Madigan offers budget, but won’t say how he’d pay for it

Democratic House Speaker Michael Madigan introduced his long-awaited spending plan Tuesday, but didn’t offer specifics on how to pay for the $36.4 billion proposal that would direct money to schools, universities and social service programs.

That prompted Republicans backed by Gov. Bruce Rauner to accuse Democrats of refusing to “show their cards” on a tax increase, saying without details it’s impossible to tell if Madigan’s blueprint was balanced.

With a Friday deadline looming to strike an agreement before Illinois government enters a third-straight year without a budget, both political parties appear to be locked in a high-stakes game of chicken.

Rauner, his Republican allies in the legislature and the Democrats who control it agree that an income tax hike from 3.75 percent to 4.95 percent is a starting point to dig the state out of a multibillion-dollar hole. In the House, neither party wants to blink first and face the blame from voters who don’t want to fork over more of their money.

“I have said from the beginning … a revenue bill will be a joint effort,” Madigan said Tuesday.

But there are other major pieces in play besides a tax hike if a budget deal is going to be struck by week’s end. Rauner has long had his wish list in return for agreeing to a tax hike, and Madigan added some of his own items to the mix this week.

Rauner wants a statewide property tax freeze and a major overhaul of the workers’ compensation insurance program to cut costs on businesses, which he views as key to economic growth. Madigan, who long argued Rauner should not hold the budget process “hostage” to political demands, now says he has “reluctantly” given in on the need for some changes in order to end the impasse. Still, Madigan warned that Democrats will not simply give Rauner everything he wants, repeatedly calling on the governor to be “reasonable.”

To that end, Madigan said Democrats planned to vote on several pieces of legislation Wednesday designed to meet the governor part of the way, though Republicans said they feared the proposals would be “watered down” to the point they would achieve little in the way of change.

“I can’t determine whether they are sincere or not,” said House Republican Leader Jim Durkin of Western Springs.

The GOP pointed to a Madigan pattern of offering up versions of legislation he knows they can’t support, then blaming them when a deal falls apart. Democrats countered that Republicans were unable to recognize a fair bargain when offered, saying Rauner was immovable.

All the while state government continues to crumble, as credit agencies threaten to slash the state’s rating to junk status, road builders caution construction projects may be halted and the Illinois Lottery says payment of large prizes once again will be delayed if a budget isn’t in place come Saturday.

Negotiations are playing out against the backdrop of next year’s race for governor, which has fueled an even deeper partisan divide at the Capitol.

With the airwaves already filled for weeks with ads from the governor and one of his potential Democratic challengers, J.B. Pritzker, a new Democratic-backed group launched an ad attacking Rauner and using the words of former Republican Gov. Jim Edgar to do it.

Edgar told a Downstate radio station in May that the state is “in the worst condition I can ever remember. Even during the (Rod) Blagojevich years it wasn’t this bad.”

A narrator then goes on to blame Rauner for “refusing to compromise,” urging voters to call Rauner and “tell him to sit down, pass a budget and do his job.”

Meanwhile, Madigan defended his spending plan, saying that it would spend $36.4 billion — below the $39 billion that’s currently going out the door under a patchwork of court orders and laws that’s essentially left spending on autopilot.

Because those expenditures are several billion more a year than the state is taking in, the backlog of bills has climbed to more than $15 billion. That’s forced those who provide goods and services for the state to wait six months or more to be paid, meaning some businesses and service providers have had to cut services, exhaust lines of credit or lay off workers. The situation could get more precarious Wednesday as Medicaid providers ask a federal judge to require the state to pay them quicker, which could result in about $550 million more a month in state money going out the door.

Madigan’s budget calls for a 5 percent cut in spending for most state agencies, as well as for universities and community colleges who’ve been hit hard during the impasse.

“I am not saying that this is perfect, I am not saying that it completely meets every request of the governor, but I think that it goes a long way toward giving the state of Illinois a good, solid spending plan that responds to the real needs of the state,” Madigan said.

