As lawmakers’ end-of-session budget-making process wraps up, Republican lawmakers assert the state has enough money on hand to achieve a balanced budget and are calling on Gov. JB Pritzker and Democrats to not end previously agreed upon economic incentives.
Illinois’ economic recovery from the pandemic has resulted in greater-than-expected revenues in the current fiscal year, and the state has more than $8 billion coming from a federal stimulus package.
But Pritzker has not wavered from his calls to eliminate nearly $1 billion in what he’s calling “corporate tax loopholes,” but what Republicans and the business community call incentives for economic growth.
During budget negotiations in 2019, the newly sworn-in governor agreed to fund various Republican-backed tax incentives in exchange for their support on the fiscal year 2020 budget.
Known as the Blue Collar Jobs Act, the package included millions of dollars in construction tax credits, repealed a franchise tax, and allowed for purchasing credits for certain manufacturing equipment.
But, in his February budget proposal , Pritzker pushed to delay their implementation in order to balance the fiscal year 2022 budget. Recently the governor has even used the term “corporate welfare” to describe the tax credit programs on the chopping block.
Republicans say Pritzker’s push violates promises made to their caucuses, a major taboo in political negotiations.
“When you pledge your support or opposition to an initiative in this town and in [the State Capitol] building, your colleagues need to know they can take that pledge to the bank,” State Sen. Don DeWitte (R-St. Charles) said at a press conference earlier this week. “The governor's change of heart on incentives he agreed to and promoted shows us just how insatiable his party's appetite is for more revenue and more spending.”
State Sen. Chapin Rose (R-Mahomet) said recently released revenue estimates calculated by the state’s Commission on Government Forecasting and Accountability — a fiscal watchdog group — project Illinois will end up taking in more than $7 billion additional dollars in the current fiscal year than what was originally expected.
Additionally, COGFA projects fiscal year 2022 revenue levels will reach nearly $41.2 billion, a slight increase from the nearly $40.4 billion estimate that was projected in March.
Rose argued when these amounts are combined with federal American Rescue Plan dollars, Illinois will have around $16 billion in “unexpected revenue,” that will be more than enough to satisfy the state’s coffers.
COGFA Executive Director Clayton Klenke in a statement said Pritzker’s introduced FY 2022 budget proposal was based on revenues of around $41.7 billion.
“Since that time, we do not know what has been added or cut from the spending levels,” Klenke said. “But if the spending levels were the same as the introduced budget (which was based on $41,708 in revenue/budget book shows actual proposed expenditure level of $41,588), then our most recent estimate of $41,188 would be below that level for FY22.”
Rose claims the Democrats’ push to end economic incentives signifies fiscal irresponsibility and an inability to stop spending, and took particular issue with Pritzker’s play to diminish a private school scholarship tax credit and completely eliminate a biodiesel tax credit.
“Do you know who they're coming for, they’re coming for school kids — getting rid of the scholarship credit,” Rose said. “They're coming for farmers, and truckers, and the environment and biodiesel. They're coming for men and women with dirt under their fingernails. You think J.B. Pritzker’s got dirt under his fingernails? I don't think so.”
But the Democrat’s chief budget officer in the House, State Rep. Greg Harris of Chicago, said his party is practicing fiscal responsibility because they are wanting to use federal dollars to pay back outstanding debts — including $2 billion owed to the federal government from borrowing the state had to do last year in the depths of the pandemic recession.
“Speaker [of the House Chris] Welch and President [of the Senate Don] Harmon and Governor Pritzker made a decision that this one time money was going to come in and we were going to spend it on paying down our debt,” Harris said. “This is setting the stage, you know, to move into a new era of fiscal responsibility where our budgets will be stable, our debts will be reduced and tax money goes in, can be spent directly on services people need.”
Although interim rules released earlier this month by the U.S. Treasury Department indicated states can’t use stimulus dollars to pay back federal debts, Pritzker has indicated he is appealing to the Biden Administration to waive the rule. However, the governor and Democrats last week said they won’t be waiting on that guidance to change, and will instead pay back the $2 billion in federal borrowing from state revenues on hand.
Harris also said the influx of billions of federal dollars this fiscal year will not be a continuing stream of revenue, and thus the state cannot look to it in order to balance the budget.
“Collecting taxes on that, that's a one time event. It's not going to happen again. So you cannot build into the base that, you know, all this money will keep flowing.”
But State Rep. Tom Demmer (R-Dixon) said Illinois' better-than-expected performance in collecting income and sales tax this fiscal year has continually changed revenue projections for next year, and highlighted the positive effect economic incentives have brought to the state.
“We need to have a close scrutiny in how those federal dollars are being used, but we also have additional resources due to economic performance,” Demmer said. “When we talk about programs like the Blue Collar Jobs Act, that's designed to give us further economic performance…those are the very programs that will lead to economic growth and better collections of revenue in the state.”
Lawmakers have until Monday to pass a budget. If they don’t meet that deadline, the threshold to pass bills will become more difficult.
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