It's time for tax hike or more cuts, Quinn says in budget address

SPRINGFIELD - Gov. Pat Quinn's call for a special tax increase to prevent school funding cuts was denounced as a political ploy by Republicans and possibly doused by a leading Democrat, who said people don't want to hear about higher taxes when struggling to make ends meet.

The combined criticism cast doubt on Quinn's surprise 33 percent income tax increase plan, unleashed on lawmakers at the end of a brisk, 20-minute budget presentation Wednesday.

"It's the best way to help save education and save our kids," Quinn told reporters after the speech. His plan would raise the individual income tax rate to 4 percent from 3 percent, and take the corporate income tax rate to 5.8 percent from 4.8 percent.

The result would be roughly $2.8 billion earmarked for restoring more than $1.3 billion in planned education cuts, including nearly $1 billion in federal stimulus money that expires at the end of this budget year.

The remainder, state budget officials said, would go to pay down the $1.8 billion in overdue payments to school districts. The growing backlog has prompted several suburban schools to begin posting the amount due on school message boards and urging parents and taxpayers to call lawmakers in protest.

The governor challenged lawmakers to take immediate action on the increase. Without it, his budget relies almost exclusively on borrowing and delaying payments to appear balanced.

But criticism came from nearly all corners of the Capitol.

House Speaker Michael Madigan in a public TV appearance again questioned whether tax increases are the right move given the state of the economy.

"The people of America, the people of Illinois, don't want tax increases. They're hurting," said Madigan, a Chicago Democrat who wields great influence on what the final budget will include.

Madigan applauded Quinn for having the courage to suggest a tax increase but quickly added, "That doesn't mean it's going to happen."

Senate President John Cullerton, a Chicago Democrat, again offered support for the tax increase, but he said it needs to start in the House. Last year, the Senate approved a tax increase backed by Quinn to help balance the budget, only to have it wither in the House.

Republicans, meanwhile, accused Quinn of playing politics with education funding, openly doubting the governor would ever follow through with cutting public education as much as threatened.

"Scaring people ... is not leadership," said House Republican leader Tom Cross of Oswego.

Other than education, budget cuts include a $70 million reduction in prescription assistance for poor seniors and no longer sharing nearly $300 million in income tax money with local communities.

Quinn's also counting on $300 million in savings from pension reforms that would put new public-sector hires in a less lucrative pension system. Sen. Cullerton said it would also cap pension benefits at $150,000 a year.

But those moves merely take a nearly $13 billion deficit down to roughly $11 billion.

In order to "balance" that red ink, Quinn would seek permission to borrow nearly $5 billion and then roll over nearly $6 billion in unpaid bills to the next budget.

Quinn, a Chicago Democrat, is seeking a full term in this year's Nov. 2 general election and faces Republican state Sen. Bill Brady of Bloomington and Green Party candidate Rich Whitney of Carbondale.

Quinn went directly after Brady's budget plan, which focuses on service cuts to fill much of a shortfall that amounts to about 50 percent of the state's main bank account.

"That approach is heartless and naive, taking a chain saw to our state budget for schools and for health care, for human services, for public safety," Quinn said, calling it "just plain wrong."

Talking to reporters after the speech, Brady called Quinn's budget a "disaster."

"Today was an embarrassing day," he said. "He asked for an extra 30 days and yet the best he could come up with was a budget that was $4 billion out of balance. A budget that left our vendors holding $6 billion in unpaid bills. That's not responsible. That's not the type of government I'm going to run."

Quinn's budget does include a $2,500 tax credit for small businesses employing fewer than 50 that add full-time jobs. It is similar to a tax credit proposed by Brady.

• Daily Herald staff writers Joseph Ryan, Chase Castle and Timothy Magaw contributed to this report.