Illinois ends 3-year spending plan impasse, and raises your taxes

After more than two years without one, Illinois has a full-year budget – but your income tax went up 32 percent retroactive to the start of the month to help pay for it.

The Illinois House on Thursday mustered the necessary votes to override Gov. Bruce Rauner’s vetoes of both the tax increase and the $36 billion budget that it funds. It overrode the tax hike veto with the exact 71 votes required, while the spending bill passed with 74 votes.

Besides most of his Democratic majority, House Speaker Mike Madigan relied on Rauner’s fellow Republicans to override the vetoes, as he did last week to pass the tax increase and the spending bill.

State Rep. Steven Andersson, R-Geneva, who broke with Rauner earlier this week to raise taxes and approve the budget, also voted to override Rauner’s vetoes. Bob Pritchard, R-Hinckley, voted in favor of the tax increase but was leaving for a vacation and was absent from Thursday’s veto override.

Andersson said in a statement that he chose “survival for the state of Illinois” over the alternative. His district covers a sliver of Huntley in McHenry County south through Kane County to Geneva.

“My decision today rests on the difference between ‘might’ and ‘will.’ If we don’t override the governor’s veto, the state will fail,” Andersson said. “If we vote to override, we might still be [credit] downgraded, but it is still the far better option of the two.”

Andersson referred to the news Wednesday from Moody’s Investors Service that it still would review Illinois’ credit rating for a possible downgrade to “junk” status, despite the tax increase and the ratification of a budget.

Despite progress, the budget package does not address the state’s $130 billion unfunded liability in employee pensions or do enough to pay down bills, Moody’s said.

The state’s income tax rate increased by 32 percent on individual filers and 33 percent on corporate filers. It permanently increases from 3.75 percent to 4.95 percent on personal income, and the corporate rate increases from 5.25 percent to 7 percent – which doesn’t include an additional 2.5 percent personal property replacement tax that corporations also pay.

Illinois is staring down a $6.2 billion annual deficit and $14.7 billion in past-due bills.

“Today, Republicans and Democrats stood together to enact a bipartisan, balanced budget and end a destructive, 736-day impasse,” Madigan, D-Chicago, said after the votes. “I want to thank you all for your perseverance through this unbelievable struggle.”

With the longest state budget impasse since at least the Great Depression over, the question now becomes whether state lawmakers make any sort of effort toward a property tax freeze or other reforms sought by Rauner and the Republicans in exchange for the tax increase.

Pritchard, who said he would have voted for the override, said he believes there is a willingness now to look at reforms of “the big issues” such as workers’ compensation. He said he is unaware whether Madigan will call them back this summer or whether the discussions will wait until the fall veto session.

“What this really signifies is that there is a working relationship between the two parties,” Pritchard said. “Until this break happened, the Democrats just assumed there would be no Republicans that would ever be willing to work with them to move our state forward, and what this is now doing is opening up the door so that there can be some discussions.”

State Rep. David McSweeney, R-Barrington Hills, scoffed at the idea that any reforms will be coming now that the budget and a tax increase are a done deal. He said that Andersson and other Republicans who voted in favor “should be ashamed of themselves.”

“This is a sad day for Illinois. The Madigan tax increase of 32 percent is going to hurt families and kill jobs. I think the saddest part of today was the 10 Republicans, including one from McHenry County, who decided to align themselves with Mike Madigan and his massive tax increase,” McSweeney said.

State Rep. Allen Skillicorn, R-East Dundee, called the budget “junk” before the vote.

“Illinois currently has unfunded pension liability of over $100 billion,” he said. “This budget, these massive tax hikes, don’t address that.”

Four Republicans who voted for the tax increase last week decided against voting to override Rauner’s veto. However, four Democratic members who voted against the tax increase voted in favor of the override.

Rauner called Thursday’s override “another step in Illinois’ never-ending tragic trail of tax hikes,” and warned that the permanent tax increase will force another future tax hike because the budget is not balanced, does not cut enough spending or pay down enough debt, and contains no pro-growth reforms.

“It proves how desperately we need real property tax relief and term limits. Now more than ever, the people of Illinois must fight for change that will help us create a brighter future,” Rauner said in a statement.

Thursday’s much-anticipated debate and vote was delayed for about 2 1/2 hours because a woman allegedly scattered a white powdery substance in the governor’s office and several other locations in the Illinois Capitol, forcing a lockdown. The woman was taken into custody and no hazardous materials were found, according to Capitol police.

The Associated Press contributed to this story.