After more than two years of Illinois’ historic stalemate, lawmakers voted to override of Gov. Bruce Rauner’s vetoes of an income tax hike and $36 billion spending plan, putting a budget in place.
The Senate voted to override the vetoes on Tuesday, while representatives in the House voted Thursday afternoon. All three bills passed the House by more than 71 votes, which was the number needed to override a veto.
Now that Illinois has its first full budget since 2015, here are some of the highlights of what this means for residents:
Income Tax Hike
Perhaps the most widely-discussed change is an increase in the state income tax. The hike will permanently increase the personal income tax rate by 32 percent, from 3.75 percent to 4.95 percent, while the corporate tax rate will go from 5.25 percent to 7 percent. Both increases are similar to a tax proposal that passed the Illinois Senate in May, and are projected to raise roughly $5 billion in revenue at a time when the state has a $6.2 billion annual deficit and a $14.7 billion backlog of overdue bills. A preliminary estimate found that a family with a combined income of $100,000 a year would pay about $1,100 more annually. Another estimate claims that a family of three, with an income of $75,000 a year would pay about $822 annually.
If no budget was in place, K-12 schools would not have received any state funding and likely would have been unable to open in the fall. Schools have been receiving some form of state funding up to this point because they were fully funded over the last two years, through the stopgap budget passed in 2016, as well as individual appropriations the year before. Education appropriations ended at the close of the fiscal year on June 30, but now local schools will continue to receive state aid – with one condition. The spending plan contains a provision that makes funds contingent on an “evidence-based model” to change the school funding formula, akin to a bill passed in May that Rauner has vowed to veto, calling it a “bailout” for Chicago Public Schools.
Higher Education Funding
Higher education will get much-needed relief. The stop-gap budget passed in 2016 funded state universities through the first half of the 2017 fiscal year, meaning colleges across Illinois received no state aid beginning Jan. 1. The budget not only appropriates money for schools like Governor’s State, Chicago State and Northeastern Illinois - which have all been hit particularly hard by the impasse – for FY18, it also moves to back pay state universities for the six months of missed funding. However, the caveat is that higher education funding was cut by 10 percent across the board as part of Democrats’ acquiescence to Republican lawmakers’ requests for spending cuts during negotiations.
That FY17 funding will allow colleges to pay themselves back for grants many of them gave students – anticipating eventual reimbursement from the state – in lieu of the Monetary Award Program funding that was suspended for the 2017 to 2018 academic year. Roughly 130,000 Illinois students qualify for the need-based aid financial aid, which will restored in the event that the House votes to override the vetoes.
Road construction will continue after warnings statewide projects would be shut down without a budget.
Social Service Aid
Struggling social service agencies will be paid. Earlier this month, a patchwork of court orders and consent decrees dictatedthat the state pay certain suppliers, though Illinois Comptroller Susana Mendoza has warned that her office is required to pay out more than it receives in revenue each month. Mendoza’s office will be forced to continue to make those payments (though many of them are late and not in full), meaning the bill backlog that already sits around $15 billion would continue to pile up. By August, Mendoza has said the state will likely not have enough money to cover even those payments it is legally required to make, forcing a tough choice that could see state employee paychecks halted, or a missed pension payment.
Two agencies have already given Illinois an extension after Sunday night's House votes, which was the first to pass the budget plan. But Moody's Investors Service has since put Illinois under review for a downgrade even if lawmakers override Rauner's veto. The agency said that while lawmakers have made progress, the package does not address the state's massively underfunded pensions or do enough to pay down bills.
After the budget impasse forced the Illinois Lottery to change its payment policy, the new plan would allow for winners to get paid in full.