Governor's Budget Address
On March 26, 2014, Governor Quinn delivered his annual budget address to a joint meeting of the General Assembly. The Governor's proposed budget for fiscal year 2015 (FY15) totals $64.6 billion, of which $38.6 billion is General Funds. The proposed General Funds amount exceeds the revenue spending cap of $34.5 billion that was approved by joint resolution of the Illinois House of Representatives and Senate on March 6. Various budget documents prepared by the Office of Management and Budget are available at www.budget.illinois.gov, including a list of associated performance measures and indicators for each of the agencies.
Several themes from the address affect GO TO 2040 priorities for tax policy and infrastructure. The Governor's budget proposal included measures to reduce the deficit by retaining the Individual Income Tax (IIT) rate of 5 percent and Corporate Income Tax (CIT) rate of 7 percent, as well as placing caps on agency General Revenue Fund (GRF) spending. Raised in 2011, the income tax hike was originally scheduled to partially sunset in 2015. The Governor asserted that allowing the 2011 income tax increase to expire would result in cuts to state services such as education and human services. To illustrate the effect of rolling back the tax rate, the budget book incorporates two funding scenarios: one extending the current rates and the other rolling back both the CIT and IIT as scheduled in current statute. The need to retain current tax rates in the next fiscal year was echoed in the Civic Federation's recently released FY15 budget roadmap for Illinois, which CMAP reviewed. Unlike the Governor's proposal, the Civic Federation calls for extending the current rates for one additional year before gradually lowering the rates.
The Governor also proposed replacing the property tax credit with a flat $500 property tax refund, for every homeowner in the state -- as the Governor mentioned, Illinois taxpayers have one of the highest property tax burdens in the nation. In fact, around 40 percent of state and local tax revenue comes from property taxes, which is more than the combined revenues from the state sales and income taxes.
The speech also previewed other new initiatives regarding state revenues and spending including doubling the value of the Earned Income Tax Credit (EITC), providing new tax cuts for job training, and establishing a task force to create a new five-year infrastructure capital plan. He pledged that his proposal would protect state funding distributions to local governments. In the address, Governor Quinn stated that he would not support taxing retirement income, such as social security payments, nor taxes on some services like daycare, haircuts, or veterinarian services.
With the forthcoming conclusion of the Illinois Jobs Now! capital program, the Governor pledged to establish a bi-partisan commission to develop a new capital plan. CMAP strongly recommends that any new state capital program be coupled with reform and laid out principles that the task force should consider when crafting the new program in its legislative agenda. Foremost, the capital program should use performance-based funding to establish measures that prioritize and select projects for funding through a data-driven, transparent, and public process. Moreover, the state should move away from an arbitrary "55/45 split" that directs only 45 percent of state highway funds to the Chicago region.
The proposed FY15 operating budget recommended $2.76 billion for the Illinois Department of Transportation (IDOT), which includes a $3 million appropriation for Metropolitan Planning and Research Purposes at CMAP to partially fulfill its required federal match. Of $19.49 billion budgeted for capital appropriations in the proposed FY15 budget, IDOT would be allocated $12.52 billion. The proposed FY15 operating budget recommends $260 million for the Illinois Department of Natural Resources (IDNR).
The State's ability to invest in the region's communities, infrastructure, and human capital is critical to implementing GO TO 2040 recommendations. Tax policy plays a key role in influencing local development decisions, infrastructure investments, and the overall regional economy. At their April meeting, the CMAP Board will consider approving a set of tax principles and discuss how they would like to engage in the conversation about the expiration of the 2011 income tax rate increase and any opportunities for comprehensive tax policy reform.