Governor Rauner’s FY 2019 Budget Address

From the State Capitol: Gov Rauner delivers his annual budget address. This comes in the wake of the first budget being approved during his tenure in office, just last August, when the legislature overrode his veto of a budget. It also follows an increase in the state’s income tax rate from 3.75% to 4.95%.

During his budget address, the governor proposed to make some changes to state spending that he argues would allow for a $1 billion reduction in taxes.

The state struggles every year to pay its pension payments, which now run $8.5 Billion and is set to grow every year.  He also argued for the need to better manage the state’s healthcare costs, which the state pays the vast majority for both current and former state workers.

Yet his critics  — including Republican Rep Jeanne Ives, who is running against the governor for the Republican nomination for governor — point out that it was Gov Rauner who just signed into law last summer, a new entitlement program that will require the state to pay for abortions for those on Medicaid.  A cost that might dramatically increase state spending, and is impossible to know ahead of time what the actual cost of that program will be.

His critics on both sides of the legislative aisle also argue that while Gov Rauner as frequently said he would not sign a budget that was not balanced, they say he has never proposed a budget that was balanced.

Illinois’ fiscal situation remains in very bad shape, despite the first budget in two years being passed last summer. Many state funded entities were severely damaged by the lack of funds over a two-year period.  Some universities are on the edge of closing, and have lost the income from thousands of students, who have opted to attend college in neighboring states, that offered them in-state tuition levels to attract them away from Illinois.

While the state’s fiscal position remains very weak, the state has managed to pay down its backlog of unpaid bills from a high of $16 Billion, to approximately $8 billion, by borrowing via a $6 billion bond issue. Those funds were all used to go toward paying down the backlog of Medicaid bills, as the Federal government than provides a 50% match. Thus the $6 Billion provided for a $3 Billion Federal match in funds. Comptroller Suzanna Mendoza then used the $3 Billion in matching funds to pay down more Medicaid funds, and thus getting another $1.5 Billion in matching funds.

As this address was delivered the national economy had also had one of its best performances in the last decade, growing just under 3%. A national tax cut in both corporate taxation and income, is thought by many economists, to lead to a national economy that will grow between 3% to 4% in 2018.

If these projections hold true, then Illinois would expect its revenue to pick up as a reflection of greater economic activity. With the current rate of taxation, the income projections are expected to rise from the previous $31.5 Billion, to approximately $36.5 Billion, which is the current spending level for FY ‘ 2018.

This budget proposal would cover the FY 2019 year, which begins on July 1, 2018 and runs until June 30, 2019.