It’s never easy for a politician to vote to raise taxes, but it’s something that had to done says state Rep. Michael Zalewski (D-Riverside) of his vote last week to raise state income tax rates and give Illinois a budget for the first time since the 2014-15 fiscal year.
Zalewski was one of 61 Democrats who, along with 10 Republicans, voted to override Governor Bruce Rauner’s veto of a tax hike that raised the state’s personal income tax rate to 4.95 percent from 3.75 percent. The corporate income tax rate will increase to 7 percent from 5.75 percent.
“It certainly wasn’t something that I took a lot of great joy in doing, but I feel like it was necessary to bring the state back from the brink of unmitigated financial disaster,” Zalewski said of his vote. “I did what I thought was in the best interest of the state of Illinois.”
The budget calls for cutting state expenses by nearly $3 billion and state agencies will face an across-the-board spending cut of 5 percent, while higher education will see a cut of 10 percent.
Rauner and other critics of the tax increase, which is a 32 percent increase in the personal income tax rate, complained about a lack of structural reforms in the budget.
“What we got with this vote was no reform and new taxes,” said Riverside resident Chris Robling, a Republican political commentator. “That’s the agenda of the public employee unions.”
Rauner had signaled that he would support a temporary income tax increase to 4.95 percent in exchange for a property tax freeze and changes in Illinois workman’s compensation laws and perhaps legislative votes on other changes, such as term limits or redistricting reform.
For four years, from 2011 until the end of 2014, the state personal income tax rate was 5 percent under a temporary income tax increase that was allowed to end.
Robling said he and other Republicans could have stomached the tax hike if it had been paired with structural reforms.
“If we had real reform then they might be able to pay a little more in taxes, but by throwing money at the problem and not changing the underlying we got nowhere,” Robling said.
Zalewski challenged the idea that there were no reforms in the budget pointing to efforts to encourage local governmental consolidation, some pension reform, procurement reform and a change in educational funding.
Zalewski said the budget reflected the input of Republicans, especially the spending cuts.
“There is a lot in this budget that was negotiated by Republicans,” Zalewski said. “It wasn’t agreed to, but it was negotiated by Republicans — the cuts, the spending levels, a wide variety of things, some of the pension reforms.”
Zalewski argued that Rauner got some of what he wanted.
“I think in reality we gave him a lot of what he wanted, and he just didn’t see it that way,” Zalewski said. “That’s his prerogative, and he’s going to be allowed to exercise his political judgement and is entitled to rebut that.”
Zalewski said that some property tax relief may still be approved this summer, pointing to a bill that would freeze property taxes for four years but allow for exceptions for property tax revenue directed toward pensions and paying off bonds.
“I don’t think our work is done yet on property taxes,” Zalewski said. “I think we’ll go back down there by the end of the month and handle that.”
The change in state pensions assumes $500 million in savings by creating a partial 401(k) style pension for state employees and public school teachers outside of Chicago. However, this new option will not go into effect for some time.
“It must first be approved by the IRS as a qualified retirement plan,” said Dave Urbanek, a spokesman for the Illinois Teacher Retirement System. “We have no idea at this point as how long that could take.”
The budget approved last week also calls for a $350 million increase in state funding for K-12 education. But the entire state aid to education portion of the budget in contingent upon a change in the state funding formula to local school districts.
Both houses of the General Assembly have passed a bill, known as Senate Bill 1, which would direct more state aid to poorer districts while assuring that no school district would receive less state aid than it currently does.
Rauner has threatened to veto bill, which has not been sent to the governor yet, saying the changes benefit Chicago Public Schools too much.
But time is running short with state checks due to go out to school districts in less than a month.
“If he vetoes it, he jeopardizes school aid payments to all districts in the state,” Zalewski said. “Senate Bill 1 is a good bill. It holds all districts harmless.”