- Associated Press - Tuesday, May 13, 2014

CHICAGO (AP) - A watchdog group said Tuesday it opposes Gov. Pat Quinn’s proposed budget because it would use an income tax hike to give homeowners a property tax refund - new spending the group says should be used instead to significantly pay down Illinois’ multibillion-dollar bill backlog.

The report by the Civic Federation comes as legislators face tough votes in coming weeks on the state’s 2015 spending plan.

Quinn’s $38.1 billion proposal would extend the temporary income tax increase lawmakers approved in 2011. That tax hike was set to be rolled back - from 5 percent to 3.75 percent for individuals - in January, leading to a drop in revenue of about $1.6 billion.

Quinn, a Chicago Democrat, has said extending the tax hike is necessary to avoid severe cuts to areas such as education.

The Civic Federation, an influential Chicago-based policy analysis organization, has said the tax should be extended for one year then scaled back over the next three years.

But the group opposes a new $500-per-homeowner property tax refund that Quinn is proposing to replace the current property tax credit.

The refund would cost the state about $715 million more than the credit, according to the organization’s analysis. They say that money should go toward Illinois’ roughly $5 billion backlog of overdue bills.

“The governor’s plan appropriately recognizes that the state’s finances cannot withstand a dramatic reduction in revenues next year,” said Civic Federation President Laurence Msall. “However, new spending initiatives are just as contradictory to the state’s fiscal reality - especially those financed by borrowing.”

Quinn’s plan calls for borrowing about $650 million from other state funds to close a gap in the operating budget and to put $480 million toward the overdue bills. That money would be paid back over two years.

Quinn spokesman Abdon Pallasch said the governor believes paying down the bill backlog is a priority, and he’s proposing the borrowing for that reason. Pallasch also noted major credit rating agencies issued positive reviews of Quinn’s budget proposal, with Moody’s Investors Service saying the new property tax refund is “manageable.”

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