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Fitch looks to June 30, not May 31 for action deadline as Rauner demands property tax relief

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Illinois

* Oddly enough, I made the same case to subscribers this morning. From Fitch…

FITCH: MAY 31 NOT THE DEADLINE FOR ILLINOIS’ BUDGET

Fitch Ratings-New York-23 May 2017: As the state of Illinois approaches the end of an unprecedented second fiscal year without having enacted a full-year general revenue fund budget, attention turns to the budget process for fiscal 2018, which begins on July 1, 2017, says Fitch Ratings.

Much is being made of the rapidly approaching May 31st end of the regular legislative session, after which state law requires super-majority approval of any tax increases. Prior to that date, a tax increase, which all parties seem to acknowledge must be a part of comprehensive budget agreement, can move forward with a simple majority vote.

Fitch does not view Illinois’ voting requirements as the main obstacle to passing a budget. Illinois’ budget crisis and related deterioration in credit quality is the result of a political impasse between the Governor and the legislature. All parties - legislative and executive, Republican and Democratic, House and Senate - have reported on-going negotiations throughout the fiscal impasse. At times these negotiations have seemed to be approaching a positive conclusion, incorporating a “grand bargain” of tax increases and spending controls designed to both close the annual budget gap and to address the rapidly accumulating accounts payable backlog. It seems clear that a budget will not be enacted until a compromise is reached. As a result, Fitch does not view the super-majority voting requirement that will arise after May 31st as the greater hurdle to enacting a balanced budget by the start of the fiscal year.

Fitch downgraded Illinois’ rating to ‘BBB’ on Feb. 1, 2017 and maintained the rating on Rating Watch Negative. At that time, we indicated that the Rating Watch would be resolved within six months based on an assessment of the state’s fiscal trajectory as it starts fiscal 2018 and that failure to enact a balanced budget for fiscal 2018 would result in a further downgrade. The timing of that review is unchanged.

Your thoughts?

* Meanwhile…

As Senate Democrats prepare to vote on a bill to permanently increase income taxes, Governor Bruce Rauner today announced in a video on his Facebook page that he will not sign off on any budget agreement that increases taxes without real property tax relief.

“The biggest issue that now stands in the way of us reaching an agreement is resistance to freezing your property taxes, and giving you the ability to control whether your property taxes go up or down in the future,” Governor Rauner said. “We will always stand on the side of taxpayers and homeowners and make sure we get an agreement that is fair to you.”

Property taxes have emerged as the biggest issue in negotiating a balanced budget.

Property taxes in Illinois are the highest in the country, and the Governor has long advocated for a freeze to provide homeowners relief. He believes if state lawmakers are going to ask for more in income taxes, then homeowners deserve relief from rising property taxes. In January, the House of Representatives passed a property tax freeze that granted local voters the ability to control increasing or decreasing their property taxes.

View the video here.

posted by Rich Miller
Tuesday, May 23, 17 @ 2:08 pm

Comments

This is bad news. Any pressure taken off getting a deal by next week makes getting a deal by next week less likely. So this stretches into the summer, and even then, even if there’s finally a deal, 3/5ths is quite a heavy lift for anything, especially something that will no doubt make lots of people unhappy.

Comment by Arsenal Tuesday, May 23, 17 @ 2:17 pm
Rauner is a governor who is rooting for our failure. His demand for a property tax freeze is counterproductive to the issues at hand.

If he was a doctor, he’d prescribe leeches for anemia.

Rauner is a quack governor promoting quack government solutions for real problems. He’s a complete nuisance.

Rauner is focused on politics when he should be focused on governing.

Comment by VanillaMan Tuesday, May 23, 17 @ 2:23 pm
I vote for members of every board that raise my property taxes. Isn’t that local control? That drives me nuts.

Comment by Exit 59 Tuesday, May 23, 17 @ 2:36 pm
Property taxes are a problem because it is the only reliable revenue source schools receive. The state and its inability to make payments on time to schools is the source of the problem.

