Illinois Democrats propose tax hikes on tobacco, vaping and gambling to balance $55B budget

Yahoo

2 days ago

SPRINGFIELD, Ill. — With only hours remaining before their midnight deadline, Democratic state lawmakers on Saturday still were finalizing various components of a more than $55 billion budget balanced with a combination of cuts and tax increases.
The spending portion of the plan was unveiled late Friday, but a package of tax increases and other revenue measures had yet to surface by early Saturday afternoon.
Heeding Gov. JB Pritzker's warning that he would veto a plan that relied on increases to the state's sales or income taxes, legislators produced a package that employed one-time tactics, such as an amnesty for delinquent tax filers, coupled with increased taxes on tobacco products and gambling, according to Democratic budget negotiators.
'What we're trying to do is make sure that this budget is balanced, and it is balanced, it is responsible, and it's a statement of our priorities,' Sen. Elgie Sims, a Chicago Democrat and budget point person, told reporters late Friday.
Sims didn't go into specifics about the sin tax increases included in the plan, nor did his House Democratic counterparts, who told Republican lawmakers at a late-night committee hearing that those measures would be discussed in detail at a later time.
Overall, the package would result in a slight surplus, with $55.4 billion in expected revenue offsetting $55.2 billion in proposed spending for the state's day-to-day operations, House Majority Leader Robyn Gabel told members of the Executive Committee, which voted 8-4 along party lines to send the measure to the full chamber.
Aside from wrangling over spending and taxes, lawmakers continued to work on a plan to overhaul governance and increase funding for Chicago-area mass transit. It also remained to be seen whether there would be a late push for legislation to aid the Chicago Bears with the team's proposed move to a new stadium in the northwest suburbs.
The proposed spending package stuck closely to the broad outlines Pritzker presented to lawmakers in February. However, with revenue projections for the budget year that begins July 1 dimming in the months since the governor made his proposal, legislators also were considering some new ideas to bring in more money, including changes that would allow Illinois to tax offshore and out-of-state corporate profits.
One new funding stream will come from taxing 'large transnational corporations' that store assets overseas, Democratic Rep. Will Guzzardi of Chicago said at the late Friday hearing in explaining the proposals to raise revenue.
'Those are the revenue sources we're contemplating to balance a budget that supports investments in children and families and seniors and people with disabilities,' he said.
Guzzardi said the budget package will include a tax amnesty program aimed at boosting revenue that was part of Pritzker's proposal. The program is expected to bring in $228 million, Guzzardi said, which is $30 million above Pritzker's initial estimate.
The legislative budget proposal, negotiated among the Democratic House and Senate leaders and the governor's office, deviates from Pritzker's original plan in certain areas, including funding for elementary and secondary education.
Pritzker proposed a $350 million increase as required under a 2017 school funding overhaul. But the measure introduced late Friday would boost funding by only $307 million over the current year, cutting $43 million that normally would go to grant program designed to help school districts with high property tax rates and low real estate values.
The grant program was paused to provide 'the ability for us to have a study that talks about the efficacy of that program, making sure it is having the desired impact and reducing property taxes for hardworking homeowners across the state,' Sims said.
The proposal surfaced several hours after Pritzker met in his statehouse office with the legislature's top Democratic leaders, House Speaker Emanuel 'Chris' Welch of Hillside and Senate President Don Harmon of Oak Park. The trio emerged from the meeting expressing confidence they'd reach a deal before the calendar turns to June but offering no details.
Welch, whose House Democrats last year had to suspend chamber rules to round up the votes needed to pass a tax-hike package, said he didn't anticipate similar issues this time.
'We're getting close to a budget that I believe our caucus can support,' Welch said after the meeting.
It remains possible, however, that certain factions of the Democratic Party could dig in their heels over aspects of the proposed deal.
For example, the plan would make good on Pritzker's recommendation to zero out funding for a state program that provides Medicaid-style health insurance for noncitizens ages 42 to 64. When Pritzker proposed the cut in February, his office estimated it would save the state about $330 million from its general fund.
The proposal would preserve the portion of the program for those 65 and older, allocating $110 million for their coverage.
Eliminating funding for the younger group, which would end coverage for more than 30,000 residents, is unpopular among Latino lawmakers and progressives, but it was unclear whether they would withhold votes on the broader budget over the issue.
'We'll see,' Rep. Elizabeth 'Lisa' Hernandez of Cicero, a member of House Democratic leadership and chair of the state Democratic Party, said when asked if she would support the budget that included the cut.
'We're doing all we can, and it's not over until it's over,' Hernandez said.
While many immigrants living in Illinois without authorization pay state and federal taxes that support the program and other services for which they are ineligible because of their citizenship status, a state audit released in February found that over three years the insurance program for older immigrants cost nearly double what was expected.
The budget proposal would eliminate funding for a relatively new state program providing free test preparation to students at public universities and some community colleges, launched in late February after receiving $10 million in the current state budget.
Supporters said in early May that the program had already saved more than 200,000 students a total of roughly $8 million in just two months. When Illinois launched the program, it became the first state to offer free comprehensive test preparation for college students.
