Illinois ends longest budget impasse among U.S. states with $5 billion in tax increases

House votes give Illinois tax hike, 1st budget in 2 years.

From Watchdog,org

Illinois ended a more than two-year-long budget impasse when its Democrat-dominated state House voted last Thursday to override Republican Gov. Bruce Rauner’s vetoes of a budget package that includes $5 billion in tax hikes and $36.5 billion in spending.

Until Thursday, Illinois had the longest-running budget impasse of any U.S. state, but it wasn’t the only only without a budget. Six other U.S. states did not pass a budget by the start of their new fiscal year on July 1. Not surprisingly, the states share certain characteristics that are making it difficult to get a budget passed.

Tough fiscal conditions can make budget decisions difficult.

John Hicks, executive director of the National Association of State Budget Officers, said government infighting on the state level regarding spending cuts and revenue increases is a factor for each state without a budget.

“Other states, such as Pennsylvania and Connecticut and Massachusetts, where low revenue growth and high spending pressures around fixed costs like pensions and health care costs, are causing big decisions,” Hicks said.

Illinois has more than $15 billion in unpaid bills, leaving many vendors, social service providers and universities unpaid or underfunded.

In places like Wisconsin and Rhode Island, statutes prevent a government shutdown or diminution of services. In Illinois, court-ordered spending and consent decrees had the state spending billions of dollars more than it was bringing in, even without a budget.

“There are states like Connecticut, and late last week Maine and New Jersey, who now have a budget, where the governors had to issue emergency executive orders defining what state services will continue and what state services will not,” Hicks said.

Even with a budget now in place, Illinois still could be downgraded to “junk” credit status because of its backlog of bills and pension debt of more than $130 billion, national credit rating agency Moody’s warned earlier this week. The rating would limit its access to tax-exempt municipal bond markets, which in turn would raise the interest rate on any more borrowing it does. That directly impacts Illinois taxpayers, according to Hicks.

“It doesn’t change the cost of the debt that has already been issued,” he said. “That’s already budgeted and in place, but any new debt moving forward, it just makes it more expensive.”

The lack of a budget can impact social programs, depending on what a state is permitted to do without an appropriation plan. Illinois has a lot of locally delivered human service programs, which Hicks said plays a role in how the state budget impasse impacts program funding.

“Since Illinois has an inability to pay a lot of their vendors, that has affected the flow of funds down to human services programs, and in some states where they are state-delivered, they haven’t been as affected,” Hicks said.

Illinois’ budget deal comes at a high cost to state taxpayers, who already pay the highest combined local and state taxes in the country. The state’s income tax rate increases by 32 percent effective immediately, and its corporate tax increase by 33 percent, also effective immediately. Illinois House Speaker Michael Madigan, who will become the longest-running House leader in U.S. history by next year, pushed through the tax increases.

Gov. Bruce Rauner vetoed the plan, but both General Assembly chambers have now voted to override.

Besides Illinois, states without a budget include Wisconsin, Connecticut, Massachusetts, Rhode Island, Pennsylvania and Oregon, according to the National Association of State Budget Officers. Michigan is an eighth state that has also not yet passed a budget, however its fiscal year begins Oct. 1.

 

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