Illinois Ends Two-Year Budget Battle After Chemical Scare

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Michael J. Bologna

For the first time in two years Illinois has a comprehensive strategy to collect revenue and fund state government after House lawmakers July 6 overrode Gov. Bruce Rauner’s (R) veto of a fiscal year 2018 budget bill.

In a rebuke to Rauner, a political newcomer and a Republican in a state filled with Democrats, members of the House revived Senate Bill 9, a revenue bill raising $5 billion through a permanent income tax increase. House members voted 71-42 to override Rauner’s veto. The Senate voted to override July 4 by a vote of 36-19.

More than a dozen Republicans abandoned Rauner and supported the tax increase, frustrated with a vicious political feud that racked up $15 billion in unpaid bills and threatened to push the state’s debt into junk bond territory.

“We all understand where we are, we are looking into an abyss, a financial abyss,” said Rep. David Harris (R), who called on fellow Republicans to join him. “The state is imploding financially and action is required.”

Rauner issued a statement lamenting that “today was another step in Illinois’ never-ending tragic trail of tax hikes. Speaker Madigan’s 32 percent permanent income tax increase will force another tax hike in the near future.”

Chemical Lockdown

The drama across the Illinois state capitol continued even as lawmakers gathered to cast their votes.

The House session was delayed for two hours after public safety personnel put the capitol complex on lockdown and a hazardous material crew searched the building. The scare was triggered when a woman allegedly tossed a chemical substance into Rauner’s offices in the capitol. No injuries were initially reported and the perpetrator was quickly arrested.

Historical Standoff

Illinois hasn’t had a conventional budget since June 30, 2015. Rauner has resisted any budget deal featuring tax increases unless Democrats agreed to a menu of cuts and government program reforms aimed at improving business conditions.

Under S.B. 9, the corporate income tax rate would rise to 7 percent from 5.25 percent, generating approximately $500 million annually. The personal income tax rate would be raised to 4.95 percent from 3.75 percent, generating almost $4.5 billion annually. The tax hikes would commence retroactive to July 1, the first day of the fiscal year.

Several organizations thanked lawmakers for making hard choices to end the impasse.

“We appreciate that the General Assembly successfully worked for a comprehensive budget solution—including enhanced revenues—without damaging cuts to healthcare,” said A.J. Wilhelmi, president and CEO of the Illinois Health and Hospital Association. “A full state budget helps support healthcare as well as critical social services provided in communities across the state.”

To contact the reporter on this story: Michael J. Bologna in Chicago at mbologna@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State