Democrats also proposed following Pritzker's recommendation to pause one of his key priorities: a $75 million annual increase to increase the number of seats in state-funded preschool programs.
At the same time, some lawmakers are pushing to boost funding for hospitals that serve low-income patients and communities.
Sen. Lakesia Collins, a Democrat whose district includes a swath of Chicago's West Side, said Mount Sinai Hospital in her district is facing financial troubles but she was hopeful the hospital and others like it, collectively, would be able to get more than $160 million from the state budget to operate.
Collins also noted the uncertainty over how much federal health care funding Illinois will receive under President Donald Trump's administration.
'Right now, as a state, we're trying to figure out how do we maneuver around all of the challenges that we're facing from the federal government while making sure that they're sustainable here in Illinois,' Collins said.
The plan includes $118 million in special grants for the safety-net hospitals, which typically treat the uninsured or Medicaid patients, often in low-income communities.
'There are significant increases, investments in our hospital systems. Our safety-net hospitals are on the front lines,' Sims said. 'They are caring for our most vulnerable. And we are making sure that we made investments in those safety-net hospitals because they carry a large volume of Medicaid clients. So, we want to make sure they have the resources necessary to be successful.'
The Democratic plan also proposes an 80-cent-per-hour wage increase for direct support professionals who work with people with developmental disabilities, but reduces the hours the state would pay for by 35%, Gabel said, which she characterized as 'rightsizing.' Advocates and unions have said wages needed to be raised by $2 an hour to meet recommendations that those workers be paid 150% of minimum wage.
Republicans criticized the use of one-time revenue streams to fill shortfalls, including the diversion of money from road projects by again delaying a shift of revenue from the sales tax on gasoline from the state's general fund to the road fund.
'Last year … we described that as a one-time, special occurrence. Now, we're doing it again,' Republican Rep. Ryan Spain of Peoria said. 'What happened to the one time occurrence?'
'We're in difficult times,' Gabel said. 'This is a hard budget. We felt like we needed to do it one more time.'
Both Republicans and Democrats pointed to the uncertain federal funding picture, with Republicans questioning spending in a 'doomsday budget' and Democrats blaming President Donald Trump for creating confusion for states.
Gabel said 'this budget is based on the information we have at this time.'
Despite the fiscal challenges the state faces, the Democratic plan includes $8.2 billion in new spending on infrastructure projects, which are separate from the operating budget and funded by dedicated taxes and borrowing.
Republicans accused the majority party of once again hording that money for projects in their own districts.
'That capital is paid for by the taxpayers. It's paid for by my constituents and your constituents. All of our constituents,' said Rep. Norine Hammond of Macomb, a top budget negotiator for House Republicans.
While Democrats dodged Republican questions about the so-called pork-barrel spending, their legislation includes funding for a number of large projects in Democratic districts.
For instance, Proviso Township High School District 209, which is in Welch's district and where he previously was school board president, would receive $40 million for 'costs associated with capital improvements and an outdoor sports complex at Proviso West High School.'
Members of the GOP also criticized proposed pay raises of about 5% — to a base salary of $98,304 — for lawmakers, though in the past they've largely accepted the pay increases even when voting against the budget.
The raises are cost-of-living adjustments included in state law, though past legislatures have voted to freeze their own pay — a move that has drawn controversy.
The plan includes similar increases for the governor, other statewide elected officials and the heads of state agencies. Pritzker, a billionaire Hyatt Hotels heir, does not take a state salary.
With the clock running out on the legislature's scheduled spring session, there also was a sense of urgency to address a looming $771 million fiscal cliff for the Chicago area's mass transit system and to overhaul the system's disjointed board structure.
Lawmakers, advocates and transit officials were working through competing House and Senate proposals Friday, with negotiations possibly moving away from a proposed increase on Chicago-area toll roads toward a new $1.50 fee on retail deliveries. That came after labor groups and suburban officials criticized the proposed toll increase.
While it hadn't been formally proposed, the delivery tax by Saturday had already drawn opposition of business groups, including the Chicagoland Chamber of Commerce, Illinois Chamber of Commerce, the manufacturers', restaurant and retail associations, and the big-tech interest group TechNet.
'This new, regressive tax will undermine consumer savings from the recent elimination of the grocery tax and would disproportionately impact communities that rely on delivery services to receive vital items,' the groups said in a statement.
Kirk Dillard, chair of the Regional Transportation Authority that oversees train and bus service across the city and suburbs, on Friday criticized the initial Senate plan to close the transit budget gap, saying in a statement that it would lead to 'significant service cuts' next year.
Dillard suggested that less than half of the new revenue in the Senate proposal would actually go toward funding transit operations, with the majority of the money going toward nonoperational and capital causes.
'While the bill also requires the regional entity to take on additional costs for new initiatives like a police force without dedicated funding, which could further limit available funding, our focus today is closing the budget gap to avoid service cuts in 2026,' Dillard said Friday.
Sen. Ram Villivalam, a Chicago Democrat, said Friday the Senate is committed to addressing transit funding and that lawmakers were working to address the pushback from critics.
'Our focus in the Senate is funding and reform. We always said, 'No funding without reform,'' Villivalam said.
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(Tribune reporter Talia Soglin contributed.)
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