Quinn seeks income tax increase for schools - State Journal-Register

Replay our live-chat coverage of the speech. Full story below.

Seeking a tax hike is never a popular move -- even less so in the middle of both a historic recession and an election year.

Nonetheless, Gov. Pat Quinn called on Illinois lawmakers Wednesday to do just that.

In a brief budget speech, Quinn also called for cutting state aid to cities, revamping state employee pensions and giving small businesses a tax break for creating jobs.

The speech

Quinn spoke for just 20 minutes, very short by budget speech standards. He renewed his call for an income tax hike, although this year’s plan is slightly different from one he pushed last year that went nowhere in the legislature.

Quinn wants to raise the state income tax rate from 3 percent to 4 percent, a 33 percent increase. Last year, Quinn called for a 50 percent increase.

The estimated $2.8 billion raised by the increase would be devoted to education, which otherwise is in line for major cuts under the spending plan Quinn outlined Wednesday. Of $2.1 billion in cuts Quinn is calling for, $1.3 billion would come from education, largely because federal stimulus dollars are drying up.

“I think it is wrong, I think it is shortsighted to cut education funding,” Quinn said.

However, a dramatically smaller budget for schools is inevitable if lawmakers don’t approve a tax hike, he said, even as he acknowledged that “conventional wisdom is you cannot pass new revenue in an election year.”

The Illinois Senate approved an income tax hike last year. Senate President John Cullerton, D-Chicago, said he supports the latest plan, but it is up to the House to take the lead, since the House never acted on last year’s proposal.

However, House Speaker Michael Madigan, D-Chicago, didn’t embrace the idea.

“The people of America, the people of Illinois, they don’t want tax increases,” Madigan said on the “Illinois Lawmakers” public television show after the speech. “You have to admire the governor for having the courage to stand up and say, ‘Look, if we wish to maintain the structural integrity of this state, then we ought to do this tax increase.’ That doesn’t mean it’s going to happen.”

Madigan said no tax increase will pass unless some House Republicans support the idea. So far, none have, and House Minority Leader Tom Cross, R-Oswego, wasn’t conciliatory Wednesday.

“This is a fellow who likes to hold people hostage,” Cross said of Quinn. “I suggest that at end of the day, this (education cuts) will not happen. This is a scare tactic. Scaring people is not leadership.”

Quinn also took a swipe at his Republican opponent for governor, state Sen. Bill Brady of Bloomington. Brady not only opposes a tax hike, he wants to cut state taxes. Brady has said the state budget could be balanced by cutting 10 percent across the board.

“There are some people who say we should just cut across the board until we close the $13 billion deficit, even if that means draconian cuts in health, human services, education, public safety,” Quinn said. “That approach is both heartless and naive. Taking a chainsaw to our state budget is just plain wrong.”

For his part, Brady said Quinn’s budget plan is not responsible. In addition to the income tax hike, Quinn proposed dealing with a $13 billion budget deficit in part by borrowing $4.7 billion.

“This is a catastrophe,” Brady said of the borrowing proposal.

Quinn’s plan also calls for delaying payment on more than $6 billion in bills, even though at one point in his speech the governor said, “Paying our bills late is not right, and it is not smart.”

Quinn said the state would realize billions in savings by stabilizing public employee pension systems. He offered no details, but Cullerton later said the plan calls for raising the retirement age for new employees and capping at $150,000 the salary used to determine pension benefits.

“The pension savings will pass,” Cullerton said.

The American Federation of State, County and Municipal Employees, which represents most state employees, hasn’t taken a position on those changes.

The overall state budget under Quinn’s plan is about $55 billion, but half of that comes from the federal government and special funds over which state lawmakers have limited control. State programs that taxpayers are most familiar with come out of the $27 billion general funds budget. However, the state has more than $32 billion in spending obligations.

“The state of Illinois has been spending more than it receives for decades, under both Republican and Democratic administrations,” Quinn said.

He also said lawmakers are partly to blame for the current deficits.

“These cuts are unavoidable, a consequence of a bipartisan refusal year after year to confront fiscal reality,” he said.

Lawmakers

Legislators predictably took partisan positions on Gov. Pat Quinn’s budget speech Wednesday.

“Frankly, I wonder if he is even planning on being here in January because he is leaving a pretty big problem,” Brady said.

Brady praised Quinn’s proposal for a $2,500 tax credit for each person hired by a small business, but said it wouldn’t go nearly far enough to boost the economy.

Brady has been blasted for proposing 10 percent across-the-board cuts in state government. “It’s ironic to me that he didn’t think 17 percent cuts in education were draconian,” Brady said.

Senate Republican Leader Christine Radogno called Quinn’s proposals the “same old song and dance.”

Cross reiterated that Republicans won’t support any tax increase without reforms.

“I think anyone in this chamber, Senate or House regardless of party, ought to demand a fundamental change,” Cross said.

Rep. Rich Brauer, R-Petersburg, said Quinn should look harder at Medicaid spending and should work with the GOP on solutions.

Rep. Raymond Poe, R-Springfield, said Quinn should have focused as much on job creation as he did on education cuts.

Sen. Larry Bomke, R-Springfield, said he is concerned about the state borrowing money to pay its bills.

“We are continuing to put off the inevitable,” Bomke said.

Interest groups

Business groups like the governor’s jobs tax credit, but little else. Other groups fear the worst.

“Small business owners don’t need tax credits. They need customers,” said Kim Clarke Maisch, state director of the National Federation of Independent Business.

