* From the Center for Tax and Budget Accountability…
Governor Pritzker’s approach to the state budget stands in stark contrast to that of Governor Rauner. While both emphasized the need for fiscal responsibility, Governor Pritzker is actually supporting his rhetoric about fiscal responsibility with actions. For instance, Illinois has had a “structural deficit” in its General Fund for decades. That just means revenue growth under current tax policy is insufficient on a year-to-year basis to continue funding the same level of public services, adjusting solely for inflation and assuming no changes in law. This structural deficit, coupled with the fact that Illinois has traditionally underfunded core services like education, healthcare, public safety, and social services, are some of the key fiscal realities that motivated Governor Pritzker to support raising an estimated $3.6 billion in new revenue through implementation of a graduated-rate income tax - a policy initiative that has the corollary benefit of creating more fairness in Illinois taxation - by having income tax rates comport with ability to pay.
However, as Governor Pritzker recognized in his budget address, that new revenue will only be realized if this coming November, voters ratify the amendment to the state’s constitution needed to permit a graduated rate income tax. And even if voters ratify this amendment, the state won’t implement the new, fair, graduated-rate structure until halfway through upcoming FY 2021 - meaning it will only generate $1.4 billion in new revenue during FY 2021, growing to $3.6 billion annually thereafter.
Which is why Governor Pritzker took the fiscally prudent step of proposing two separate General Fund budgets for FY 2021, forcing the state to live within its fiscal means, whether or not the amendment passes. The Governor’s “recommended” budget identifies appropriations for core services that would be made, if the amendment to the constitution permitting a graduated rate income tax is ratified. During his budget address, Governor Pritzker emphasized he will devote a portion of the new revenue a graduated rate income tax will generate to shoring up Illinois’ questionable fiscal condition, rather than to enhanced spending on services. He does this by devoting $100 million to deficit reduction, investing $50 million to build-back the state’s rainy-day fund, and contributing $100 million more to the state’s five public employee pension systems than is required under current law.
The Governor also proposed a far more stringent “base budget,” built upon the assumption the Fair Tax amendment does not pass, and hence the state has $1.4 billion less in revenue to spend in FY 2021. Because of that, and in the name of being fiscally responsible, Governor Pritzker makes numerous “hard choices” (his words) to invest less than what the Governor believes is needed to fund core services like education, healthcare and public safety. He accomplishes this by “reserving” a portion of the target appropriations made in his recommended budget proposal, that ultimately would not be made if the amendment permitting a graduated-rate income tax does not become law.
CTBA agrees with Governor Pritzker’s focus on being fiscally responsible, and applauds his efforts to reduce the accumulated deficit, build the rainy-day fund and pre-pay some of the significant debt owed to the pension systems. Indeed, any effort to prepay what’s owed to the pension systems to flatten the unaffordably back-loaded repayment schedule his administration inherited that covers the existing pension debt is sound fiscal policy. We at CTBA think he should go much further and have a full reamortization plan (click here for more info) to deal with this problem once and for all, but laud the fact that he is focusing on the issue in a rational way.
However, CTBA disagrees with his proposal to reserve up to $150 million of the $300-$350 million in Evidence-Based Funding appropriated for FY 2021. Effectively, that means K-12 funding under the base budget proposed by the Governor for FY 2021 would [grow] by only $200 million over FY 2020 levels. If that happens it would be the first time K-12 funding did not grow by the minimum amount of $300 million targeted in statute, since the Evidence Based Funding Formula was enacted in FY 2018. It also means that Evidence Based Funding for FY 2021 would barely keep pace with inflation, effectively providing little true new money for school districts to invest in providing those evidence-based practices shown to enhance student achievement over time. That’s problematic, given that according to the Illinois State Board of Education, as it stands today, overall K-12 funding is some $7 billion less than what the evidence indicates is needed for all students to receive an adequately funded education. Barely keeping pace with inflation does nothing to close that material shortfall. And by failing to reduce that funding gap in any meaningful way, the $200 million appropriation for Evidence Based Funding in the “base” budget proposal increases the pressure on local property taxes to fund schools. Considering that Illinois is already the state that is most reliant on property taxes to fund K-12 education in America, it would be far better fiscal - and education funding policy - for the state to continue down the path of boosting the state investment in K-12, thereby taking pressure off of property taxes. An alternative to a reduction in K-12 funding that still allows the state of Illinois to live within its means would be withholding a portion of the $500 million appropriated for research facility investments for the University of Illinois, as proposed by Representative Will Davis. This would allow Illinois to continue making the necessary investment in K-12 education vital for students to succeed at the college level.
I generally concur with much of the above.
The governor essentially presented a maintenance budget, dressed up with some extra funding promises if the voters approve a constitutional amendment on taxation this November. I have no real problem with that.
But a governor’s budget is essentially his list of priorities. He told reporters yesterday that education was his top priority. His official budget proposal plainly does not reflect that claim.
* And the Republicans are eagerly putting the wood to him…
Rep. Avery Bourne, R-Morrisonville, said school districts are required by law to submit their budgets to the state by September. However, under Pritzker’s budget plan, they won’t know how much state assistance they can expect until months after that deadline.
“It will force their budgeting process to make difficult decisions without the certainty of knowing what the state will be sending to them at the end of the year,” Bourne said. “It means local school districts will be making decisions on hiring, on resources for their classrooms before we know the outcome of the governor’s political agenda.”
But they can only go so far before their logic falls apart. Governor’s office response…
“Governor Pritzker is a tireless and staunch advocate for education funding, which is why he fought to find a way to actually pay for substantial increases for our schools and why he strongly supports the fair tax,” Bittner said. “It is the height of hypocrisy for Republicans to demand increased spending and refuse to pay for it. The governor’s door is always open to hear ideas from both sides of the aisle on addressing our challenges.”
* Gov. Pritzker’s budget address concerns some Illinois school administrators: Pritzker’s contingency on the graduated income tax is not ideal for Vienna Superintendent Joshua Stafford. “We can’t have political contingencies tied to education of our children of Illinois. It’s impossible for a school district to plan for next school year and have contingencies tied to our funding,” he said.
* Budget bully? GOP accuses Pritzker of holding ‘funding to our schools hostage’ to income tax plan
* House Republicans disagree with Gov. Pritzker’s school funding proposal: “When I was listening to the Governor’s speech and he mentioned this, I couldn’t help but think of the old line - it’s a nice funding formula you got here. It would be a shame if something happened to it,” Rep. Steven Reick (R-Woodstock) said.
* Pritzker stumps for higher education budget at UIC