Illinois Senate Draws On Federal Funds

Date: August 20, 2015

Skips Budget, Chooses Labor Interests Over Reform


The Illinois Senate approved a final measure that would draw on over $5 billion in federal funds to keep state programs running in lieu of enacting a budget for 2016. The Democratic-led chamber also overrode a veto by Republican Governor Bruce Rauner on a measure that would allow for arbitration in disagreements over collective bargaining. Reuters reports Rauner blasted Democrats in the state Senate for making “it abundantly clear that they’d rather raise taxes than stand up to the politically powerful,” adding that it “is now up to House members to take the responsible, pro-taxpayer position and uphold our veto.” Democratic lawmakers have opposed Rauner’s plan to improve the state’s finances and enact reforms to improve the climate for small businesses, while the state enters its seventh week of operating without a budget.

What Happens Next

The poor state of Illinois’ finances has already led to the Metropolitan Pier and Exposition Authority to default on its bond payments. While the Democrats’ measure also sets aside state funds to support these bonds, lack of action on a state budget gas already prompted rating agencies to downgrade that authority’s credit rating, increasing the cost of capital. This is representative of the challenges that public borrowers will face if the state does not take steps to address its structural budget challenges.

What This Means For Small Business

Should the markets view intransigence over the state’s finances as a systemic risk to lenders, future efforts to balance the state’s budget will be significantly more expensive. Higher interest rates on bonds will directly impact both tax paying small businesses and consumers, potentially driving investment and businesses to neighboring states. Improving the business climate in Illinois will require lawmakers to adopt risky positions and challenge those with entrenched political interests. Adopting a budget compromise, enacting pro-business reforms, and allowing the state and municipalities to stand up to powerful labor interests will greatly improve the business climate in Illinois.

Additional Reading

The NFIB has commented extensively on challenges facing small businesses in Illinois. Bloomberg News provides additional coverage of the state’s budget challenges.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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