Illinois' Budget And What It Means For Its Citizens

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On July 6, 2017, Illinois voted and passed a budget for the first time since 2015. The budget, negotiated by a Democrat-controlled Legislature, was firmly opposed by Republican Governor Bruce Rauner who vetoed the bill two days before it passed. Despite this, Democrats were able to secure enough support from Republican legislators to override Rauner’s veto. The final vote was 71-42 in favor of the budget.

Illinois now has adopted a $36 billion spending plan that lawmakers plan to utilize to reduce current debts. Although more than a majority of the House and Senate voted to pass the budget, Governor Rauner opposes the budget. He describes the budget as “not balanced, does not cut enough spending to pay down enough debt, and does not help grow jobs or restore confidence in government.” In his July 4th veto statement, Governor Rauner wrote that “even with the permanent 32% income tax increase, this budget remains $2 billion out of balance for fiscal year 2018.” Rep. Allen Skillicorn also shares his sentiment. Skillicorn calls the budget “junk” and firmly asserts that the income generated from increased taxes will not help pay off Illinois’ unfunded $130 billion pension liability.

As Illinois enters 2018, its financial situation reveals a $6.2 billion annual deficit and $14.7 billion in overdue bills.

On a more local note, Mayor Rahm Emanuel, mayor of the city of Chicago praised the deal. He states that “although the bill may not include everything either side wants, it includes what Illinois needs: funding for schools statewide, much needed support for state universities and their students, a safety net for the most vulnerable, and job-creating projects.” For Illinois’ citizens, this translates to six major effects.

1.     Increase in State Income Taxes: The passing of the budget is set to raise personal income taxes from 3.75% to 4.95 percent. Furthermore, the state’s earned-income tax break will increase by eight percent over the course of the next two years. These increases are projected to raise approximately $5 billion per year, money that will improve Illinois’ debt.

2.     Schools Funding: Part of the budget includes an additional $350 million for K-12 classrooms. Prior to the budget, schools have been receiving partial funding through the stopgap budget passed in 2016 and individual donors. Although funding for these classrooms is now available, there are stipulations in place that local schools must adhere to in order to receive funding. Additionally, other legislation currently in debate will determine the percentage of funds each school district will receive.

 

3.     Higher Education Funding: Funding from the new budget will now pay back state universities for six months of missing funding. Additionally, the 130,000 Illinois students who qualify for need-based aid financial aid will now be able to receive it in 2018.

4.     Road Construction: Waves of warnings were sent out in earlier this year about shutting down construction projects throughout the state of Illinois. Now, statewide projects will now be able to continue.

5.     Social Service Aid: Social Service Agencies will now receive need funding. In 2017, Illinois Comptroller Susana Mendoza warned that her office was paying more each month than it received in revenue. The payments being made through her office were accumulating more debt. Illinois’ new spending plan will provide funding to help Mendoza’s office make their required payments to Illinois citizens in need of social aid. 

6.     Lottery Payments: Under the new spending plan, Illinois lottery winners will now get paid in full.

Although these changes promise hopeful, positive change, Moody’s, a credit rating agency, stated in July that it may make still make Illinois the first state with a “junk” credit rating. Moodys warns that “broad bipartisan support my signal shortcomings” in the spending plan’s effectiveness and potential impact.

The Illinois Constitution terms a budget as secure when “appropriations for a fiscal year shall not exceed funds estimated by the General Assembly to be available during that year.” As strong opposition of the bill continues to exist, the term estimated used in the constitution has created controversy around what makes a budget balanced.

The passing of this budget ultimately means that Illinois can begin rebuilding and working to pay off its unpaid billions.  Although Illinois has finally established a budget, steps still need to be taken to improve Illinois’ financial situation. There is still much progress to be made and much to be done in 2018.