Governor JB Pritzker recently delivered his Fiscal Year 2022 budget proposal and State of the State address. Below are some key takeaways from his address. The Illinois fiscal year begins on July 1, 2021 and ends on June 30, 2022.
Recognizing the difficult environment COVID-19 has created, Governor Pritzker’s FY 22 budget proposal does not raise income taxes and calls for keeping the Operating Budget flat while closing corporate loopholes. Currently, the proposal estimates $41.7 billion in revenue. This is a decrease of $1.772 billion from the FY 21 estimates of $43.48 billion. This decrease is due to the income tax filing extension and one-time borrowing from the Municipal Liquidity Fund (MLF).
General Fund revenue source breakdown:
- 48.3% individual income tax
- 22.8% sales tax
- 9.5% federal aid
- 7.3% corporate income tax
- 1.9% lottery and gaming taxes
- 1.9% public utility tax
- 8.2% other sources
The individual income tax, state sales tax, and corporate income taxes are the largest revenue drivers for the State and are estimated to bring in $32.7 billion.
The total spending proposal is $41.6 billion (including transfers out of the General Funds). This is a $120 million surplus. The operating budget is level to FY 21, but State agencies such as DCFS, HFS, DHS, IDPA, and IDES will see modest appropriation increases to accommodate the vital services these agencies provide.
- Strengthen Safety Net Services. The Governor’s proposed budget would request $60 million in immediate funding to support unemployment benefits and an additional $73 million in FY22 to increase staffing and fraud prevention efforts.
- Additionally, the proposal funds increase the budget for the Department of Children and Family Services by 7.9 percent while increasing the budget for Human Services for those with developmental disabilities, home services, and efforts to prevent evictions.
- To support childcare providers, $290 million is going directly to 5,000 childcare centers and homes in 95 counties.
- Protects early childhood block grants, expands early intervention programs, and directs $350 million in federal funds directly to childcare providers.
Investment in Economic Development, Infrastructure, and the Environment
- The proposed budget invests $375 million to expand broadband internet across the state.
- Telecommuting, telehealth, remote learning, and videoconferencing initiatives will receive at least $50 million in additional state match grants this year making substantial progression toward universal access in 2024.
- $43.7 million to the Illinois Power Agency for the purchases of Renewable Energy or Renewable Energy Credits (RECs).
- The recommended budget includes $570 million, through the Federal Emergency Rental Assistance Program, to provide direct assistance to households who are unable to utilities and rent because of COVID-19.
- It continues the Rebuild Illinois capital investment of more than $33 billion to upgrade aging infrastructure.
- The evidence-based funding (EBF) is maintained at $7.2 billion.
- Increases MAP funding by $28 million.
- The proposed budget includes $543 million for the Early Childhood Block Grant.
- Career and Technical Education programs will receive $43 million.
- $16.6 million will be allocated to help mentor educators.
Closing of tax loopholes
Governor Pritzker proposed ending a number of corporate tax deductions and credits. Altogether his proposal is estimated to save the state $932 million in revenue.
- Cap Corporate Net Operating Loss Deductions at $100,000 per year ($314 million)
- Roll back Federal Tax Cut and Jobs Act 100% Foreign-Source Dividend Deduction ($107 million)
- Roll back Federal Tax Cut and Jobs Act 100% Accelerated Depreciation ($214 million)
- Accelerate the Expiration of Exemptions for Biodiesel ($107 million)
- Reverse Repeal of the Corporate Franchise Tax ($30 million)
- Cap Retailer’s Discount at $1,000 per month ($73 million)
- Limit Tax Credit for Private School Scholarships at 40% ($14 million)
- Eliminate New Add-On Income Tax Credit for Construction Job Payroll Expenditures ($16 million)
- Remove Production Related Tangible Personal Property from the Manufacturing Machinery and Equipment (MME) Sales Tax Exemption ($56 million)
The Republican reaction was strong after Governor Pritzker went after Republicans in his speech for not offering up ideas for cuts. House Minority Leader Jim Durkin was especially hard on the Governor’s proposals to close the tax loopholes, a move that the Republicans categorize as tax increases. Leader Durkin, in his remarks after the address, slammed the Governor because from Durkin’s perspective, the loopholes were part of an agreement with House and Senate Republicans in 2019 in order to gain Republican support for the Rebuild Illinois legislation. Other Republican reactions criticized Pritzker’s overreliance on federal borrowing as well as not being transparent about the cost saving measures the Governor has identified in agency cuts. Senate Republican Leader Dan McConchie criticized Pritzker for proposing to close these loopholes without doing anything to help businesses. McConchie went on to explain he has been pushing Governor Pritzker to pursue workers’ compensation reforms, pleas the Governor has rejected.
Due to the COVID pandemic, Governor Pritzker did not give his annual State of the State address; instead this year’s address was a combined effort. In addition to summarizing his budget proposal, Pritzker did briefly discuss a few other topics. He urged the General Assembly to enact ethics reform legislation. In his opinion, an ethics bill should include a revolving door provision to prohibit legislators from resigning from the General Assembly one day, and then registering to lobby the General Assembly the next. The Governor also urged all Illinoisans to get a COVID vaccine as soon as it was their turn. Lastly, Pritzker highlighted several businesses from around the state that have benefitted from the DCEO Business Interruption Grants (BIG). He then pledged to set aside additional money from new federal money to keep the program up and running.
To view the Operating Budget, please follow this link.
To view the Capital Budget, please follow this link.
For the main Budget page, please follow this link.