Mark Denzler of the Illinois Manufacturers Association said, “businesses don’t want to work in a bankrupt state,” but he saluted Quinn for pushing pension reforms, job training programs and managed care for some Medicaid recipients.

John Peller, government relations director for the state AIDS Foundation, said Quinn’s calls for budget cuts and continued borrowing were “politics as usual.”

“The legislators need to step up and be leaders and allocate the revenue that’s needed to maintain the vital services that’s needed in the state,” he said.

The Responsible Budget Coalition continued to reiterate its support of HB 174, which would raise the Illinois income tax rate to 5 percent.

“Illinois communities are already hurting from the failure of legislators to stop damaging cuts and delayed payments to education, human services, public safety and more,” the organization said in a statement. “If they fail again to support a responsible budget with adequate revenue, they will not only force schools to cut thousands of teachers, but cities will lay off police and close libraries, and our state will turn its back on the most vulnerable in their time of need.”

Doug Finke can be reached at 788-1527. Brian Feldt, Matt Hopf and John Guidroz also contributed to this story.

Local leaders skeptical after Quinn's speech

State employees

A spokesman for the American Federation of State, County and Municipal Employees said Gov.

Pat Quinn’s plans to slow down payments to vendors would cause more problems for state workers and retirees whose medical bills already aren’t being paid on time.

AFSCME Council 31 spokesman Anders Lindall added that the union will fight Quinn’s plans to alter retiree health bene­fits. The governor’s proposals would save $255 million, but Lin­dall said the state can’t change those benefits without negotiating the changes with AFSCME.

Lindall said Quinn’s plans to push billions of dollars in unpaid bills for fiscal 2011 into fiscal 2012 would victimize patients, doctors and hospitals.

“Already, state employees, uni­versity employees, retirees and their families are being denied health care, and they’re being hounded by bill collectors for bills that the state owes and has not paid,” Lindall said. “If that crisis isn’t addressed, it will only get worse.”

â€" D­ean O­lsen

Education

Springfield School District fi­nance director Agnes Nunn laud­ed Gov Pat Quinn’s proposal for a 1 percentage point increase in the state income tax that would be de­voted solely to schools, but she said Quinn’s proposal raises many questions.

“We would welcome any addi­tional funding,” Nunn said. “But when would the income tax go into effect? When would the rev­enue start flowing in?”

“There are still too many un­knowns out there,” she said.

University of Illinois officials said Quinn’s proposed budget calls into question Illinois’ com­mitment to higher education.

The $697 million the budget of­fers the university would be $46 million less than promised this year and would bring state appro­priations back to where they were in 1998-99, said U of I spokesman Thomas Hardy.

Ellen Andres, chief financial of­ficer for the Illinois Community College Board, said the appropria­tion for community colleges would be about the same as this year.

“Everything is flat-funded, ex­cept we lost the federal stimulus money,” she said.

The recommendation leaves community college funding at the same level as the 2005-06 school year.

â€" C­hris De­ttro a­nd P­ete S­herman

Municipalities

Illinois municipalities would re­ceive $300 million less in state in­come tax revenue under Gov. Pat Quinn’s proposed spending plan.

For the city of Springfield, that would mean a loss of about $2.9 million.

“A shortfall of that proportion will definitely have an effect on city services,” Ernie Slottag, the city’s spokesman, said Wednes­day.

Chatham officials estimate the village will lose about $253,000 if Quinn’s proposal is approved.

“That’s going to be a killer,” Vil­lage President Tom Gray said. “It will affect our police department, because that’s mainly what we spend our money on.”

The state is already $250,000 behind in its income tax share payments to Chatham this year, Gray said.

Rochester Village President Dave Armstrong said municipali­ties are being put “in a real bind.”

The village board next week will start a series of meetings to pre­pare a budget for fiscal 2011.

“We’ve basically told the man­agers to kind of come in with a no­growth budget, and we’ll probably start from there,” he said.

â€" A­manda R­eavy a­nd D­eana P­oole

Social services

More and potentially longer de­lays in state payments worry the executive director of Springfield­based Senior Services of Central Illinois.

“It sounds like things are proba­bly going to get worse before they get better,” Karen Schainker said Wednesday after Gov. Pat Quinn’s budget speech.

Schainker said Senior Services already is waiting on $450,000 in late state payments and has laid off 23 people, almost one-third of its staff, since July. Senior citizens haven’t yet felt any cuts in agency programs, but that could change if delays persist, she said.

Quinn’s proposed 50 percent cut in the Illinois Cares Rx program, a reduction of $70 mil­lion, would make it harder for low-income seniors to pay for prescription drugs, Schainker said.

The program serves 200,000 low-income seniors and people with disabilities statewide. Illinois Cares Rx currently pays Medicare Part D premiums, reduces co-pays for drugs and helps fill other gaps in Part D benefits.

â€" D­ean O­lsen

Agriculture

The Illinois Farm Bureau won’t take an immediate position on the 1 percentage point income tax in­crease for education proposed by Gov. Pat Quinn, “It’s an interesting approach to balancing the budget. We know school districts are hurting, and this would help,” said legislative director Kevin Semlow.

However, just before the gover­nor’s budget speech Wednesday, Illinois Pork Producers Associa­tion executive director Jim Kaitschuk told a group of beef and pork farmers in Springfield he doesn’t think any sort of tax in­crease can pass in an election year.

“If I was a bookie, I’d say the odds are that isn’t going to happen before the (November) election,” he said.

â€" T­im L­andis

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