Tax Increases Viewed Likely As Funding Shortfalls Continue
Debate over the Illinois budget continued last week with Democratic House Speaker Michael Madigan urging “a measure to raise taxes on millionaires while GOP lawmakers shot back with a call for term limits,” the Chicago Tribune reported. On Memorial Day, the Chicago Tribune noted that Madigan announced that Democrats will “pass a budget that’s at least $3 billion short” and “will keep working to find more money but reject attempts to link the Republican governor’s legislative agenda to a new spending plan.” Republican Governor Bruce Rauner has had difficulty getting “the pro-business changes he wants” in the budget, the Tribune noted.
The budget wrangling comes amid the backdrop of “one of the worst fiscal crises of any state in recent decades,” the New York Times reported. The Times said Illinois is losing money “largely because it has mismanaged its pension system,” and now appears to need to implement “sharply higher taxes and cuts in spending.” The Times called Illinois “model of what can go wrong — with political intransigence, mounting costs and a complicated legal terrain.”
The Wall Street Journal has noted that Moody’s Investors Services and Standard & Poor’s Rating Services have different views of Chicago’s fiscal situation. While Moody’s lowered the city’s bonds to junk status, Standard & Poor’s gives Chicago an A-minus rating. Reuters noted Illinois now has the worst credit rating of any US state as well as the least-funded pension program. This despite being the third-most populated city in the US and home to 20% of all state residents. Reuters suggested that tax hikes are likely despite Gov. Rauner getting elected last November after campaigning to remove a temporary hike in income taxes implemented in 2011 under former Democratic Governor Pat Quinn. Rauner rolled the rate back from 5% to 3.75% this January.
What Happens Next
Illinois legislators face a May 31 deadline to pass a budget that would take effect July 1. If a budget deal isn’t reached, the state could see its credit rating worsen.
What This Means For Small Businesses
The fiscal health of the state can have many impacts on small businesses. An uncertain fiscal climate could lead some businesses to relocate, or decide against starting operations in Illinois. For those that choose to remain in the state, a weakening economy could mean access to state programs designed to help businesses, like small business loans, may be limited. News of budget uncertainty and fiscal woes is a troubling indicator that Illinois’ business climate is in jeopardy.
Additional Reading
NFIB has noted Governor Bruce Rauner’s pro-business agenda since taking office, which may be affected by budget shortfalls.
