Gov. JB Pritzker on Wednesday proposed a $41.58 billion state budget for the next fiscal year that relies on more than $900 million in savings from the elimination of “corporate loopholes,” relatively flat spending overall, increases for some programs, no income-tax increase and a second year of skipping a recommended $350 million boost for the school aid formula.

“I had bolder plans for our state budget than what I am going to present to you today. It would be a lie to suggest otherwise,” Pritzker said during his annual budget and State of the State address.

“But as all our families have had to make hard choices over the past year, so too does state government,” Pritzker said. “And right now, we need to pass a balanced budget that finds the right equilibrium between tightening our belts and preventing more hardships for Illinoisans carrying a heavy load.”

Because of the ongoing COVID-19 pandemic, the Democratic governor spoke in a prerecorded, streamed message from the Orr Building at the Illinois State Fairgrounds, where a state-managed COVID-19 mass-vaccination clinic got underway Wednesday.

Senior budget officials in Pritzker’s administration said the proposed $932 million in loopholes to be eliminated are tax breaks for businesses that could afford them. Cutting those loopholes would put the state “on a trajectory” to chip away at a decades-in-the-making “structural deficit” that results in a rising backlog of bills to state vendors, officials said.

They said the $350 million increase that school districts wouldn’t receive should be offset by increased federal funding during the COVID-19 pandemic. 

Republicans who are in the super-minority in the Illinois House and Senate are expected to fight the reductions in business tax credits, which they consider essential to fuel the state’s economic recovery from a COVID-19-induced recession. Eliminating those tax incentives would amount to tax increases on businesses, they said.

Pritzker’s budget plan requires approval by the General Assembly this spring.

Pritzker said his budget plan doesn’t depend on federal aid to state and local governments being considered by Congress and President Joe Biden. That aid could amount to $7.5 billion for Illinois state government and $6 billion for local governments. 

If the federal money comes through, it mainly would be used to pay down the state’s debts, which include an estimated $10 billion backlog in bills to state vendors by June, Pritzker budget officials said. If left unchecked, that backlog, which is part of the state’s structural gap between state revenues and the cost of state services, is expected to grow to $14 billion by June 2022.

Republicans said the proposed elimination of tax incentives would hamper job creation. They said Pritzker shouldn’t resort to “gimmicks” such as borrowing and diverting millions away from road improvements plug holes in the budget.

While not saying what programs and services they would cut, Republican leaders said after Pritzker’s speech that changes to the Medicaid program and state employee pensions would be a good place to look for efficiencies.

“We need to change the narrative,” said House Minority Leader Jim Durkin, R-Western Springs. “This is not about cuts. This is about reforming state government.”

Rep. Chapin Rose, R-Mahomet, said the Prizker is “relying on borrowed money to pay off borrowed money.”

More: In no surprise, reaction to Pritzker’s budget proposal splits along partisan lines

Durkin said Pritzker never has publicly disclosed details of potential 5% state agency spending reductions he requested from agency heads in 2020. Republicans would like to know those agencies’ preferences for cuts, Durkin said.

Pritzker’s press secretary, Jordan Abudayyeh, wouldn’t release the list of potential agency cuts to The State Journal-Register, either, but she said “the ideas for spending controls and cuts at state agencies have been included in the fiscal 2022 budget in order to hold spending flat or produce savings.”

Pritzker administration budget officials said the governor took no pleasure in proposing a flat budget for fiscal 2022 when many social services need to be increased during the pandemic. They said the pandemic has wracked state revenues, though some revenues are indicating the start of an economic rebound.

Pritzker is expected to face pressure from Democratic lawmakers to increase funding in some areas and potentially consider a tax increase after a constitutional amendment to institute the graduated income tax plan that Pritzker supported was defeated by voters in November. That plan would have increased taxes on the wealthy and brought the state an estimated more than $3 billion in additional revenue each year.

House Speaker Emanuel “Chris” Welch, D-Hillside, issued a statement after Pritzker’s speech that said, “As expected, given the challenges of COVID-19 and the accompanying job loss and business disruption, this year’s budget requires hard choices by the legislature and the governor.

“Today’s address was the first step in a process that involves all of us coming to the table and working line by line to build a budget that reflects our priorities: Our COVID-19 response, improving operations for the Illinois Department of Employment Security, funding veterans homes, and providing resources for schools and job-training efforts,” Welch said.

Senate President Don Harmon, D-Oak Park, called Pritzker’s budget outline “a good-faith effort … to both recognize our state’s financial realities and honor our commitment and priorities.

“Coming out of this pandemic, we need to get people back to work,” Harmon said. “Our priority with any tax incentive needs to be jobs for hard-working Illinoisans. So I think it’s fair to ask what the hard-working taxpayers of Illinois are getting in return for these corporate tax breaks.”

Rep. Sonya Harper, D-Chicago, chairwoman of the Illinois Legislative Black Caucus, said Black lawmakers will work to “ensure our most vulnerable do not bear the brunt of cuts to direct services and other needed resources, especially when so many disparities already exist for these communities.”

Pritzker proposes to deal with a $2.6 billion spending shortfall forecast for fiscal 2022, which begins July 1, with the cuts in corporate tax incentives, by redirecting about $100 million in cigarette tax revenue from the capital improvement program to the general fund, and with a general fund budget that is $1.8 billion less than the current fiscal year spending plan.

The state is benefiting from an enhanced federal match on Medicaid spending during the pandemic, officials said.

The governor is dealing with the current fiscal year’s projected $3.9 billion spending shortfall, $2 billion of which is related to COVID-19-related revenue drops, in part by cutting $711 million, which includes a state hiring freeze, operational and grant reductions and $75 million in personnel cost reductions.

The personnel cuts, which could include furloughs of state employees, still need to be negotiated with the American Federation of State, County and Municipal Employees.

Borrowing would cover most of the rest of the shortfall.

Pritzker’s fiscal 2022 budget would:

• Make the full $9.3 billion payment toward state pensions, a $739 million increase from the current fiscal year.
• Provide a 7.9% funding increase for the Illinois Department of Children and Family Services to continue to hire staff and support a growth in caseload.
• Give a $66.8 million increase to the Department of Human Services’ home-services program for increasing caseloads and a wage increase for providers.
• Include money for proposed Jan. 1, 2022, rate increases in the Department on Aging’s Community Care Program.
• Not cut K-12 education funding.
• Increase funding for the Monetary Award Program for higher education.
• Increase general revenue funding by $10.3 million for in-service training for local law enforcement officers based on new training requirements in the criminal-justice reform bill that Pritzker is considering signing into law.
• Reduce spending on “government services” by $135 million. Spending on state prisons, for example, would decrease in connection with a dropping prison population.

Contact Dean Olsen: dolsen@gannett.com; (217) 836-1068; twitter.com/DeanOlsenSJR.