House Overrides Rauner's Budget Veto, Ends Historic Budget Impasse
The vote means the budget plan is now law
By Charlie Wojciechowski ••
For the first time in more than two years, the state of Illinois has a budget after representatives overturned Governor Bruce Rauner’s veto. NBC 5’s Carol Marin has all the latest details on the income tax hike, and what residents can expect as the budget goes into effect.
The Illinois House on Thursday voted to override Gov. Bruce Rauner's vetoes of a budget plan and income tax hike, making them both law.
“Today was another step in Illinois’ never-ending tragic trail of tax hikes," Rauner said in a statement. "Speaker Madigan’s 32 percent permanent income tax increase will force another tax hike in the near future."
In the end, 10 of the 15 Republicans who voted against the governor on the original bill voted for the override.
"The people of this chamber did not do what was easy today," House Speaker Michael Madigan said. "But we did what was right for the future of our state."
The state’s budget crisis is finally over after two-plus years of not coming to an agreement, and now lawmakers can focus on implementing the new plans and dealing with the next step in the process. NBC 5’s Charlie Wojciechowski has the latest on an eventful day in Springfield.
Handshakes were seen on the floor of the House after the longest budget crisis since the Great Depression was over.
The override followed a brief lockdown of the statehouse as lawmakers arrived to vote. Authorities said the lockdown was due to a security situation, and NBC affiliate WAND-TV reported a powder was found in front Rauner's office and an arrest was made.
The Illinois Senate voted earlier in the week to override Rauner's vetoes. The governor vetoed the measures shortly after the Senate sent them to his desk, taking particular issue with the tax increase that was part of a revenue plan among three bills passed in ongoing negotiations to enact the state's first budget in over two years.
"I just vetoed Speaker Madigan's 32% permanent income tax increase," Rauner tweeted Tuesday afternoon.
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"This budget package does not provide property tax relief to struggling families and employers," Rauner said in a statement. "It does not provide regulatory relief to businesses to create jobs and grow the economy. It does not include real term limits on state elected officials to fix our broken political system."
Speaking in Chicago Wednesday, Rauner added that the permanent 32 percent tax hike "is a disaster."
"This is a 2x4 smacked across the forehead," he said. "It will solve one of our problems and make them worse."
The measure raises the personal income tax rate from 3.75 percent to 4.95 percent and the corporate tax rate from 5.25 percent to 7 percent.
The tax hikes are projected to raise roughly $5 billion at a time when Illinois has a $6.2 billion annual deficit and a $14.7 billion backlog of overdue bills.
"I will always veto tax hikes without fundamental reform," Rauner said Wednesday.
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The area that would likely impact the most people directly is education. K-12 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. While most school districts around the state are behind on receiving state aid to some degree, there are appropriations in place for them to eventually get paid – though the comptroller is behind on making those legally-obligated payments. If Illinois enters its third fiscal year without a budget – that’s no longer the case. Because the entire budget compromise from House Democrats appears to be contained in one bill (versus piecemeal appropriations as in years prior), it’s essentially, as it stands Wednesday, an all-or-nothing deal. If the compromise isn’t passed, then nothing is funded, meaning K-12 schools would have no state funding, period. If they can open in the fall at all, many schools likely wouldn’t be able to stay open very long – though each district’s financial situation varies.
When it comes to Illinois’ largest school district, Chicago Public Schools officials say the state owes them about $467 million. CPS plans to use that funding to repay $387 million in loans from JPMorgan Chase that the district took out to continue operating through June, as well as make its required contribution to the Chicago Teachers' Pension Fund at the end of the month. CPS faces a deadline of Dec. 28 to repay or refinance the loans, according to the Chicago Tribune, which calculated that the deals will cost the district roughly $70,000 per day in interest alone. "School districts throughout Illinois have suffered under the Rauner Administration's failure to provide education funding in a timely manner, and the agreement CPS was forced to reach today is a direct result of this failure,” CPS’ Vice President of Finance Ron DeNard said in a statement when the first agreement was finalized on June 19.
The state’s problems with education funding continue at the college level as well. Illinois’ public universities have been among those hardest hit by the stalemate, with several schools like Chicago State, Governor’s State and Northeastern Illinois forced to make cuts and layoffs, implement furlough days and reckon with drastic drops in enrollment – all major issues that will continue should the standoff extend past Friday. What’s more, the Higher Learning Commission – the regional agency responsible for granting Illinois schools accreditation – warned legislators last week that there could be “consequences” for institutions’ standings if the impasse continues. Accreditation essentially serves as official recognition that a school is meeting certain standards to provide a quality education for its students. But it extends beyond that, as the federal government will not administer financial aid to students attending institutions that are not accredited.
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That’s not the only impact the standoff has on financial aid for students. Budgetary woes have hit Illinois hard when it comes to Monetary Award Program grants. MAP grants are a form of financial aid that go toward tuition for roughly 130,000 Illinois students who demonstrate need based on their FAFSA application. Last year, the state suspended MAP grants for the 2017 to 2018 academic year. Some schools continued to award around 124,000 students funding in lieu of the MAP grants they would have received in hopes of reimbursement, while others have depleted their own savings in an effort to continue their education. Roughly 1,000 people were unable to return to college as a direct result of losing their MAP grant funding.
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Students and residents turning to luck to help boost their funds will be sorely disappointed, as the Illinois Lottery suspended sales of Powerball tickets effective Wednesday night, with plans to shutter Mega Millions sales Friday night. Players who win more than $25,000 will also have their payments delayed due to the impasse, the Lottery said.
And while summer is typically the season of road construction, projects across Illinois will come to a halt without a budget, putting roughly 30,000 people out of work. While reports surfaced that discussions are underway to keep some of those projects going, the governor’s office refuted that claim Tuesday, as countless social service agencies across the state have already been waiting for more than two years to be paid.
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Those social service agencies will continue to wait if the stalemate continues. A patchwork of court orders and consent decrees dictates that 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.
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All these factors are part of what’s led credit ratings agencies to warn that they will downgrade Illinois’ rating to junk status without a budget deal by Friday. Illinois has the distinction of being the only state to ever go two years without passing a budget, according to the National Conference of State Legislators, and if its creditworthiness drops below investment grade, the Land of Lincoln will again be in a league of its own, as no other state has ever earned a junk rating before. A downgrade would also make it more difficult for the state to issue bonds – making it more expensive to borrow money at higher interest rates, ultimately deepening the deficit and potentially costing taxpayers millions of dollars for years to come.
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As if that weren’t enough, while the clock ticks closer to the end of the fiscal year, the special session costs taxpayers $40,000 a day – with no end in sight, as Republican Gov. Bruce Rauner vowed Wednesday to keep the Democratic-controlled legislature in Springfield past the June 30 deadline until a deal is done.
Dozens of lawmakers in the House left Springfield before session, eliminating the chance of an override vote on Tuesday.
"House Democrats look forward to working with our colleagues on the other side of the aisle to begin healing the wounds of the last several years," Madigan said in a statement Wednesday.
The state narrowly avoided a downgrade to “junk” bond status as the House passed the budget plan Monday.
Members of both parties had cheered the budget as it was sent to Rauner's desk Tuesday.
