THE ILLINOIZE: Thursday Free for All...The Civic Committee's going-nowhere tax hike idea....What to expect when you're expecting a budget...Another day, another gun suit
February 9, 2023
Good morning, Illinois.
I got a call from a radio station yesterday morning asking if I wanted to discuss the State of the Union address. Yeah, I didn’t watch it. State stuff keeps me plenty busy.
The Senate was in for about 45 minutes yesterday, but it was mostly just Tim Anderson and Scott Kaiser reading bills into the record. The Senate canceled session today and returns next Tuesday. The House was in for under 7 minutes. They’re canceled today as well and return next Tuesday. The Governor is at the NGA Winter Meeting in DC.
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SOME TOP LINKS FROM THE WEEK SO FAR
YOUR THURSDAY FREE FOR ALL
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Income tax ‘surcharge,’ other measures needed to pay down pensions, business group says (Chicago Sun-Times)
Illinois lawmakers have shown fiscal discipline lately, but politically toxic tax increases must be considered to fully fund pensions and improve the state’s credit rating, senior business leaders in Chicago said in a report Wednesday.
The report by the Civic Committee of the Commercial Club of Chicago said it could support income tax “surcharges” for people and companies, lasting 10 years, provided the additional revenue is earmarked mostly for pensions.
It was a notable message from a group that opposed Gov. J.B. Pritzker’s plan for a graduated income tax, with higher rates for higher incomes.
The Civic Committee cited Illinois’ history of “fiscal mismanagement” in opposing the plan in 2020. But the finances have improved, and the business leaders can now back higher taxes if there are “lockbox” protections for the money, said Derek Douglas, president of the Civic Committee.
Pritzker’s graduated income tax was voted down in a referendum.
Among other moves to be considered is a broadening of state sales taxes to cover more services, expanding the income tax to include retirees’ earnings and forcing members of state retirement systems to pay more for health care, the Civic Committee said.
The proposals all would raise enormous opposition. But the report said the ideas should be on the table if Illinois is to end structural deficits. It said Illinois should try to achieve a coveted AA bond rating in five years, something 80% of states have. Illinois’ BBB+ rating is the lowest among the states, despite recent upgrades.
“There are options that are put in there that are tough choices, but they are motivated by a need to deal with the pension situation we have,” Douglas said.
Douglas said his group has discussed alternatives with Democrats and Republicans in Springfield but has no commitments to sponsor legislation. “Our sense is that to do anything, it’s going to require a bipartisan approach,” he said.
Accelerating pension funding would save the state $37 billion over the next 22 years and bring the retirement plans to 100% funding levels, rather than the current target of 90%, said the report, called “Securing Illinois’ Future: Stabilizing State Finances to Promote Long-Term Growth.”
It suggested a surcharge of 0.5% on the personal income tax, currently a flat 4.95% in Illinois. Similarly, corporate income taxes of 9.5% could sustain a surcharge of 0.7%, the group said.
It’s good fodder, but they’re not going to have a sponsor for this. Even if they do, it ain’t going anywhere. We’re going to miss serious proposals and honest, realistic discussion about state finances with Laurence Msall around.
Related: Execs pitch 10-year income tax hike to cover pensions (Crain’s Chicago Business)
What to know ahead of Pritzker’s budget proposal to lawmakers (Capitol News Illinois)
Gov. JB Pritzker’s second-term legislative agenda will kick off in earnest next week as he proposes his fifth annual state budget to lawmakers in the General Assembly.
But while a governor’s proposal usually provides the framework for the state’s annual spending plan, it rarely makes it through the General Assembly untouched by lawmakers who have their own spending priorities.
The monthslong negotiating process involves dozens of budget hearings and behind-closed-doors meetings, eventually culminating in the budget’s passage – in normal years – sometime before the end of the legislative session. This year, lawmakers are scheduled to adjourn on May 19.
llinois is coming off a record-high $50.3 billion in base revenue for the fiscal year that ended June 30 – about $8 billion more than had been anticipated when the Fiscal Year 2022 budget was initially approved in the spring of 2021.
Following that strong performance, lawmakers budgeted for an 8 percent decrease in the current fiscal year that began July 1. But in the seven months that have already passed in FY 2023, revenues are outpacing even last year’s strong performance by $2.3 billion, according to COGFA’s January report.
