CHICAGO (Reuters) - Illinois Governor Pat Quinn signed the state's $35.7 billion operating budget for fiscal 2015 on Monday, vowing to continue to chisel away at spending approved by the legislature.
The General Assembly's budget is peppered with one-time measures after House Democrats in May could not muster enough votes to make a temporary income tax hike permanent.
Higher personal and corporate income tax rates, which were passed in 2011 during one of the state's budget pinches, are set to partially expire on Jan. 1, causing an estimated $2 billion revenue decline in the fiscal year that begins on Tuesday. The new budget keeps most spending at fiscal 2014 levels despite the revenue drop.
The Democratic governor, who pushed for making the tax rates permanent, said he will do the budget cutting that lawmakers failed to do.
“Reducing the budget and identifying additional efficiencies will help minimize the impact of cuts in vital services and maintain our hard-won fiscal gains," Quinn said in a statement. "While there's more work to do, we must ensure the state lives within its means.”
The governor said he canceled $250 million for state capitol renovations and directed state agencies to identify additional efficiencies, including selling nearly half the state's aircraft. Last week he announced plans to save $55 million by cutting the amount of property leased by the Illinois government and also called for a reduction in the amount of state-paid parking for workers.
The revenue decline will occur in the second half of fiscal 2015 as the personal income tax rate falls to 3.75 percent from 5 percent and the corporate rate drops to 5.25 percent from 7 percent.
Republican lawmakers have warned that Democrats who control the House and Senate will try to make the higher tax rates permanent following the November general election. Bruce Rauner, Quinn's Republican opponent in the governor's race, said in a statement that Quinn's "only goal is to permanently take more money out of every hard-working Illinoisan’s paycheck – and this broken budget is the result."
The budget is expected to add $2 billion to Illinois' backlog of unpaid bills, while allowing the governor to borrow up to $650 million from a variety of dedicated state funds to boost general fund cash flow. These kinds of one-time revenue measures have contributed to past downgrades of Illinois' credit ratings, which are at the lowest level among states.
This month, Moody's Investors Service said the budget poses the risk the state could erode some of the progress it has made in reducing its huge pile of unpaid bills.
The state's bill backlog currently totals $4.3 billion, according to Quinn's budget office.
(Reporting by Karen Pierog; Editing by James Dalgleish)