IASB Legislative Report 102-03

Deliverd via email: February 17, 2021

Governor Pritzker Delivers Virtual Budget Address

Governor JB Pritzker (D-Chicago) delivered a virtual budget address on February 17, outlining his plans for state spending in Fiscal Year 2022 and kick-starting the budget making process in Illinois. Before a budget can be enacted, the governor’s proposal or an alternative budget must be acted on by the General Assembly. The Illinois Governor has a constitutional responsibility to present a balanced budget. Last year, the budget address was presented about a month before a major statewide shutdown due to COVID-19. While the pandemic has certainly changed the governor’s approach to the budget, it is not the only factor. In November, voters defeated a graduated income tax proposal that was proposed to bring in billions of new dollars for the state. With both of those factors in mind, Illinois’ budget situation is looking slightly better than expected. Revenues have not bottomed out nearly as significantly as some of the early pandemic projections anticipated. However, there are still major challenges to crafting a budget and Governor Pritzker suggested several initiatives to balance the budget.

Additional Revenues

The main way the governor is looking to balance the budget is through closing several corporate loopholes. It is estimated that this action could bring in over $900 million to state coffers. Proposed loopholes to be closed include a reduction of business loss deductions, deleting a biofuels tax exemption at an accelerated pace, and reducing the tax deduction for private school scholarships. One of the many challenges the governor’s budget proposal will face in the General Assembly is that lawmakers are sensitive to the hardships business owners have faced in 2020-21. Many of these so-called loopholes are tax incentives they rely on. If the opponents of closing these loopholes are successful at removing even one of the new sources of revenue, it will cause the State of Illinois to have to find new revenues elsewhere.

One area of possible revenue generation that is not on the table is an income tax increase. The budget proposal was also missing any major changes to broaden the sales tax base. The state budget has seen some additional revenue in special funds and set asides. The governor proposed moving $100 million from the Cigarette Tax Fund to the General Revenue Fund which would give the administration additional flexibility to spend those funds.

Education Funding

While the overall budget picture might be better than projected, the education funding proposal falls short of the $350 million needed to properly fund the Evidence Based Model. In the address, the governor proposed holding education funding flat for the second year in a row. The administration also counts revenue received by school districts through federal COVID-19 pandemic funding, as additional money, relieving some state funding pressure. Under the governor’s plan, Illinois schools would receive just 0.5% additional state funds while having to continue to grapple with a global pandemic and ever expensive and increasing mandates. While we are pleased that education will not be cut in the budget being created during a global pandemic, the Illinois Association of School Boards will work with the General Assembly to fight for the minimum $350 million needed for the Evidence Based Model.

Federal Stimulus

Another proposal that might give Illinois a boost is an additional federal stimulus plan that would infuse money into the state budget, as well as to school district budgets. More details on what is in that stimulus proposal can be found in the most recent IASB Federal Legislative Report. Due to the parameters of the Illinois Constitution, the governor cannot project spending revenue that has yet to be realized. While there are still many uncertainties around how the Illinois budget will be crafted, IASB will continue to keep you informed on the process as spending proposals make their way through the Illinois General Assembly.