The strong revenue performance led COGFA to up its projections by $4.9 billion in a November forecast revision. The agency now anticipates revenue receipts will top last year’s totals by $259 million.
GOMB, meanwhile, was more conservative, projecting revenues to spike by about $3.6 billion over initial estimates. That was the basis for a supplemental spending plan that included $2.7 billion in debt repayment and savings measures approved in the January lame duck session.
As the economic forecasting agencies mull the likelihood of a recession, we’ll be watching to see if Pritzker plans for a downturn in revenue or if the current-year projections for a surplus are updated in either direction.
Spending growth is important to watch because GOMB’s five-year budget analysis projected Illinois could be in for a deficit of about $384 million and growing beginning in Fiscal Year 2025. Generally, that means the state must increase base revenues, cut expenditures or pass some combination of both.
While Illinois’ base sales and income tax rates have not changed in Pritzker’s time in office, the governor has taken credit for increasing revenues by eliminating some corporate tax exemptions and streamlining the way the state levies an online sales tax.
It remains to be seen what, if any, new revenue sources or structural spending reforms the governor might offer in his address next week.
Related: Push for state child tax credit begins, could face uphill battle (Capitol News Illinois)
Bill surfaces in Springfield to crack down on auto insurers (Crain’s Chicago Business)
Car insurance rate hikes could require state approval under new bill (Chicago Sun-Times)
Macon County judge blocks assault weapons ban from being enforced on some, declines to extend order statewide (Decatur Herald & Review)
A Macon County judge has issued a temporary restraining order halting the state from enforcing its semi-automatic weapons ban on about 2,000 people and a handful of gun dealers.
But Judge Rodney Forbes' order, issued Wednesday afternoon, does not apply to the entire state as plaintiffs in the case had requested.
"We wanted to do something for the whole state, but I understand the judge's decision," said state Rep. Dan Caulkins, R-Decatur, the lead plaintiff in the case. "It's still another win for the people of Illinois. This is the first step. We need to get a permanent restraining order. And that's what our attorney Jerry Stocks is going to be working on."
It is the third order issued by a downstate judge temporarily shielding gun owners from being subject to the law, which was passed by the state legislature and signed last month by Gov. J.B. Pritzker.
It only applies to plaintiffs in the case, who include Caulkins, Decatur Jewelry & Pawn owner Perry Lewin and those under the banner of "Law-Abiding Gun Owners of Macon County." A list provided to the court included about 2,000 names of people who are members of the association.
They join about 850 plaintiffs in Effingham County and nearly 1,700 in White County who are now free from the ban's reach for the time being.
Attorney General Kwame Raoul's office has asked the Illinois Supreme Court to review the appellate court decision upholding the temporary restraining orders.
A ruling from the state's high court may be necessary to prevent a patchwork of enforcement from continuing to develop should additional lawsuits seeking temporary relief be filed.
Just a reminder as I have been with all of these state court stories: don’t get caught up in these headlines. The real action will come in federal court.
POLITICAL POTPOURRI
Ramirez calls for more action on working-class issues in State of the Union response (Crain’s Chicago Business)
Illinois Court Upholds Pritzker’s Tax Relief Pension Merger Law (Bloomberg Law)
In the spotlight: Rolling Meadows High School student sits next to first lady Jill Biden at State of the Union address (Chicago Sun-Times)
'Hello, Kate? It's Jill Biden': First lady invites Arlington Heights teen to State of the Union (Daily Herald)
Approaching ‘Medicaid cliff’ could leave hundreds of thousands uninsured (Capitol News Illinois)
Macon County state’s attorney critiques SAFE-T Act as no cash bail portion remains up in air (Decatur Herald & Review)
Bleak numbers spell trouble for Mayor Lightfoot’s reelection bid (Chicago Sun-Times)
Andrew McKenna, an accomplished Chicago businessman and part owner of the Bears, dies at 93 (Chicago Tribune)
Opinion: Gambling booming, but revenue growth iffy (Champaign News-Gazette)
Opinion: Children who are in juvenile jail because DCFS can’t find them a home are being harmed (Chicago Tribune)
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