SPRINGFIELD — Democrats in the Illinois Senate on Friday announced a $1.8 billion package of mostly temporary tax relief proposals that they hope to include in the fiscal 2023 budget as the legislative session enters its final week.
The package is $800 million beyond the tax relief package proposed by Gov. J.B. Pritzker in his budget in February, although it includes many of the same tax reductions backed by the governor. The measures are contained in eight amendments to Senate Bill 1150.
Sen. Scott Bennett, D-Champaign, addresses a tax relief proposal touted by Senate Democrats Friday at the Illinois Capitol.
Peter Hancock, Capitol News Illinois
The measures include direct checks to Illinoisans, a 10-day stay on taxes on schools supplies and qualifying clothing, and a six-month stay on the grocery tax and a motor fuel tax increase, among others.
Lawmakers are scheduled to adjourn on April 8, with the budget being the main proposal that still needs to be wrapped up. It needs approval from both chambers of the General Assembly and the governor.
Pritzker’s office said it will review the plan, while Republicans called it an election-year gimmick.
Sen. Elgie Sims, D-Chicago, one of the lead budgeteers in the Senate, said the tax relief was made possible by unspecified “additional revenues” made available in the budget.
“As we were going through the budgeting process, additional revenues had been made available,” he said. “And we we’ve looked at those revenues. We looked at the governor’s budget that was proposed in February, there was a billion dollars in tax relief that was planned there. So the tax relief that was planned, we’ve built on that, based on the new revenues which are available.”
Sims said only that the revenues were “identified from all sources” based on “a rebounding economy.”
Last month the Department of Revenue testified in committee that Illinois took in $4.6 billion more than expected in the current fiscal year that ends June 30, due largely to pandemic-related changes in consumer spending, although Pritzker included that revenue spike in his February budget plan.
IDOR also warned that the ongoing war in Ukraine could have an impact on revenues for the remainder of the current fiscal year and next. And some of the current-year surplus was spent on $1.4 billion in debt reduction in a measure passed last week that also addressed debt in the Unemployment Insurance Trust Fund.
The plan announced Friday would include one-time direct checks to Illinoisans. Those earning less than $250,000 in 2021 would receive a $100 check, while joint filers earning less than $500,000 would receive $200. Checks would include an extra $50 per dependent, up to three dependents.
Lawmakers said the hope would be that the checks would be distributed by September, although they said the date was based on immediate taxpayer relief, not on the fact that an election is upcoming in November.
Taxpayers would not need to take action to receive the checks. Anyone who is eligible based on their 2021 return would be sent a check.
Other programs include a six-month suspension on the state’s 1 percent grocery tax, as well as a six-month stay on the inflationary adjustment to the motor fuel tax. That equates to keeping the motor fuel tax at its current level rather than increasing it by 2 to 3 cents.
Democrats are also proposing to increase the state Earned Income Tax Credit by a percentage point, raising it to 19 percent of the federal tax credit. The EITC is a credit available to low- and moderate-income households. It is a refundable credit, meaning those who qualify can receive a refund, even if the amount of the credit exceeds what they would otherwise owe in taxes.
Another proposal would allow for a tax credit up to $300 for homeowners who earn less than $250,000 individually or $500,000 jointly. The credit would be 5 percent of property tax paid, up to $300.
Another measure gets rid of the sales tax on school supplies from Aug. 5 to Aug. 14 this year. The tax moratorium also would apply to qualifying clothing and footwear items up to $125 per item.
It would also give teachers a tax credit up to $250 for supplies purchased for their classrooms and a $500 credit for volunteer firefighters and EMS members who held those positions for at least nine months in the tax year. The sponsors said those credits would be permanent.
“We look forward to reviewing this proposal,” Pritzker’s spokesperson said in a statement. “Our conversations with members of the General Assembly in both chambers have been productive, and we will continue to focus on delivering fiscally responsible relief for working families.”
Senate Minority Leader Dan McConchie, R-Hawthorn Woods, issued a statement criticizing the proposal’s temporary nature.
“The Senate Democrats’ proposal appears to be just another election year stunt,” he said in a statement. “Under their plan, checks and relief will arrive right before the election and then will expire right after the election. This is not the real reform the people of this state want and need, and Illinoisans will see right through this disingenuous gimmick.”
9 things to know about Pritzker budget plan
Pension contributions
Updated
Illinois’ largest general revenue fund expenses continue to be K-12 education and pensions. The latter will make up 20.7 percent of the proposed general revenue spending in the upcoming budget, or about $9.6 billion.
The governor has proposed adding another $500 million to the pension payment beyond what is required by law in fiscal years 2022 and 2023.
That’s notable, because previous governors have been widely criticized for shortchanging the pension system – something Pritzker proposed, then quickly abandoned, in his first year in office. Critics often point out that the state law governing pension payments already shortchanges the system from what accountants suggest should be paid into it.
The governor proposed spending $300 million of the surplus from the current fiscal year to pay down pensions, with $200 million added to the statutory payment in the upcoming budget.
The governor’s office estimated the $500 million increase beyond statutory amounts would reduce unfunded liabilities – which sit at about $130 billion – by about $1.8 billion. A pension buyout program previously approved by the General Assembly has reduced that liability by about $1.4 billion, according to the governor’s office.
