- Associated Press - Wednesday, March 26, 2014

SPRINGFIELD, Ill. (AP) - Gov. Pat Quinn said making Illinois’ temporary income tax increase permanent should prevent “extreme and radical” state budget cuts, a politically difficult trade-off revealed Wednesday that’s likely to be a major issue during his tough re-election bid.

The Chicago Democrat tied his push for extending the increase to relief for homeowners, saying he’d like to guarantee every Illinoisan who pays property tax a $500 annual refund. He also used his budget address to call for increasing the earned income tax credit for low-income families.

But the ideas - particularly the income tax extension - give Quinn’s Republican challenger, businessman Bruce Rauner, fodder to attack him and set up what’s expected to be a tough budget battle already heightened by election year scrutiny.

Still, Quinn predicted dire cuts without the tax extension. And Democrats, who control both the Illinois House and Senate, said they’d support the move.

“If action is not taken to stabilize our revenue code, extreme and radical cuts will be imposed on education and critical public services,” Quinn said in the roughly 30-minute address before lawmakers. “Cuts that will starve our schools and result in mass teacher layoffs, larger class sizes and higher property taxes.”

The question of what to do with the income tax increase has nagged lawmakers and candidates. Extending it won’t be politically easy. Polls show that most Illinois voters would rather cut existing spending than increase revenue.

Rauner and his fellow Republicans immediately blasted Quinn’s proposal, saying he went back on his word because the roughly 67 percent income tax increase approved in 2011 was billed as temporary.

“After five years of Pat Quinn’s failed leadership, we have record tax hikes, outrageously high unemployment, massive cuts in education, and there’s still a giant budget mess in Springfield,” Rauner, of Winnetka, said in a statement. “We can balance the budget without more tax increases, if we create a growth economy, and restructure and reform our broken government.”

Other top Republicans said Quinn didn’t address the state’s high unemployment or go far enough on other fiscal issues, like how to pay down the backlog of bills.

Illinois will see a roughly $1.6 billion revenue dip if the tax increase rolls back in January as scheduled. State agency officials for weeks have been predicting dire cuts if that happens.

Quinn said without the increase there would be about 13,000 teachers laid off, among other cuts.

He said maintaining the tax rate would be a “hard choice” but vowed not to institute new taxes on “everyday services.” He said he’d like to again increase the state’s earned income tax credit, to help poor families keep more of what they earn, over the next few years.

Democrats credited Quinn with taking a bold step.

“I would commend the governor for his political courage and honesty, unlike previous governors,” House Speaker Michael Madigan told the public television show “Illinois Lawmakers.” ”He told the truth. He laid the cards on the table. If we wish to continue to provide the level of services we’ve become accustomed to education and other services, then the tax increase should be extended.”

Still, Quinn’s budget proposed an increase in spending.

Budget documents show a $36.8 billion state spending plan, including more for education, public safety and courts if the extension is in place. That’s a roughly 4 percent over last year when lawmakers approved a $35.4 billion budget. Quinn budget director Jerry Stermer said part of the increase addresses rising costs. He said Illinois is still saving money from Quinn’s past decisions, including closing state facilities, a re-negotiated union contract and a Medicaid overhaul.

Quinn, who is seeking a second full term, played down the call for extending the tax increase during the speech, referring to it as “maintaining” current rates. He’s been mum for weeks on what he’d planned to do.

Republicans and business groups have vowed to fight any extension of the temporary income tax hike and claim testimony from state agency officials predicting dire cuts has been overblown to justify keeping it. They’ve called for cutting spending and limiting new programs.

The push to make the increase permanent comes as Illinois is also grappling with billions of dollars in unpaid bills, a low credit rating and uncertainty with the state’s pension debt.

Quinn briefly recapped his signing of a landmark pension overhaul, which he’s called one of his biggest accomplishments. But the proposed budget won’t contain the estimated savings. The overhaul that cuts benefits for state employees and retirees is undergoing a legal challenge by unions that contend it’s unconstitutional.

Republicans said they had hoped for Quinn to address the state’s issues. House Republican Leader Jim Durkin called Quinn’s speech “rhetoric” that didn’t mention how to combat high unemployment.

“I would have hoped to have heard something of how we can do that, how we can turn that tide other than we’re going to tax, tax, tax,” he said. “I don’t believe that we can tax our way to prosperity.”

Lawmakers must approve a budget for the new fiscal year, which starts July 1, by the end of May.


Associated Press writers John O’Connor and Chacour Koop contributed to this report.


Follow Sophia Tareen at https://twitter.com/sophiatareen.

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