SPRINGFIELD — Gov. J.B. Pritzker used his first budget speech Wednesday to ask for $1.1 billion in new revenue — including from recreational marijuana and sports wagering — to start the state on a path toward financial stability.
In a roughly 40-minute speech, Pritzker made clear that he believes the ultimate way to that stability is to bring a graduated income tax to Illinois, an issue that was the centerpiece of his campaign for governor.
Pritzker opened by offering a glimmer of hope after years of budgetary discord in the Capitol.
“The road to normal conditions is in sight,” Pritzker said. "Budgeting will not be done anymore by taking the state hostage.”
But Pritzker also argued that the state won’t fix its problems within the context of an income tax system he believes is unfair.
“To fix our state’s problems, we need fundamental tax reform,” Pritzker said. “There’s no hiding from it. There’s no running from it. There’s no lying about it. A fair tax will change the arc of Illinois’ finances forever.”
Pritzker said he will “immediately begin negotiations over proposed fair tax rates from the House and Senate.” The governor said he has already reached out to opponents to get ideas to improve the graduated income tax idea and will bargain with them in good faith.
“What is not appropriate is a small collection of the wealthiest people thinking that they should drown out millions of lower and middle income Illinoisans unfairly burdened by the current flat tax system,” Pritzker said.
Enacting a graduated income tax would take at least two years and Pritzker said more than $1 billion in new revenue is needed to avoid making significant cuts to his proposed $39 billion budget. Administration budget documents said that cuts of 4 percent would be necessary to education, human services and public safety programs without the new revenue.
Pritzker ruled out another increase in the state income tax as long as it remains flat. He also said he will not tax retirement income nor will he extend the state sales tax to services, two ideas floated by budget watchdog groups.
Instead, Pritzker wants to avoid cuts by relying on some revenues that aren’t allowed in Illinois at this time. Pritzker’s budget assumes it will get $170 million from legalizing recreational marijuana. Pritzker said he wasn’t doing it only for the money.
“I think we should take this action for our state because of the beneficial criminal and social justice implications and the jobs it will create,” Pritzker said. “And let’s be honest, like it or not, cannabis is readily available right now. I would rather the state tax it and regulate it.”
Administration budget officials acknowledged the money would only arrive at the end of the fiscal year at best because of the time necessary to set up a secure distribution system for the product.
The administration also believes it can collect $212 million from legalizing sports betting, although states have seen widely varying revenues from the gambling. At the same time, Pritzker avoided discussion of a broader gambling expansion bill that would include new riverboat casinos.
Pritzker also wants to put a 5-cents a bag tax on plastic bags, start taxing e-cigarettes and raise the tax on a pack of cigarettes to $2.30.
As expected, Pritzker called for extending the state’s long-term payment schedule on pensions by another seven years. The administration said this would free up about $800 million a year that would ease pressure on other spending.
The governor’s pension plan also promises to inject additional money from a graduated income tax into pensions, issue $2 billion in pension bonds to be applied to the debt and allow beneficiaries to cash in their benefits and drop out of the systems.
Much of Pritzker's spending plan focused on education, with community colleges and public universities sharing a $66 million funding increase. The budget would also add $50 million to the Monetary Award Program that helps low-income students afford college.
Another $375 million would be added to the revised school funding formula to continue its 10-year phase-in. Pritzker’s proposed budget also calls for helping more families with child care expenses and calls for hiring more Department of Children and Family Services child welfare specialists. New cadet classes to add 200 state police troopers are also part of the spending plan.
House Republicans Leader Jim Durkin of Western Springs said he is absolutely opposed to the idea of stretching out the pension payment schedule.
“That is what got us into the problems with our pension systems today,” Durkin said.
He also said he disagreed with Pritzker’s portrayal of the budget plan as austere.
“All I heard and saw was more spending,” Durkin said. “Austerity does not mean we are going to continue spending above and beyond previous years.”
Senate Republican Leader Bill Brady of Bloomington said Republicans will support increased spending for K-12 education and higher education, which has been hit particularly hard by cuts and the budget impasse. However, he thinks there is still room for cuts.
“There’s always an opportunity to reduce spending and I think we have to delve into that,” he said.
Following the budget speech, administration budget officials acknowledged there are no spending reductions in the budget proposal, although they insisted that a lid was kept on spending increases.
“He talked a lot about raising taxes, which I don’t think helps create jobs,” Brady said.
But in his speech, Pritzker said that too often lawmakers have made short-sighted cuts only to come to regret it.
“Let’s not hollow out vital government services anymore,” he said.