After 364 days, the Governor and legislative leaders finally reached an agreement on a temporary, six-month stopgap budget (SB 2047) that will fund state government through the end of the year. The agreement includes a full twelve months of funds for K-12 education to ensure that schools open on time in the fall and will not be held hostage to a further budget impasse at the end of the year.
All told, the budget includes $25 billion for the current FY16 and $50 billion for the FY17 budget using a combination of federal funds, other state funds, and general revenue. It passed on the last day of the fiscal year and will be signed into law by Governor Rauner.
While a budget agreement was reached, the IMA noted that this is not a permanent solution. It temporarily relieves the budgetary pressure but does not create stability nor enact key economic development, pension or spending reforms that are needed to get Illinois back on track.
As the IMA has reported previously, the Governor and General Assembly failed to pass a FY16 budget for the fiscal year ending on June 30. While no budget was in place during the fiscal year, more than 85 percent of funds were automatically spent largely because of court orders and consent decrees. Governor Rauner had signed the K-12 education budget while vetoing the rest of the budget because it was not balanced. According to Comptroller Leslie Munger, the state’s backlog of bills has continued growing and is expected to total nearly $11 billion at the end of June.
Key components of the temporary budget agreement include:
- Appropriates a total of $75 billion for FY16 ($25 billion) and FY17 ($50 billion) for agency operations, grants, capital spending, and other spending.
- Revenue for the spending comes from a variety of sources including GRF ($7.7 billion), Commitment to Human Services Fund ($701 million), Education Assistance Fund ($690 million), Fund for the Advancement of Education ($442 million), Budget Stabilization Fund ($275 million), and other state and federal funds.
- K-12 Education will receive a total of $11.1 billion to fund the entire year that represents an increase of slightly more than $1 billion more that the FY16 enacted budget including early childhood education.
– $5.1 billion for General State Aid that will be distributed using four criteria including (1) school districts are held harmless based on 2015-16, (2) funds a $250 million poverty grant that will funnel nearly $100 million to Chicago, (3) school districts are held harmless to the 2016-17 year, and any extra funds will be distributed through the normal school aid formula.
– Early childhood funding is increased by $75 million.
- Higher Education will receive $997 million including $151 million for MAP grants for the spring 2016 semester. Universities and community colleges will receive between 82 and 90 percent of the funds they received in FY15.
- Transportation will receive $14.6 billion for annual operation and capital infrastructure for FY16 and FY17. This will ensure that road projects and other capital infrastructure projects continue unimpeded during the summer construction season. Separate legislation allows Chicago to use money from Tax Increment Financing (TIF) districts to access federal money for mass transit.
- Human services will receive $752 million to pay for programs related to aging, SIDs, HIV/AIDS, autism, and other programs.
The IMA issued the following statement in response to the budget agreement:
“While we recognize the work of the Governor and lawmakers to reach accord on a temporary, short-term budget after 364 days of inaction, the stopgap should not be considered a victory for Illinois taxpayers and businesses. Today’s action is a band-aid that will temporarily relieve budgetary pressure, but does not solve the core problems plaguing Illinois. Manufacturers lost 15,000 good, high-paying jobs in our state last year and it’s well past time that our elected leaders enact a real balanced budget and pro-business reforms that will grow our economy. Today’s agreement will once again foist a property tax hike on manufacturers and other businesses in Cook County without offering any spending reform or job creation policies. The IMA stands ready to work with the Governor and lawmakers over the summer to reach consensus on key economic development reforms of tax policy, workers’ compensation, pension reform, and the court system that will help stop the loss of middle class manufacturing jobs.”
With regard to pensions, the Governor and lawmakers agreed to help Chicago with their pension costs. Illinois will pay more than $200 million in FY17 for the Chicago Public Schools pension system as part of the employer cost (SB 2822) if, and only if, the General Assembly passes a larger pension reform bill later in the year. At the same time, SB 318 will reinstate an annual property tax level of 0.383 percent for the Chicago Teachers Pension Fund. The Chicago City Council will have to approve this property tax hike that will generate $250 million annually for pensions with the lion’s share of the cost borne by commercial and industrial taxpayers because of the classification system.
The IMA will continue working with the Governor and lawmakers to reach a real long-term solution in the fall.