SPRINGFIELD, Ill. (NEXSTAR) — Facing a projected three billion dollar budget shortfall in the upcoming fiscal year, Governor J.B. Pritzker pledged to balance the state budget “with no tax increase.”
Pritzker and his administration had previously warned the state would have to raise taxes on everyone if voters didn’t approve his graduated income tax proposal, which would have allowed the state legislature to raise and lower tax rates on people and businesses with different income levels. After voters rejected the idea in November, former House Speaker Michael Madigan and private and public sector labor unions floated hiking the flat income tax as an alternative to spending cuts.
At a January press conference, Pritzker was asked if he would revive his calls for a progressive income tax in 2022 when he faces re-election. “That’s not something I’m pushing for,” he said.
The Governor’s Office of Management and Budget was banking on roughly $3.4 billion in annual tax revenue from the graduated income tax. Instead of that influx of new revenue, the state faces a massive budget hole instead.
Pritzker has warned all year that the looming budget talks would be difficult due to the dramatic economic downturn during the pandemic. However, his office now projects the budget deficit at $3 billion instead of $5.5 billion because “the economy performed more strongly than expected.”
Pritzker’s budget office slashed state agency spending by roughly $700 million this year to offset tax losses suffered during the pandemic. He plans to mirror those cuts for a second straight year, discontinue $900 million in tax breaks for some businesses, and prop up the General Revenue fund with cigarette taxes.
Illinois is on pace to collect $257 million in cigarette taxes by the end of this fiscal year, according to a report from the Center on Government Forecasting and Accountability.
The biggest savings in Pritzker’s budget proposal would come from ending $900 million in tax incentives for businesses, many of which were established to promote job growth in specific industries. For example, Pritzker’s first budget included tax incentives for big technology data centers. He later credited the tax breaks for helping to attract Facebook to develop a data center in DeKalb.
“Certain of these incentives are better than others,” Pritzker said in January.
He said Republicans “want to demand cuts in state government, but they don’t want to accept any that might affect constituencies that support them and write them checks. And so I would just say we’ve got to look at the entire state budget. We’ve got to look at expenditures for businesses, and we’ve got to look at expenditures for individuals. These are going to be painful cuts to get made.”
In a preview of next week’s scheduled budget address, Pritzker’s office said in an email that, “Vital services such as IDPH, DCFS, IDES, and others will be strengthened.”
“There is no question that this budget will include painful choices, but as the effect of the pandemic diminishes over the coming months, the Governor will continue to focus on economic recovery for the hardest hit,” spokeswoman Jordan Abudayyeh said Tuesday. “The Governor will also continue to advance long-term structural budget improvements that continue the stronger fiscal trajectory Illinois was on before the pandemic.”
The governor will combine his budget address with the State of the State speech and deliver his remarks virtually, instead of before a joint session of the House and Senate.