Pritzker Speeds Through the Honeymoon Period

Pritzker’s promise of a bridge to a stable fiscal future still leaves a lot of potholes to avoid.

Illinois’ 34th governor is off to the races. Gov. J.B. Pritzker wasted no time during the typical honeymoon period in office and instead began advancing his gubernatorial agenda with quick executive orders and a consolidated constitutionally required budget address that was blended with the State of the State Address.

In his first state operating budget, Pritzker proposed a host of new taxes to build Illinois a “bridge to a stable fiscal future.” In dealing with an estimated $3.2 billion budget hole, Pritzker is calling for $1.3 billion in new revenues from new or increased taxes on legalized recreational marijuana, sports betting, e-cigarettes and cigarettes, plastic shopping bags, and managed care organizations. Pritzker is eyeing some savings by phasing out the private school scholarship credit, imposing a progressive tax on video gaming, capping the retailer sales tax discount at $1,000 per vendor, offering a delinquent tax amnesty program, and decoupling from the federal repatriation tax credit.

Pritzker’s budget proposal also extends the state public pension ramp payments by seven years and infuses the system with cash by selling off unspecified state assets, which could save $878 million. Pritzker further proposed selling another $2 billion in general obligation bonds to pay down the state’s bills and reduce interest payments and further savings could come from lowering the interest rate in the state Prompt Payment Act.

However, successfully amending the Illinois Constitution to replace the state’s flat income tax with a graduated income tax is also central to Pritzker’s long-term plan to stabilize the state’s finances and public pension plans. This is a potentially contentious position to be in. The mechanics of moving to a graduated income tax requires both the Illinois House and Senate to pass a Joint Resolution Constitutional Amendment (JRCA) by a three-fifths majority vote, which the Democrat supermajorities in each chamber could readily pass without Republican votes.

Providing the JRCA passes both chambers, the decision will turn to Illinois voters in the November 2020 General Election. If voters approve the amendment, the General Assembly would need to pass legislation establishing income tax rates, and a graduated income tax could likely go into effect in 2021.

The premise of a graduated income tax is that high wage earners pay higher tax rates, increasing tax revenues for the state’s coffers. Putting this into motion requires a heavy lift, but I suspect the issue will be put on a legislative fast track because Pritzker’s proposal hinges on it. In fact, Illinois Senate President John Cullerton has already indicated a willingness to move away from past JRCA voting practices to have the Senate vote on the amendment this year.

While not as austere as many Republicans would have wished, Pritzker’s budget proposal highlights the stark realities of Illinois’ fiscal situation. Without judging the merits of the governor’s proposals, he has at least shown a willingness to make tough decisions to bring short- and long-term fiscal stability to Illinois.

It’s no secret that our past elected officials have generally avoided making the tough decisions needed to truly restore Illinois to long-term fiscal stability. Maintaining the status quo and kicking the can down the road has only exasperated Illinois’ downward spiral. You don’t need me to tell you that real solutions to Illinois’ problems are not easy and will not be pain free. In fact, we are all likely to feel some pain in various forms, whether it be increased income taxes, paying for shopping bags, increased healthcare costs, reduced state services or programs, or something else.

Illinois voters elected Pritzker to execute on his campaign platform and promises, which included big causes, like increasing the state’s minimum wage, moving to a graduated income tax, and reforming the state’s pension system. He has shown leadership, taking quick action and bringing proposals to the General Assembly. To little surprise, Pritzker’s first major victory came by way of working with Democrats in the House and Senate to pass a graduated $15 per hour state minimum wage. But Pritzker knows that he cannot solve Illinois’ problems alone and that bi-partisanship is needed — he has appointed Republicans to his cabinet and has reached out to Republican legislators.

Still, aside from the enormity of the issues above, the challenge will always be bridging the political divide in the General Assembly. Let’s hope that partisan gridlock can be avoided, and our elected officials can collectively work together on resolving our state’s critical issues and making the tough decisions that will ultimately turn Illinois around and put us all back on the road to prosperity.

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Author’s Note: This column includes my personal observations of the evolution of the legislative environment and are not necessarily the views of the Illinois CPA Society.