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Illinois Almost Has A Budget — Here's What It Means For You

By Heather Cherone | July 5, 2017 8:20am | Updated on July 5, 2017 8:32am
 Gov. Bruce Rauner vetoes the budget approved by the Illinois General Assembly on the Fourth of July.
Gov. Bruce Rauner vetoes the budget approved by the Illinois General Assembly on the Fourth of July.
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CHICAGO — After more than two years without a budget — and the state's credit rating poised to topple into junk territory — Illinois lawmakers finally are about to approve a $36 billion spending plan over the objections of Republican Gov. Bruce Rauner.

A dramatic showdown ended with a series of votes cast on Independence Day. Fifteen Republican members of the Illinois House broke away from the governor to pass a budget.

One more vote remains — the Illinois House is poised to follow the Illinois Senate and override Rauner's veto — perhaps on Thursday — setting the stage for Democrats and Republicans to squabble over who prevailed in the fight that made Illinois a national laughingstock.

Mayor Rahm Emanuel praised the deal.

"While the bill may not include everything either side wants, it includes exactly what Illinois needs: funding for schools statewide, much needed support for state universities and their students, a safety net for the most vulnerable, and job-creating projects," Emanuel said.

But what does it mean for Chicagoans if the package wins final approval?

State income taxes are going up.

To generate $4.3 billion, Illinois residents will see their personal income taxes rise from 3.75 percent to 4.95 percent. State lawmakers also hiked the corporate income tax rate from 5.25 percent to 7 percent to generate another $460 million.

Rauner slammed the tax hike as a "32 percent permanent income tax [rate] increase" in his veto message posted on Facebook. The governor had supported a temporary tax hike of the same size — in return for a property tax freeze and changes to workers' compensation, which Rauner has said will kickstart the state's economy.

The deal includes neither provision.

• Schools will open on time in the fall.

The spending plan includes an additional $350 million for kindergarten through 12th-grade classrooms. But that portion of the budget hinges on a separate piece of legislation that changes how much each school district gets from the state.

Because the bill gives the Chicago Public Schools more state money to cover both current and past due pension payments, Rauner has called it a Chicago "bailout" and threatened to veto the school-funding formula, which has not yet reached his desk.

• The package changes the way Chicago funds some of its employee pensions.

The package allows Chicago to pay more toward the pensions of about 88,000 city workers while changing the way pensions work for employees hired after Jan. 1, 2018.

The measure would allow the city to contribute millions more a year to the city workers’ and laborers’ pension funds using revenue generated by a 30 percent increase in the water and sewer tax approved by the City Council last year.

New employees could retire at age 65 after contributing 11.5 percent of their salary annually to their pensions — 3 percentage points more than employees contribute now. Employees hired after Jan. 1, 2011, could chose to contribute 11.5 percent to their pensions and retire at 65 or keep paying 8.5 percent and work until they are 67.

The legislation also requires Chicago aldermen and elected officials to serve longer to earn a pension of 80 percent of their city salary.

• Chicago nonprofits — which haven't seen a state check for years — will get paid.

The deal includes about $8 billion to begin paying down $15 billion in unpaid bills the state accumulated during the budget impasse. That's good news for nonprofit organizations like Family Focus, which had been on the verge of laying off 70 percent of its staff.

• Grants for Chicago college students will be paid — and colleges will get paid back.

The spending plan sets aside $365 million for universities and colleges to use to cover the scholarships they advanced to low-income students earlier this year. The budget includes $400 million for the scholarships to pay for tuition for classes starting this fall.

The package also would restore funding to schools like Northeastern Illinois University in North Park, that was forced to lay off employees to cover a $17 million shortfall created by the budget impasses.

However, state universities would see their budgets cut 10 percent going forward as part of an across-the-board belt-tightening that helped win the spending plan's passage. Other agencies and programs will see a 5 percent cut as part of the agreement.

• Teachers — and parents — will get a (small) break.

The spending plan includes a new tax break of $250 for teachers who spend their own money to buy school supplies — and increases the Education Expense Tax Credit to $750 per family from $500 per family.