CHICAGO – Illinois’ historic two-year-old budget logjam broke Thursday with the House’s successful override of Gov. Bruce Rauner’s veto of a $36 billion spending package that includes a $5 billion tax hike.
"Today, Republicans and Democrats stood together to enact a bipartisan balanced budget and end a destructive 736-day impasse," said House Speaker Michael Madigan, D-Chicago, thanking members on the floor after the vote for managing through an “unbelievable” struggle and working in “good faith” on negotiations.
The state's two years without an enacted budget have left it hanging on the final rating rung above junk-bond status.
With the help of GOP votes, the Democratic-controlled House cleared the final hurdle needed to enact a budget package. Two of the bills passed without a vote to spare. The action followed the Senate’s successful override on Tuesday, which means the spending plan that restores road projects and funds programs, universities, and services starved for cash over the last two years is now law.
While pressure from the rating agencies helped drum up support in the legislature, passage of a budget package might still fall short of what at least one rating agency believes is needed to keep Illinois at investment grade.
Moody’s Investors Service on Wednesday put its Baa3 rating on review for a downgrade, saying the budget doesn’t tackle building long-term pressures.
Fitch Ratings and S&P Global Ratings, which have the state’s ratings on watch, earlier in the week said the plan represents progress in stabilizing the state’s fiscal crisis. Fitch assigns a BBB rating and S&P a BBB-minus.
Moody’s raised concerns over the state’s “failure to achieve broad political consensus on how to move toward balanced financial operations.” Moody’s is concerned over what it sees as a lack of more profound measures to address a mammoth pension tab and whether adequate safeguards are in place to keep the state from again piling up bills after adding to the state’s GO debt burden.
The House lacked sufficient members to attempt a vote earlier in the week and the Thursday afternoon vote was delayed after the capitol building was placed on lockdown and a Springfield hazardous materials unit called in to investigate a powdery substance spread inside the building.
After the substance was found not to be harmful, the House convened with debate and a vote first to override the tax hike veto of Senate Bill 9. It cleared with 71 votes, the minimum required to meet the three-fifths majority needed to override the governor.
GOP members who broke ranks defended their position ahead of the tax vote after other members voiced their opposition to approving tax hikes without a local property tax freeze and other items Rauner has made a condition for his support of tax hikes. Many opponents cited the Moody’s report and warning that the state could still be cut to junk despite enactment of a budget.
Voting against the override would result in a “financial meltdown” with a fall to junk all but certain, said Rep. Steven Andersson, R-Geneva.
“Today was another step in Illinois’ never-ending tragic trail of tax hikes," Rauner said in a statement after the vote. "Speaker Madigan’s 32% permanent income tax increase will force another tax hike in the near future. His tax-and-spend plan is not balanced, does not cut enough spending or pay down enough debt, and does not help grow jobs or restore confidence in government. It proves how desperately we need real property tax relief and term limits.”
Rep. David Harris, R-Arlington Heights, said Moody’s may be evaluating the state for a downgrade but it’s also giving lawmakers a chance to go further on needed reforms in a bipartisan fashion. Without action on the budget “we are looking the abyss, the financial abyss” and “if we don’t have a budget with virtual certainty we go to junk status,” he said.
The budget eases the “chaos” and restores “stability and order,” Harris said.
The budget appropriations in Senate Bill 6 passed with 74 votes in the House and 42 in the Senate. Senate Bill 42, which authorizes up to $6 billion of general obligation borrowing to pay down the state’s nearly $15 billion backlog of delinquent bills, cleared the House with 71 votes.
Democrats hold 67 seats and Republicans hold 51 in the House. The House on Sunday passed the tax bill with 72 votes with the help of 15 Republicans. The tax bill lost a handful from those 15 but several of the 10 Democrats that had voted against the actual bills then supported the override.
