As expected, Illinois Gov. Pat Quinn called today to maintain the current "temporary" state income tax rate of 5 percent to fund state programs and proposed a $500 property tax rebate for all homeowners.
Quinn's annual budget address was delayed from its scheduled February date until after the March 18 primary election in which Quinn was nominated for his second full term.
“Illinois is in stronger financial position now than we were five years ago," Quinn said. "Because of the hard choices that we’ve made, today we’re in a position to balance the budget in a way that protects the middle class by providing significant tax relief.”
Quinn also called for doubling the earned-income tax credit and increasing the minimum wage in Illinois.
The governor cited pension reform and a contract with state-employee labor unions -- plus closings and consolidations of state facilities -- that cut spending by more than $5.7 billion. He said state discretionary spending today is below 2008 levels, and the backlog of bills has been reduced by $5 billion.
Republican gubernatorial candidate Bruce Rauner said the governor's budget address breaks several promises.
“Pat Quinn first promised the working people of Illinois he wouldn’t raise taxes by 67%," Rauner said in a statement. "He broke that promise, taking away nearly a week's worth of pay for Illinois families. Then he promised his tax hike would be temporary. Today he broke that promise too and is doubling down on his failed policies."
Kane County Republican Sen. Karen McConnaughay says Quinn's plan to keep the higher income tax is a Democratic pattern.
"You've got the Governor extending the income tax," she said. "You've got Mike Madigan with the millionaire tax. And you've got Senate Democrats who have introduced a progressive income tax. I mean, taxation is their way of solving all problems in Illinois."
Rep. Elaine Nekritz, a Democrat from Northbrook, says the General Assembly is still working under the assumption the income tax hike will expire, despite Quinn's wishes. Still, she thought his speech today showed how serious the cuts ahead could be.
"I thought the governor did a good job of laying out the very stark choices that face the General Assembly between making cuts and and finding new revenue," she said. "It's those two sort of extremes that will inform the debate over the next few months as we put together a budget."
Nekritz says that, despite the fact Quinn says he won't consider increasing the sales tax, all options remain on the table for the legislature.
Highlights of Quinn's budget address include:
- Providing every homeowner in Illinois with a guaranteed $500 property tax refund every year.
- Doubling the value of the Earned Income Tax Credit over the next five years.
- New tax cuts to businesses that provide job training to make it easier for businesses to create new jobs.
- Maintaining the state’s current income tax rates, due to expire in January 2015.
- Instituting strong fiscal controls over state spending, including solid spending caps.
His proposals drew immediate fire from business groups.
"Making the record income tax increase permanent is the wrong approach and a piecemeal solution to a much larger problem with outdated tax policy in this state," said Greg Baise, president and CEO of the Illinois Manufacturers' Association.
Rob Karr, president and CEO of the Illinois Retail Merchants' Association, said his organization appreciates the budgetary pressures facing Quinn and the even higher financial hurdle if the temporary income tax is not made permanent.
"We commend the Governor for his efforts in this regard," Karr said. "However, we would like to see a more balanced approach that avoids imposing additional cost pressures on Illinois employers and promotes more aggressive spending control measures by the State. Employers cannot afford both the highest minimum wage in the Midwest and high tax rates."
Quinn opposed taxing retirement income, instituting a new tax on everyday services, or slashing education funding.
He called for increased investment in education, including:
- Investing $1.5 billion in the Birth to Five initiative that focuses on prenatal care and access to early learning opportunitiest.
- Doubling the state’s investment in Monetary Assistance Program (MAP) scholarships for students in need to attend college.
- Modernizing classrooms across the state.
- A $6 billion increase in classroom spending over the next five years.
Quinn also proposed a bipartisan working group to develop a new capital plan for the next five years.