Comparing Illinois's financial swamp to the challenges the state faced during the Great Depression, Gov. JB Pritzker used his first budget speech on Wednesday to outline the early stages of a leaf of multi-year road that ultimately depends on the voter approving a progressive income tax.
In a 37-minute speech, Pritzker promised to end the days of ideological war that fueled a record fiscal stalemate under his defeated predecessor, Republican Bruce Rauner. He sought compromise and patience, urging Republicans to respect the state's one-party Democratic regime and urging all lawmakers to take a long-term view by adopting multi-year budget changes aimed at stabilizing Illinois' fragile finances.
"Budgeting will no longer happen by taking the state hostage, or by judicial decisions, consent decrees and continuing credits, but by debate, compromise and return to normal order. We will work together seriously to solve the problems of the state. We will sometimes disagree on important points, but the work for which we have all come here will be accomplished, "said Pritzker.
"To achieve fiscal stability and eliminate our structural deficit, there is no quick fix. It took decades to get into this mess. It will take at least several years to get out, "he said. "We must therefore take a multi-year approach based on fair principles and sound investments in our teams. Our state is doing well when our people are doing well.
Read the remarks prepared by the governor J.B. Pritzker for his first speech on the state budget »
Pritzker said his spending plan of $ 38.7 billion for the fiscal year beginning July 1 was balanced, but was based on a "regressive tax structure that I do not favor and which puts the greatest burden on working families, "he continued. thematic pitch to replace the flat-rate income tax provided for by the Constitution with a tax that raises the rates of high-earners.
"Ultimately, our primary responsibility to the people of Illinois is to place this state on the path to sustainable growth with a fair income tax system" said the billionaire heir to the fortune of the Hyatt hotel.
"It's not fair that I pay the same tax rate as a teacher, educator, police officer or nurse. In addition, efforts to simply raise the income tax rate help to increase income inequality and enable our children and grandchildren to solve our current fiscal problems. The state needs a fair tax and I will do the same over the next two years, "he said.
Mr Pritzker said his office intended to start "immediate" discussions with legislators on proposed tax rates under a tax system. progressive. He noted that the state is facing a budget deficit of $ 3.2 billion. To compensate for this and address the current pension shortage, Mr. Pritzker said he would be pushing for new revenue by legalizing marijuana and sportsbooks and instituting a tax on insurance companies. to help cover the costs of Medicaid.
While the governor said he "would reject imposing additional taxes on income, retirement and sale to the middle class," his proposal is based on new taxes that would hit middle-class taxpayers, including a tax on electronic cigarettes, an increase in the price of cigarettes. a tax on plastic bags similar to that in effect in Chicago.
Pritzker's proposal provides $ 402 million in new revenue from sports betting, legalized marijuana and a new national tax on plastic bags, a tax that could be added to the 7-cent tax on Chicago bags.
It also supports an increase of 32 cents per package of the current cigarette tax of $ 1.98 per package, which would raise an additional $ 55 million. The cigarette tax was last increased in 2012 to 98 cents per pack. The application of the wholesale tobacco tax by the state to e-cigarettes would generate an additional $ 10 million.
Pritzker would generate an additional $ 89 million through a higher tax structure on high-performance video game terminals; $ 75 million by reducing a deduction taken by retailers for the collection of state sales taxes $ 94 million by separating the income tax from a state of one federal tax relief for foreign income; $ 175 million from an amnesty-type program for offender reporters; and $ 6 million by phasing out a tax credit program for private schools set up as part of a plan to improve public school funding.
Pritzker would also put in place an evaluation program for long-term care insurance companies, generating $ 390 million in funding for Medicaid.
These proposals alone would generate nearly $ 1.3 billion, according to the Pritzker Budget Office.
On top of that, as part of a multi-year, multi-year effort to reduce the huge unfunded pension liabilities of the state, Pritzker would save $ 878 million over the next fiscal year by extending the schedule by seven years. pension payments required by the State.
Together, the governor's income proposals and lower pension payments would close nearly $ 2.2 billion of the government's $ 3.2 billion deficit. The remaining $ 1 billion would come from a variety of sources, including "natural income growth" resulting from a stronger economy, the increase in the minimum wage effective Jan. 1, and the transfer of funds from the province. 39 other public funds, said Pritzker's spokesman, Jordan Abudayyeh said in an email.
Critics immediately criticized Pritzker's proposal to extend the timing of pension payments, repeating the previous years' policy of setting the tone for the ball, resulting in an exponential increase in pension debt.
Republican House leader Jim Durkin of Western Springs called the governor's proposal "a return to the bad years 20 years ago, when we overthrew the pension systems".
"That's what put us in our problems with retirement systems today," he said.
Durkin said Republicans would continue to call for changes in pension systems that would reduce costs by cutting benefits. But these changes would require an amendment to the Illinois Constitution and would be of questionable legality. Pritzker rejected this approach.
"Throughout my campaign I said we had to pay the due pensions and the (state) Supreme Court ruled that," said the governor, acknowledging the court decisions that had overturned previous attempts reduction of pension costs.
In addition to lengthening the payment period, Pritzker's plan provides for the sale of state assets and the issuance of new bonds up to $ 2 billion to put money into retirement systems and spend $ 200 million of progressive income tax revenues on pensions. It would also put in place a permanent plan to reduce pension liabilities by about $ 134 billion by allowing state officials to sell part of the value of their cost-of-living adjustments after retirement. retirement. The plan provides for a $ 125-million saving on the state pension contribution in the next fiscal year.
Republicans are not the only ones to express doubts about this approach.
Rating agencies Fitch Ratings and S & P Global Ratings each asked questions about the Pritzker Administration's proposal.
"The recent retirement proposals of the new Governor of Illinois are an important first step in addressing the significant fiscal challenges of the state," said Fitch Ratings in a note. "Whether they are implemented or not, Fitch predicts that the burden of long-term responsibility for Illinois will remain high and among the highest in the United States for the foreseeable future." . "
In a new report, S & P Global warned that states like Illinois could hurt their credit rating by leveraging their assets to cover the cost of retirements.
"(Asset transfers) offer the opportunity to supplement the required contributions in retirement plans, thus freeing up income for government services," S & P Global said in a press release. "However, in the long run, if assets turn out to be illiquid or poorly valued, future pension costs could escalate."
Pritzker said his budget focused on spending in three areas: education, health and social services, and public safety.
It is proposing an additional $ 630 million for education, including early childhood development programs, elementary and secondary education, and public universities and community colleges. It also provides an additional $ 542 million in social services, including money to provide child care assistance to parents of 10,000 more children, and to hire another 126 child protection workers. childhood in the Department of Child and Family Services.
The president of the Democratic House, Michael Madigan, congratulated Pritzker for recognizing "the magnitude" of the state's challenges, but added that his majority was ready to work with the new governor and the Republicans for "bring all options to the table for honest negotiation" and decisions. "
Pritzker has only briefly mentioned another important budget item, namely the need for the state to implement a vast program of public works to repair roads, bridges and other state facilities. . He told lawmakers that they "should be ready to invest heavily in our transportation and infrastructure" and had promised that a plan would be presented during the spring session. But he did not provide details on the projects he would include or how he would be funded, including through an increase in the gas tax.
Despite the additional spending and new revenues contained in his first public spending project, Pritzker told lawmakers he presented "a limited budget – more austere than I would like".
This characterization has raised eyebrows among Republicans.
"I can not agree with that," Durkin said. "All I saw and heard was more expense."
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