Comment by Bill Tuesday, May 23, 17 @ 2:36 pm
Rauner’s last minute, self-centered, and non-budgetary demands are also extremely frustrating, but I really can’t go over Fitch basically giving them all permission to draw this out for another two months.

Comment by Arsenal Tuesday, May 23, 17 @ 2:42 pm
==giving you the ability to control whether your property taxes go up or down in the future==

Voters already have this. Property taxes are set by a variety of local governments and voters have frequent opportunities to make their voice heard. As a long time school board member, I can say that no one shows up when we vote to raise taxes, but if we are about to cut something, people show up. We hear the voters. They complain about taxes, but they act on cuts to services.

Comment by Pot calling kettle Tuesday, May 23, 17 @ 2:43 pm
As Rich has said, Democrats are foolish to let make property taxes their line in the sand. This video shows why.

Comment by property taxes Tuesday, May 23, 17 @ 2:43 pm
At some level, local property taxes are none of his business. Why is he holding *that* gun to the legislature’s head? As noted above, it’s the only way local governments and schools can get around the state’s stinginess and neglect. As the state’s poor and sick suffer, he is without empathy, like the kid pulling wings off a bug.

Comment by Ray del Camino Tuesday, May 23, 17 @ 2:44 pm
I assume this isn’t about the taxes.

It’s about local control of collective bargaining as part of the package, right?

Comment by Mr. K Tuesday, May 23, 17 @ 2:58 pm
Property taxes are probably the biggest cause of the mass exodus of people out of Illinois.

Comment by Ron Tuesday, May 23, 17 @ 2:59 pm
“As a result, Fitch does not view the super-majority voting requirement that will arise after May 31st as the greater hurdle to enacting a balanced budget by the start of the fiscal year.”

This, to me, is similar to the courts telling Illinois to pay the bills because money is still coming in. Republicans refusal to vote on the hard choices in the coming days and weeks will not look good if there are further downgrades because it will be on their political heads. Votes count, and people will be watching and tallying.

Comment by Anon221 Tuesday, May 23, 17 @ 3:05 pm
Ron. I agree with you again. Now if you would just stop with this Chicago is utopia thing….

Comment by blue dog dem Tuesday, May 23, 17 @ 3:05 pm
==“We will always stand on the side of taxpayers and homeowners and make sure we get an agreement that is fair to you.”==
If you were on the side of homeowners, you would pass a budget.

Comment by Mama Tuesday, May 23, 17 @ 3:20 pm
As of today, I think that there is a high probability of a rating downgrade to or just above junk status in early June. I see little chance of a budget being passed by May 31 given the current political climate of Illinois. If the rating of the state becomes junk it will cost the taxpayers of Illinois dearly.

Comment by Hit or Miss Tuesday, May 23, 17 @ 3:21 pm
===just above junk status in early June===

Well, it won’t be by Fitch.

Comment by Rich Miller Tuesday, May 23, 17 @ 3:33 pm
senate dems have provided the gov his way to re-election–not signing dem only tax increase until property tax relief–big winner for BR

Comment by anon Tuesday, May 23, 17 @ 4:02 pm
Dear Illinois Taxpayers,

I want more of your dollars in Springfield (because I need them) not left at the local level where you can actually have an impact on their use and see the value.

Thanks

Fake Governor Rauner.

Comment by JS Mill Tuesday, May 23, 17 @ 4:19 pm
No incumbents 2018. If they can’t figure out how to resolve their problems which are now our completely the tax payers problems? None of the politicians are representing my inymterests. Everyone seems to want a budget, are they listening? Just maybe they should to do their job and not worry about getting elected again. Make the tough decisions and do your job! Finch should shut up and leave the pressure on these clowns. Budget by May 31 or no incumbents, period.

Comment by Troutmask23 23 Tuesday, May 23, 17 @ 5:15 pm