State Rundown 2/19: The Budget Balancing Act

Illinois Gov. Bruce Rauner unveiled his budget on Wednesday to mixed reviews.  The proposal does not include any new revenues despite a $7 billion budget gap, and relies heavily on slashing state spending. Democratic legislators, including powerful House Speaker Michael Madigan, pushed back against the governors’ budget. They argue that his proposed cuts, including $1.5 billion in Medicaid spending reductions and hundreds of millions of dollars cut from social services and transit, would hurt low-income working families the most. Rauner has also proposed $600 million worth of cuts in local government aid (while paradoxically pushing for a freeze in local government property tax rates) and $387 million in higher education cuts. ITEP’s recent Who Pays report found that the bottom 20 percent of Illinois taxpayers pay almost three times more of their income in state taxes than the top 1 percent. The governor’s budget will make an unequal situation worse by slashing programs that many of the less fortunate depend on.

Wisconsin Gov. Scott Walker, who likes to tout his bona fides as a “fiscal conservative,” decided to address his state’s $238 million deficit by not paying its bills. Walker made the decision this week to defer over $100 million in debt payments, opting instead to restructure the debt to the tune of an additional $19 million over the biennium. Many observers have pointed out that Walker’s $2 billion in new tax cuts since taking office – most of which went to the wealthy and corporations – are to blame for the state’s current budget woes. Meanwhile, progressive Wisconsinites slammed Walker for continuing to refuse $345 million in federal dollars to expand Medicaid, arguing that accepting the money could reduce the deficit and help reverse $300 million in higher education cuts proposed by the governor. Walker has also supported cuts to the state park system, science positions in state government, and recycling programs, to the consternation of many.

Connecticut Gov. Dannel Malloy outlined an ambitious budget on Wednesday that combines tax cuts, spending increases and new revenue to address a $1.3 billion deficit. Malloy wants to lower the sales tax from 6.35 to 5.95 percent to support low-income and middle-class families, but also repeal a sales tax exemption on clothing set to take place in July. On the business side, the governor would make a 20 percent surcharge on the corporate profits tax permanent, reduce the size of business tax credits for research and development and capital purchases, and eliminate the $250 business entity tax on small businesses. Altogether, Malloy’s changes to business taxes would increase revenue by $300 million. The rest of the deficit would be made up for with deep cuts elsewhere; Medicaid and mental health services would be especially hard hit, and the budget for state parks would be cut by 25 percent. Malloy affirmed his commitment to avoiding cuts in state aid to municipalities.  He also did not propose using rainy day funds to close the state’s budget gap.

Texas Gov. Greg Abbott, not to be outdone by his lieutenant governor, unveiled a budget proposal with $4.2 billion in tax cuts for businesses and property owners. Half of these cuts would come through a reduction in the state’s business franchise tax – $1 billion more than what the Senate budget proposes – and the other half would come from property tax cuts. Abbott pledged that his budget would make whole any school districts impacted by his property tax cuts. Critics feel that the tax cuts are an irresponsible move, given the state’s worsening economic climate.

State of the State Addresses This Week:
Texas Gov. Greg Abbott (watch here)

Governors’ Budgets Released This Week:
Alaska Gov. Bill Walker (amendments offered)
Connecticut Gov. Dannel Malloy (read here)
Illinois Gov. Bruce Rauner (speech here)
New Hampshire Gov. Maggie Hassan (read here)