The Illinois House passed a $36.5 billion Democratic budget measure with Republican support, opening the door to a tax hike that will cost Illinois taxpayers $5 billion.

The fiscal year began at midnight, July 1 and for the 3rd year in a row, state lawmakers failed to pass a budget. Bond agencies have threatened to reduce the state's bond rating to junk status if no budget was in place.

But Democratic leader Michael Madigan sent a letter to the bond rating agencies after the House vote asking them to hold off on changing the state's rating. 

GOP Governor Bruce Rauner has indicated he will sign the budget measure if it reaches his desk, even if it includes the $5 billion in tax increases.

Chicago Sun Times:

There’s still a long path to a resolution. Democrats must drum up support not only for the spending plan, but also for a politically unpopular revenue measure. There’s also a need for a measure to pay the state’s $14.7 billion backlog of unpaid bills.

Saturday marks the first day of a new fiscal year — meaning the state will enter its third straight year without a budget. But there were notes of optimism on Friday.

“We’re close. We’re close. But again, I need to be able to sell it to my caucus and look at it as a whole,” Durkin said en route to his second meeting with the speaker, noting the plan needs to include cuts, reforms and revenue.

“Obviously we haven’t reached a consensus on revenue. That is still something that’s open to negotiation,” Durkin said. “But again, the situation is very fluid and I will say that we’re in — the last two days and today —we’re in a better situation than we were the day before.”

Taking the floor after the vote, Madigan thanked Republicans for their support: “I think it’s a good step forward, a step we can build upon.” The speaker also sent letters to credit rating agencies, which had threatened to downgrade the state to “junk” status come July 1 without a budget, imploring them to “temporarily withhold judgment and allow legislators time to negotiate a bipartisan, balanced budget.”

In his letter, Madigan notes pension and procurement reform, local government consolidation and workers’ compensation changes as “compromises” he wants the governor to recognize.

Durkin said he committed Republican votes on the appropriations measure as a “gesture of good faith.”

In other “good faith” gestures, after the appropriations vote, the Gov. Bruce Rauner-led Illinois Republican Party pulled a digital ad that dubbed the speaker “Junk Madigan.”

Still, there was finger-pointing. In a statement, the speaker dubbed the impasse “the governor’s budget crisis.” Soon after, Rauner approved a bill funding 911 centers, but used his veto powers to remove a Chicago phone tax Mayor Rahm Emanuel was relying on to shore up the Laborer’s pension fund. Despite the measure having passed with Republican support, in his veto message, the governor accused Democrats of a “mean-spirited strategy” that the majority has used for years, using vulnerable residents as leverage to “force excessive, unwarranted tax hikes.”

Those "excessive, unwarranted tax hikes" are being supported by members of his own party.

House Minority Leader Jim Durkin, R-Western Springs, said he’s putting GOP votes on the spending plan that relies on more than $5 billion in new taxes.

“We are close,” Durkin said. “We are so close I can taste it.”

But his caucus wasn’t entirely on board. State Rep. Jeanne Ives, R-Wheaton, said the proposed budget continues to fund bad government behavior.

“This budget is a disaster, and this budget is the death knell for Illinois,” Ives said. “It tells every taxpayer who’s capable of moving from the state of Illinois it’s time to pick up stakes and leave. That’s what this budget does.”

Rep. David McSweeny, R-Barrington Hills, echoed Ives sentiments.

“Obviously, things are heading in the wrong direction,” McSweeney said. “Today, the Republicans in the General Assembly raised the white flag to a massive tax increase.”

All House Democrats and 23 Republicans voted for the measure.

The proposed spending doesn’t address the state’s $15 billion bill backlog.

Legislative leaders will meet again today, where tax increases could be discussed. Then they’re back at it Saturday, the first day of the new fiscal year.

Rauner has abandoned all of his radical reforms of the state's finances and pensions. He has been mugged by reality. 

The reality is that Illinois is a Democratic state with numerous special interest groups almost wholly dependent on government to survive. Rauner's proposed cuts to programs like senior care, Medicaid, the university system, and other programs with powerful Democratic backers in the legislature went absolutely nowhere for 3 years. All attempts to reform the state's finances and bring government spending under control have failed. 

The lack of pension reforms for state workers and Chicago public unions means that the pension time bomb is still ticking. The unions fiercely and successfully resisted these reforms with the help of the courts and the Illinois Constitution that prevents changes to existing public pension plans.

The tax increase won't make much of a difference in the long run. There's still $15 billion in unpaid bills the state owes to contractors and small businesses. Then, there's history to contend with. No matter what tax increases are passed, it is doubtful that the revenue projections will be met. Higher personal income taxes means more residents and businesses exiting the state. "Sin" taxes on tobacco and liquor never bring in what is promised. 

With GOP help, Democrats will be able to pass their band aid budget that won't come close to staunching the flow of red ink and paying off what the state owes in unpaid bills. And Republicans - including the governor who is running for re-election - will be complicit in this travesty.