Gov. J.B. Pritzker’s budget proposal includes $800 million in tax increases, largely for corporations, sportsbooks

SPRINGFIELD — Facing a tighter budget outlook, Democratic Gov. J.B. Pritzker on Wednesday unveiled a $52.7 billion election-year spending plan built on more than $800 million in tax increases that would largely fall on businesses, from large corporations to state-regulated sportsbooks.

In his sixth budget proposal, Pritzker also laid out a long-term plan to manage the state’s massive pension debt by increasing the funding target to 100% from 90% and extending the payment deadline for three years, to 2048.

To address a projected deficit as anticipated revenue growth slows, Pritzker is proposing to more than double the state tax on sports wagers — paid by sportsbooks out of their post-payout revenue — raising it to 35% from 15%. The change would generate an estimated $200 million in additional revenue.

The governor also proposes extending a cap on losses large corporations can write off on their state income taxes, which he estimates will generate another $526 million in annual revenue. The current annual cap of $100,000 is set to expire Dec. 31, but Pritzker proposes raising the limit to $500,000 and allowing it to continue.

Pritzker also is proposing a permanent repeal of the 1% sales tax on groceries, which he and the Democratic-controlled legislature previously suspended for one year in 2022, when the governor was running for reelection.

Lastly, Pritzker is dusting off a previous unsuccessful plan to limit the tax discount retailers receive for collecting sales tax, which his office estimates would generate another $101 million annually.

Pritzker laid out the proposals in a speech to both chambers of the General Assembly in a combined budget and State of the State address.

The business tax increases are designed to bring a spending plan aides described as “austere” into balance without raising taxes or fees that Illinois residents pay directly, particularly in an election year when Democrats are looking to defend their overwhelming majorities in the Illinois House and Senate.

In his address, Pritzker acknowledged the “hard choices” facing lawmakers this year.

“I wish we had big surpluses to work with this year to take on every one of the very real challenges we face,” Pritzker told lawmakers, according to the prepared text of his remarks.

“It’s important to note, that while this budget is tight this year, our fiscal house is in order, and we are able to keep our commitments to the people of Illinois,” he said, according to that text. “This year’s budget proposal is focused and disciplined, and because of the responsible actions we took in the last few years paying off state debt and treating federal pandemic relief as one time revenue, we are not facing the budgetary challenges that other big states are this year.”

Overall, Pritzker’s proposal, which kicks off several months of negotiations with lawmakers who must approve a final budget before the new fiscal year begins July 1, would raise spending from the state’s general fund by $2.3 billion over the budget lawmakers approved last May, a 4.6% increase.

While confronted with spending pressures including the response to migrants arriving in Chicago from the southern U.S. border and rising costs in a separate health care program for immigrants who are in the country without legal permission, Pritzker is attempting to increase spending in other areas that have been among his priorities, including early childhood education, and offer some relief to low-income residents.

Taking a cue from Cook County, the governor’s proposal for Healthcare and Family Services includes $10 million for a program to erase medical debt. That investment would amount to $1 billion for an estimated 300,000 Illinois households, according to the governor’s estimates.

“This was done, I would say successfully by all accounts, in Cook County,” Deputy Gov. Andy Manar told reporters Wednesday, leading the state to seek to scale up the program.

The Cook County debt initiative was on track to wipe out bills for around 73,000 residents as of last year. It was targeted at people with lower incomes and those who had medical debt that was 5% or more of their household income.

The governor’s proposal keeps his focus on early childhood education and care, including funds for an additional 5,000 slots in so-called “preschool deserts,” his office said.

The early childhood investments also include $13 million for Pritzker’s push to roll all early childhood services into a new state agency, the Department of Early Childhood.

A proposal for a new child tax credit, meanwhile, would mean an income tax credit for “working families” with kids under age 3.

The budget details unveiled Wednesday indicate the governor won’t seek more than the state’s minimum obligation of increasing education funding for kindergarten through high school by at least $350 million annually.

Pritzker’s administration also announced increased funding for its Home Illinois program, which addresses the prevention and response to homelessness and expands housing support and job opportunities for those affected.

Pritzker’s proposals include providing $35 million to maintain court-based rental assistance; $25 million for short-term rental assistance and other services for households for up to two years; over $33 million for street outreach, legal assistance, medical respite care, services for people getting out of prison and other support.

The Home Illinois program is administered by the Illinois Department of Human Services, and the Pritzker administration said the budget proposal includes “record funding” for human services programs and “support for our social safety network.”

In November, the administration announced its allocation of $160 million from the agency’s current budget for funding the migrant crisis in the Chicago area. Pritzker’s proposal includes an additional $182 million for the next budget year. His budget also includes $440 million for a program that provides state-funded health insurance to adult immigrants who are in the country without legal permission, down from $550 million budgeted for the current year.

During a briefing with reporters Wednesday morning, Manar, Pritzker’s budget point person, said the proposed increase in Human Services funding is a reflection of the governor’s priorities and the rocky fiscal shape of state government five years after the administration of Pritzker’s predecessor, Republican Gov. Bruce Rauner.

“Undoubtedly, meeting the emergency nature of the costs related to asylum seekers is a priority of the governor’s,” Manar said.

The governor’s budget proposal also increases funding for the embattled Illinois Department of Children and Family Services under its new director, Heidi Mueller, by $76.2 million. The plan would include funding for 392 additional workers to support DCFS caseloads and a one-time investment of $100 million for capital grants that would help increase the capacity for youth placement “in the most clinically appropriate settings,” according to the governor’s office.

dpetrella@chicagotribune.com, jgorner@chicagotribune.com, oolander@chicagotribune.com