How Illinois’ Budget Bedlam Is Causing a $10 Billion Shortfall
Policy + Politics

How Illinois’ Budget Bedlam Is Causing a $10 Billion Shortfall


The messy budget situation in Illinois, one of the country’s largest economies, became even worse Wednesday afternoon when first-term Governor Bruce Rauner (R) delivered his second budget speech. Rauner’s first budget never passed, and this one has even less of a chance of a being blessed by the Democrat-controlled state legislature.

Without a budget, Illinois is running on fumes.

The bitter impasse began after Rauner’s inaugural budget address a year ago, when his proposed spending plan included deep cuts to Medicaid and higher education. The budget slashed by half the amount of income tax funds – about $634 million – the state would share with its 1,400 local governments and saved $2 billion by reducing state worker benefits -- all to fill a projected $7 billion hole in the Land of Lincoln’s budget without raising taxes.

Related: Illinois governor fails to budge as fiscal deadlock drags on

The legislature rejected the roadmap outright and proposed a budget of their own, one with modest spending cuts that still left Illinois billions in arrears. Rauner, the former chair of a private equity firm, vetoed much of that plan, though he approved a section that increased spending for primary and secondary education.

A series of court rulings have helped keep 90 percent of the state government running, but the prolonged gridlock has begun to threaten social programs and operations at state universities.

Related: Illinois sells $480 million in bonds after 20 month hiatus

Then there’s the looming $10 billion shortfall in the budget year that starts July 1.

"With my hand outstretched — with a genuine desire to compromise with respect — I humbly ask you to join me in transforming our state for the better," Rauner told lawmakers.

But if observers were hoping for some kind of departure from what’s come to be known as the governor’s “turnaround” agenda, they didn’t get it in his 27-minute address.

"The true solution to fixing our budget is to raise revenue by expanding our tax base and growing our economy – not by raising taxes and driving more jobs and families out of our state," he said, keeping his heels firmly dug in. "My point is this: we need to change the way we think about the budget. This isn't a binary choice between program cuts and revenue increases."

Rauner said lawmakers must pass his legislative agenda before he’ll even negotiate on the state’s budget. Rauner reversed a temporary tax rate hike last year from 5 to 3.75 percent.

As the standoff continues, the collateral damage throughout Illinois builds. Lutheran Social Services of Illinois and Catholic Charities, owed $6 million and $25 million by the state respectively, warn they’ll have to cut hundreds of jobs and programs to make ends meet.

Related: Illinois Is Not Alone: States Facing $1 Trillion Pension Shortfall

Chicago State University recently declared a financial emergency to make it easier to fire employees after it discovered it might not be able to meet its payroll next month and Eastern Illinois University is laying off 200 non-classroom employees.

Rauner’s speech made clear that the budget impasse will continue for the foreseeable future. The gridlock could force the governor and the legislature to hammer out a two-year budget that would retroactively address last year’s proposals in some way, perhaps lay out a plan to phase in spending cuts over time.

Or both sides could continue to keep their arms crossed and send Illinois careening toward another year without a budget.