Tax increase still possible as Illinois lawmakers tackle budget, despite Rauner's scolding

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SPRINGFIELD, Illinois — Gov. Bruce Rauner's first shot at an Illinois budget didn't involve new taxes, but residents could still be asked to open their wallets in the future as part of an ultimate solution to the state's budget crisis.

Top Democrats who control the Illinois Legislature say they'll continue to push for a tax increase to avoid some of the huge cuts Rauner proposed Wednesday. Though Rauner has opposed restoring the state's now-expired income tax hike, he and other Republicans are leaving the door open to new revenue in some form as they try to close a more than $6 billion budget hole next year.

"I think he's prepared to negotiate," said Sen. Matt Murphy of Palatine, the GOP's ranking member on the Senate appropriations committee.

The plan Rauner laid out Wednesday recommended balancing the budget entirely by slashing spending, including a $1.5 billion cut to Medicaid and a new pension plan he says could save $2.2 billion. Other cuts would hit mental health and addiction treatment and after-school programs.

Some of that was intended to set a tone, as Rauner scolded legislators for years of "bad decisions" and spending money Illinois can't afford. But Rauner's budget team also noted a tax increase wasn't on the table anyway because the governor is obligated to present a balanced budget based only on revenue currently available.

The governor's budget office indicated Wednesday that Rauner remains determined to overhaul the tax code and implement a new tax on services — both issues he campaigned on last year. The former private equity investor said during the campaign that he would be open to closing some corporate tax "loopholes," such as a sales tax exemption on racehorses.

House Speaker Michael Madigan was among those calling for a blend of tax cuts and revenue, again pitching a new tax on incomes over $1 million. That plan would require voter approval to amend the state constitution, which imposes a flat income tax.

"In the Legislature, everything's open for discussion," the Chicago Democrat said.

Other Democratic legislators have pushed for raising the income tax rate once again. Those rates rolled back on Jan. 1, from 5 percent to 3.75 percent for individuals, reducing revenue by an estimated $5.7 billion next year.

Democrats say raising the rate, even to a level lower than 5 percent, could eliminate the need for cuts some legislators described as callous and irresponsible. Among Rauner's recommendations was cutting money for heroin abuse treatment, mental health care and health insurance for low-income people and eliminating educational programs for youths in the Department of Children and Family Services when they turn 18, rather than 21.

Madigan and Senate President John Cullerton also said it would be reckless to count on Rauner's $2.2 billion in pension savings. That's because there's almost zero chance that a pension bill could pass the Legislature, survive an inevitable court challenge and be implemented in time for those savings to be realized next year.

Rauner's proposed budget also assumes Illinois will be able to save money on health insurance for state workers. However reducing those benefits or getting employees to pay a larger part of the costs is all subject to contract negotiations, which have barely gotten started.

Democratic leaders say they won't carry the political burden for raising taxes on their own. But getting Republicans to vote "yes" on any tax increase will likely require Rauner's blessing.

While some Republicans and Democrats insisted they'll oppose an increase, others were more open-minded.

"It's a process," said GOP Sen. Mike Connelly of Naperville. "We're going to be here for the next four months, at least, watching this unfold."


Associated Press writer Nick Swedberg contributed.

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