Madigan would not detail how he proposed to pay for that spending, with his chief budget negotiator saying only that Democrats want to “live within the confines” of a tax plan passed last month by Senate Democrats.

Under that proposal, an additional $5.4 billion would be generated by raising the personal income tax rate from 3.75 percent to 4.95 percent and the corporate income tax rate from 5.25 percent to 7 percent, which would be retroactive to Jan. 1. Senate Democrats also called for extending the state’s share of the 6.25 percent sales tax to services like tattooing and piercing, and imposing new taxes on satellite television and streaming services such as Netflix.

House Democrats have been reluctant to support a retroactive tax hike, as it would take a bigger chunk out of paychecks. They’ve also raised concerns about putting in place new service taxes. Rep. Greg Harris, D-Chicago, said one way to bring in more money could be through eliminating corporate tax breaks, which has historically been opposed by Republicans who view such “loopholes” as ways to spur business.

While Durkin questioned Madigan’s declining to introduce a tax bill, Republicans also have failed to sponsor their own revenue proposal, saying they too support the outline passed in the Senate. But the Republican backing comes with several caveats, chief among them that the income tax hike must be limited to four years and come with a corresponding four-year freeze on property tax increases.

Without that, Durkin said, “my ability to provide votes to break the impasse becomes even more challenging.” Madigan wants Durkin to put up 30 GOP votes for a tax hike, which needs 71 votes to pass.

Durkin said he was “confused” by Madigan’s insistence to move ahead Wednesday with votes on items on Rauner’s agenda, saying talks were still ongoing between Democrats and Republicans working to reconcile differences.

House Democrats advanced a four-year property tax freeze plan Tuesday that would exempt Chicago, Chicago Public Schools and more than a dozen school districts the state has identified as being in financial distress. The freeze would not apply to levies that are used to pay debt or pension payments for employees, including police and firefighters.

Republicans argued those exemptions are too broad, saying excluding pension payments means taxpayers would ultimately see little relief.

Democratic Rep. Barbara Flynn Currie, a top Madigan deputy, countered that it would be “unconscionable” to not give cities and towns some flexibility to cover increasing retirement costs while at the same time limiting their ability to raise taxes. She argued that despite being politically popular, a freeze would not necessarily mean that property tax bills stop growing, pointing to various factors including changes in property value. But Currie noted that the Democratic proposal also increases the homestead exemption, which means most homeowners would see some tax breaks.

Currie said Democrats “have moved very significantly” off their initial negotiating stance that a freeze only be in place for two years.

Republicans pointed to their competing property tax freeze legislation that would also allow voters to decide via a referendum if property taxes should be raised or lowered, saying it was “critical” to give taxpayers more control over how their government spends money.

Another area of disagreement centers on the workers’ compensation system, which provides money to employees who are injured. Lawmakers signed off an on overhaul in 2011, but business groups argue those changes did not go far enough and resulted in only minimal savings.

Initially, Rauner wanted tougher standards to prove an injury happened on the job, known as causation. Rauner has dropped that demand, but is pushing to limit the fees doctors, hospitals and pharmacies get for treating workers. While those fees were cut by 30 percent six years ago, business groups say the rates are still too high when compared with other states. They want the rates closer to those set by Medicaid, which are much lower.

Opponents say such a dramatic reduction could limit a worker’s access to care as medical providers simply choose not to treat employees because they aren’t being paid enough. Madigan contends the insurance industry hasn’t passed along premium savings in the wake of the 2011 changes, noting companies are largely free to set their own rates. The speaker wants Rauner to agree to legislation that would regulate rates, which the insurance industry says would decrease competition and could drive up premiums.

Votes also are scheduled Wednesday on measures to alter the state’s employee pension system and to change rules regarding government consolidation.

“I can’t ask the governor to get behind anything that comes out of this chamber until I can convince my members that this actually works for Illinois,” Durkin said. “We have talked over and over again for the last two-and-a-half years that Illinois needs responsible and reasonable reforms. And we’re not going to walk away from that.”

Chicago Tribune’s Rick Pearson and Kim Geiger contributed from Chicago.

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