicans, and independents — a tripartisan effort of voters — said no.”

Senate Republican Leader Dan McConchie, R-Hawthorn Woods, said Pritzker “continues to show how out of touch he is with everyone else when we all have to balance our own budgets, but instead the governor is failing to do that.”

“He refuses to make the spending reductions, or at least publicize those spending reductions that the people who fund his budget and the tax dollars have to do in their own households every year,” McConchie said.

Pritzker’s office said earlier this month an economy that “performed more strongly than expected” helped the state avoid some of the “serious and, frankly, painful” cuts the first-term governor warned residents about after voters soundly rejected his proposed move to a graduated income tax.

In December, Pritzker authorized more than $711 million in budget cuts in offices under his control for the 2021 fiscal year and continued the state’s freeze on non-essential hiring and travel as well as other “operational savings” related to reduced equipment purchases and delayed technology projects, as well as grant reductions due to lower prison populations and the cancellation of state and county fairs.

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February 17, 2021 at 12:12PM

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