February 15, 2017 / 7:11 PM / a year ago

Illinois governor raises prospect of tax hike in budget speech

CHICAGO, Feb 15 (Reuters) - Illinois Governor Bruce Rauner said on Wednesday he will entertain tax measures to address the state’s deep financial woes, but continued to tie his possible support to nonbudgetary demands to spur economic growth.

In his third budget address to the legislature, the Republican governor said a bipartisan Senate bill package aimed at breaking the state’s nearly 20-month budget impasse could win his support.

“First and foremost: the final result must be a good deal for taxpayers and job creators: a grand bargain that truly balances the budget once and for all, and really moves the needle when it comes to job creation,” Rauner said.

He also tied an income tax hike proposed by Senate leaders to a permanent instead of a two-year local property tax freeze and said he was open to broadening Illinois’ sales tax base.

Illinois is limping through a record-setting second consecutive fiscal year without a complete budget due to an ongoing feud between Rauner and Democrats who control the legislature. A six-month fiscal 2017 budget expired on Dec. 31.

The Senate’s so-called grand bargain consists of 12 bills to raise income taxes by a third, borrow $7 billion to winnow down a $12 billion record-setting pile of unpaid bills and expand casino gambling.

It would also change how workers are compensated for on-the-job injuries and impose term limits on legislative leaders. A key bill to ease Illinois’ $130 billion unfunded pension crisis was rejected by the Senate earlier this month.

While Rauner delivered his speech, some Democrats taped sheets of paper to their desks saying “Rauner Budget = Fake News” and “Rauner Budget = Alternative Facts.” Details of the governor’s proposed budget for the fiscal year beginning July 1 were not immediately available.

A former private equity investor, Rauner won election after pledging to use his business acumen to fix Illinois’ collapsing state finances. Instead, he is the first American governor in at least 80 years to fail to enact a full-year operating budget.

An inability to secure a balanced budget with Democrats this spring would carry potentially stinging political consequences for Rauner because he risks entering his 2018 re-election effort with a nearly threadbare list of legislative accomplishments, including perhaps the most important trophy of all: passing a budget.

Illinois’ credit ratings, the lowest among the 50 states, have been downgraded six times since Rauner took office in January 2015. They are now just two notches above the junk level.

Editing by Matthew Lewis

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