Thomas J. Turney, The State Journal-Register via AP
Higher education
Updated
The governor proposed spending $2.2 billion on higher education, a $208 million increase from the current year. That includes a $122 million increase to Monetary Award Program grants to help students demonstrating a financial need attend college.
Universities and community colleges would see their budgets increased 5 percent, or $68 million, while adult education programs would see $2.5 million in new funding and funding would increase for minority teacher scholarships by $2.3 million
Through College Illinois, a state-run prepaid tuition plan that is no longer open for enrollment, the state has about $230 million in obligations that the fund cannot currently meet. Pritzker proposed spending $230 million in general revenue funds to pay down that remaining balance, and his team estimated the long-run savings at about $75 million
Thomas J. Turney, The State Journal-Register via AP
K-12 Education
Updated
Approximately 21 percent of the budget is dedicated to Pre-K-12 education, an increase of $498 million from one year ago.
That includes $350 million for the evidence-based funding formula for K-12 schools, which prioritizes new money toward the schools furthest from their “adequacy” target, which takes into account class sizes, a local district’s property values and other factors.
The budget asks for another $54.4 million to provide early childhood education services to another 7,100 children, and another $96 million in transportation and special education grants for schools.
Another $12 million would be added to the Regional Offices of Education budget to address truancy and chronic absenteeism, and agriculture education funding would increase by $2 million.
Temporary tax relief
Updated
The governor cited rising inflation as the basis for creating about $1 billion in temporary tax relief for motor fuel, groceries and property taxes.
The motor fuel tax relief would not lower gas prices, but it would prevent an annual increase to the motor fuel tax that is written into law from taking effect this year. It prevents a hike of 2.2 cents per gallon of gas, according to the governor’s office – a taxpayer savings it pegged at $135 million.
Motor fuel tax money does not go to the general revenue fund, but rather to road construction projects. The tax holiday does not appear to affect a proposed $46.5 billion capital infrastructure budget, which is mostly an extension of the 2019 Rebuild Illinois plan.
The governor also proposed rolling back a 1 percent state grocery tax for the fiscal year, a taxpayer savings pegged at $360 million. The state would reimburse local governments for the effect of the tax holiday.
Illinoisans currently eligible for a 5 percent property tax credit under current law – that is, joint filers earning below $500,000 and single filers earning below $250,000 – would be eligible for another 5 percent property tax credit under the proposal, up to $300. The taxpayer savings is estimated at $475 million.
Rainy day fund
Updated
Illinois’ “rainy day fund” at its height contained only about $300 million since its 2001 creation, but that was spent down to almost nothing during a budget impasse under Republican former Gov. Bruce Rauner and Democratic leaders in the General Assembly.
Pritzker’s budget proposes adding $600 million to the fund with a supplemental budget from the current fiscal year, while dedicating $279 million to the fund in FY2023 to bring the balance up to $879 million.
The governor also proposed dedicating $898 million to pay down overdue health insurance bills.
Safety net
Updated
The beleaguered Department of Children and Family Services would see a funding increase of $250 million, or 16 percent, to about $1.3 billion from general revenue funds. That includes rate reforms for private sector providers in an effort to address staffing shortages, totaling $87.1 million.
The budget also provides $15.5 million to hire an additional 360 employees to address growing caseloads, improve caseload ratios and continue operations in licensing, monitoring and clinical services.
Funding for nursing homes would increase by $500 million, with lawmakers expected to take up rate reforms and a new provider assessment designed to maximize federal dollars, encourage improvement of care and staffing ratios.
Unemployment trust fund
Updated
As of Feb. 1, Illinois owed the federal government more than $4.5 billion for advances received to keep its unemployment insurance trust fund afloat during the height of the COVID-19 pandemic. By Sept. 30, Illinois will owe almost $32 million in interest on that borrowing.
If the state doesn’t take action to pay down the deficit, it could lead to massive unemployment insurance rate hikes on businesses and cuts to benefits for those claiming unemployment.
The budget does not include any money to pay down the borrowing, but the governor’s office said it remains in negotiations with lawmakers and representatives of labor and businesses on a solution. There’s serious consideration of using much of about $3.5 billion in remaining federal American Rescue Plan Act funding to pay down the deficit, according to the governor’s office.
Public safety
Updated
Pritzker noted his budget includes an $18.6 million increase to allow for three classes of Illinois State Police cadets. Another $5.4 million will go to opening a new forensic laboratory in Decatur in August.
The budget also includes $4.5 million to fund body cameras for ISP in accordance with a criminal justice reform bill passed one year ago, as well as providing the Illinois Law Enforcement Training and Standards Board with $10 million for distributing grants to local law enforcement for body cameras.
The Department of Human Services budget includes $240 million as part of a two-year, $250 million commitment to the Reimagine Public Safety Act, which aims at investing violence prevention resources in some of the state’s most dangerous areas. Just $5 million of that comes from the general revenue fund, with $235 million funded through the American Rescue Plan Act.
Revenues
Updated
The budget does not call for raising taxes to create any new revenues.
The state does expect a 4 percent increase in income tax receipts at $22.4 billion. Corporate income taxes are expected to decline 5.4 percent to $4.4 billion, with sales tax decreasing 1.3 percent to $9.9 billion and other sources netting $3.1 billion.
The lottery is expected to bring in $754 million, legalized gambling $157 million, and adult-use marijuana $142 million. Federal sources account for just over $4 billion.
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April 1, 2022 at 07:30PM