Springfield Budget Update 7-5-2017

July 5th, 2017
Over the past two years, I have regularly provided updates on the budget negotiations taking place in Springfield.  It is apparent Illinois’ ongoing financial challenges has finally reached its inevitable breaking point.  A huge contributing factor in the last couple years are the court orders mandating spending levels well above our revenues to pay for it.  All agree we will see catastrophic consequences if we do not pass a budget immediately.
The bond rating agencies, Fitch, S&P, and Moody’s, have declared Illinois’ bond rating would be reduced to “Junk Status” if a balanced budget is not passed by July 1st. (Due to the passage of the House budget plan on July 2nd, Fitch said, “Illinois made concrete progress” and has delayed a downgrade.  On July 4th, the Senate concurred with the House budget and sent it to the governor for his signature.  The Governor immediately vetoed the budget as promised.  The Senate immediately voted to override the Governor’s veto.  The House has not yet scheduled a veto override vote).  In addition to this downgrade which would cost Illinois taxpayers hundreds of millions of dollars in higher costs, it would also label Illinois as the first state in history to be reduced to such a status.  Furthermore, without a budget by July 1st, the Illinois Department of Transportation announced the suspension of road construction projects, laying off tens of thousands of hard-working, well-paid employees thus placing our states’ infrastructure at risk. Without action, our schools will be in jeopardy of an opening in the fall, preventing our children from furthering their education.
The deliberations of each issue deepened and were constantly delayed due to the variety of opinions and ideas expressed by each political party.  Various Democrats are upset the FY18 budget, specifically, Senate Bill 6, contains a $3 Billion decrease in spending, along with spending $800 Million less than Governor Rauner’s introduced budget.  Some Democrats believe the proposed income tax rate increase in Senate Bill 9, from 3.75% to 4.95%, should be higher especially for the wealthy.  Many Republicans asked for deeper spending cuts as well as an income tax rate much lower than 4.95%.
Included in the overall budget discussions are issues such as government consolidation, pension reform, procurement reform, property tax relief, K-12 education funding formula, worker compensation reform, as well as the states $15 Billion in unpaid bills piling up in the comptrollers’ office.  The already challenging process is further exasperated by the deep political divide between Governor Rauner and House Speaker Madigan, as the political attacks between the two have been personal, vicious, and crushes any level of trust complicating negotiations.
Both parties have been tirelessly negotiating to reach an agreement and this budget deal may be as close as we get.  It’s certainly not perfect and there’s plenty not to like.  But because it was close, Republicans and Democrats in the Illinois House of Representatives joined together as a super majority and voted Yes to pass this compromise budget plan for Illinois.  At least one organization has offered a “cuts-only” budget translating to an $8 Billion decrease in spending within FY18, which only a couple legislators in Springfield would even consider supporting.  The reality of the matter is a cuts-only budget would never receive the requisite number of votes for passage, which is why we included both a combination of cuts and taxes.
An outline provided below depicts the personal income tax rate a family may have in comparison to our surrounding states:
A family having an annual income of $50,000 will have the following personal income tax rate:
Illinois – (Currently 3.75%)  increasing to 4.95%
Indiana – 3.23%     (Imposes a tax on services)
Wisconsin – 6.27%
Iowa – 7.92%
Missouri – 6%
Kentucky – 5.8%
A family having an annual income of $75,000 will have the following personal income tax rate:
Illinois – (Currently 3.75%)  increasing to 4.95%
Indiana – 3.23%     (Imposes a tax on services)
Wisconsin – 6.27%
Iowa – 8.98%
Missouri – 6%
Kentucky – 6%
A family having an annual income of $150,000 will have the following personal income tax rate:
Illinois – (Currently 3.75%)  increasing to 4.95%
Indiana – 3.23%     (Imposes a tax on services)
Wisconsin – 6.27%
Iowa – 8.98%
Missouri – 6%
Kentucky – 6%
I hope you found this information helpful.  Thank you for your continued help and support!

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