Attempting to avoid becoming the first state ever to see its bond rating downgraded to “junk” status, the Illinois legislature on Tuesday sent Republican Gov. Bruce Rauner a $36 billion spending plan in a dramatic showdown that culminated in an extraordinary Fourth of July vote.
Rauner, who called the legislature into a special session to pass a budget, quickly vetoed the measure, citing its permanent income tax increase; the governor, who is attempting to salvage his precarious 2018 reelection prospects, has sought a temporary tax hike and a property tax freeze.
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The Illinois Senate already voted to override the veto and the House is expected to follow suit Tuesday afternoon, setting up stability for the state as markets reopen Wednesday.
Lawmakers say it’s beyond late for more bickering with Illinois having already entered its third fiscal year without a budget.
Legislators – including 15 Republicans in the House who broke from the governor – say they want to end a crisis that turned Illinois into a national disgrace, drew the intervention of a federal judge, sent university enrollments plummeting, threatened to close K-12 schools in the fall and resulted in a staggering eight bond rating downgrades.
“We are in a moment in time,” state Sen. Toi Hutchinson, among the Democratic leaders in negotiations said on Tuesday. “We are faced today with the fierce urgency of now.”
The state hasn’t had an operating budget since Rauner took office in 2015, after the Republican locked horns with a Democratic-dominated legislature. Rauner vetoed a 2015 budget, saying it was out of balance. He has demanded his own policy changes be implemented as a condition of the budget. Democrats opposed his changes, calling them “extreme” and anti-middle class.
The protracted political clash caused unpaid bills to pile up to $15 billion and left an operating deficit at $6 billion this year alone.
The veto override could put Rauner in a perilous position politically. The blue-state Republican is already viewed as the most vulnerable incumbent in the nation. He had vowed to “shake up Illinois” but now must run for reelection without having advanced his legislative agenda and unable to stop a 32 percent income tax increase – a tax hike for which many in his own party had voted.
But there are possible political benefitsof a veto even with a legislative override. Rauner stands to enjoy the revenue from more tax money to avoid a full state shutdown and at the same time gets to say he tried to stop the bill.
“Illinois families don’t deserve to have more of their hard-earned money taken from them when the legislature has done little to restore confidence in government or grow jobs,” Rauner said in a Facebook address.
Without a veto override, the state’s bond ratings would be sent to junk status, a black mark on his governorship from which it would be difficult to recover. Supporters point to $2.5 billion in cuts, including across-the-board reductions to state government and another $1.5 billion in pension savings contained in the budget. The income tax would jump from 3.75 percent to 4.95 percent.
Illinois is one of eight states with a flat tax, which taxes all income levels at the same rate. Democrats running for Illinois governor, including billionaire J.B. Pritzker, have called for a graduated system that would target the wealthiest at a higher rate.
The past several days marked an exceptionally tense and emotional time at Illinois’ Capitol, including one of the most dramatic floor debates in the state’s history with 15 Republicans breaking away from Rauner publicly to vote with Democrats for a tax increase.
Several Republican House members broke into tears as they voted in favor of a tax increase they said they opposed on principle but said they couldn’t continue to watch the state burn to the ground. That included lawmakers who represented areas with universities that have been ravaged by the impasse.
“The trajectory we are on right now is immoral. We have to have a budget,” state Rep. Michael Unes, among the Republicans to vote for the budget. “For me today, right here, right now, this is the sword that I’m willing to die on. And if it costs me my seat, so be it.”
Political pitfalls remain for both sides. Democrats will be blamed for a tax increase by voters who are just now tuning into the state’s disastrous financial straits. Conservative groups have already targeted Democrats as well as the Republicans who crossed over on the vote.
Rauner, who has stayed out of the public eye during the last round of negotiations, must attempt to regain the trust of his legislative caucus, with members complaining of harsh tactics used by the governor’s office to advance his agenda. The state Senate’s GOP leader resigned last week, amid frustrations over the impasse.
And on Monday, a House member in GOP leadership said he’d had enough.
“The current dislike and distrust between the governor and the speaker has paralyzed government in Illinois,” Republican state Rep. Chad Hays said in a statement. “Ego, money and power eclipse the desire of well-meaning and honest public servants, and blame, press conferences and talking points have replaced governing. Sadly, voices of moderation and reason are increasingly elbowed out by well-financed fringe elements.”
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