$1.8B state tax-break deal reached, with fund-diversion help

By JOHN O'CONNOR

SPRINGFIELD, Ill. (AP) — Gov. J.B. Pritzker and leaders of the Illinois House and Senate on Thursday announced agreement on a state spending plan that aims to fight nagging, near-record inflation by giving $1.8 billion back to taxpayers.^[1]

The deal comes from a freeze on the motor-fuel tax, a year-long hiatus on grocery sales taxes, a per-household property tax reimbursement of up to $300, and an increased tax credit to the low-income working families.

“Illinoisans will benefit from $1 billion in tax relief at the pump, in the supermarket checkout and in their property tax bills,” Pritzker said outside his state Capitol office, flanked by Senate President Don Harmon and House Speaker Emanuel “Chris” Welch. “On top of that, we’re expanding the earned income credit, sending direct checks to working families."^[2]

Despite an expected surplus of more than $1 billion this year and next, the tax breaks rely in part on tapping a different account. In this case, road fund money lost to freezing the motor fuel tax would be backfilled by taking $140 million saved up to clean up underground fuel tanks that pose an environmental hazard because they're leaking.

According to the Illinois Fuel and Retail Association, there are about 5,000 sites that have been cleaned up or are in the process of remediation, following state Environmental Protection Agency regulations under the 26-year-old law. The Leaking Underground Storage Tank Fund, fueled by a separate 1.1 cents-per-gallon gasoline tax, reimburses remediation costs, minus a $10,000 deductible.

The fund is liable for those cleanups. Josh Sharp, CEO of the fuel and retail group, said EPA estimates its obligation at $900 million to $1 billion. Even without the diversion, at a typical yearly payout of $65 million, it would take nearly 14 years to retire that debt.

That leaves property owners completing cleanups awaiting reimbursement for large upfront costs, just like the vendors who for years waited for state reimbursement and which Pritzker said are finally covered in this budget with a $4.1 billion pay-down of overdue invoices.

“The question is, can they keep their doors open?” Sharp asked. “Probably. Would it be preferable once you outlay a sizable amount of money to get reimbursed from a fund that's supposed to be there for just that purpose? Yeah, that would be ideal.”

Pritzker's EPA maintains an online database of 30,046 sites targeted for leaking storage-tank cleanup.^[3] But the agency did not respond Thursday to requests for information on the status of those projects or with any financial data related to the LUST Fund.

“These are funds that we believe are not necessary for the LUST Fund but the LUST Fund obviously will continue on even after this temporary tax relief,” Pritzker said.

In a year when Pritzker and his legislative colleagues trumpet budget-making moderation, the move recalls a darker fiscal period in the early 2000s when feuding Democrats Gov. Rod Blagojevich and House Speaker Michael Madigan cobbled together state spending with “fund sweeps,” taking what appeared to be large unspent balances in special funds to shore up the operating budget.

Concern over a shorted road fund rose from Pritzker's February budget proposal, which established the inflation-fighting scene with the hold on the motor fuel tax part of a $970 million tax cut. The fuel tax got specific attention because it was just three years ago that lawmakers increased it for the first time in 30 years and tied it to inflation to keep up with costs of a deteriorating infrastructure.

But the budget would forestall an expected 2.2-cent inflation-driven increase July 1, to 41.4 cents per gallon for gasoline.

That didn't sit well with transportation proponents, who noted it would cost transportation projects $135 million and stall pouring concrete on long-overdue repairs.^[4]

The LUST Fund's current $140 million balance would not be used, but incoming revenue would be diverted to roads.

House Revenue Chairman Michael Zalewski, a Riverside Democrat, called it a “weighing of equities.” Relief at the gas pump, he said, “is the most concrete thing that we can do that we feel like our residents will feel the effect of without doing greater harm to the state’s overall fiscal situation.”

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