Credit Gov. J.B. Pritzker for not staggering off the dais Wednesday while reciting Illinois' financial quandaries: alarming unfunded pension liabilities, a $3.2 billion budget shortfall and $15 billion in unpaid bills. Oh, we almost forgot the $700 million Illinois paid in late fees on its invoices last year, enough to send 12,000 students to a four-year college. That's what out-of-control deficit spending looks like.
During his first budget address, Pritzker didn't shy away from the state's challenges. But he adopted an optimistic tone, channeling Illinois' 28th governor, the upbeat and energetic Henry Horner, who served during the Great Depression when half the state's workforce couldn't find a job. We'll see how long Pritzker can sustain a rosy outlook. Our four takeaways from his speech:
The taxman cometh
Pritzker emphasized that he wants a graduated state income tax. "I am proposing this path forward because I truly believe this is what is best for Illinois," he said. Illinois currently has a flat individual income tax rate of 4.95 percent, a structure that is codified in the Illinois Constitution (although lawmakers can change the rate).
Changing to a graduated tax requires a three-fifths vote of the General Assembly to put the question on a ballot, and then approval by voters statewide. How much new money would a graduated income tax extract from taxpayers -- and who would get squeezed? Those questions matter in part because Illinois has a shrinking base of taxpayers: Illinois lost residents for the fifth straight year in 2018 with a net loss of 45,116 people, the worst year of the five.
People debating whether to stay or leave likely will factor into their calculation the desire of Pritzker and many fellow Democrats to collect more tax revenue.
Toking for dollars
Pritzker said he believes legalizing recreational cannabis would generate $170 million for the next budget in licensing fees. Proposals being discussed would allow Illinois residents 21 years and older to possess up to 30 grams of cannabis. Need a visual on that measurement? If you scooped up a pile of snow in your cupped hands, it's about that much. Households could have five plants apiece.
Municipalities still could ban dispensaries within their borders. Conversely, they could welcome dispensaries and apply their own taxes to marijuana sales. Wonder which they'll choose.
Is Illinois prepared to manage such a complicated program? Not yet. But with Pritzker using his bully pulpit to advocate, legalization is gaining momentum. Time to spice up the Tribune's annual holiday baking competition. We even spotted a recipe for "weed milk." Pair your brownies with that, Illinois.
This creates more taxpayers -- how?
Pritzker did mention the need to grow the state's tax base, but mostly in platitudes: Invest in job training, fund anti-violence programs, strengthen the social safety net and attract talent. The cannabis industry could expand entrepreneurship and job opportunities, he said, along with passage of a bricks-and-mortar capital bill. How it would be funded, he didn't say. But lawmakers love big-picture infrastructure programs that allow them to cut ribbons back home.
Pritzker also spoke of growing the economy by increasing the number of minority-owned businesses eligible for state contracts and by working with downstate lawmakers on a revitalization plan for that region of the state. But employers looking for new reasons to keep or create jobs here, rather than locating in lower-tax states, didn't hear many specifics that would improve Illinois' competitiveness.
Kicking the pension can
Pritzker's plan to address $134 billion in unfunded liabilities relies on notions calibrated to not offend public employees unions: shoring up the pension funds with additional money from tax revenues; the sale of unspecified state assets; borrowing up to $2 billion by selling pension bonds; stretching out the current payment schedule; and making permanent an employee buyout program. Taken together, it's more can-kicking. The only way to save the pension funds, and protect taxpayers, is to amend the Illinois Constitution's pension clause. No, Pritzker didn't say anything about that.