SPRINGFIELD -- Illinois Democrats are scaling back a major income tax increase as they search for votes in a frantic, last-ditch effort to deal with the state's crippling budget crisis.
After rank-and-file lawmakers balked at a 75 percent hike in the income tax rate, a new plan surfaced Monday that would raise it by 66 percent. The 3 percent rate now paid by individuals and families would rise to 5 percent in one of the largest state tax increases in Illinois history.
The Capitol crowd found itself multitasking, trying to piece together a tax and budget package while taking time out in the middle of the day to watch Democratic Gov. Pat Quinn get sworn into a full term. Many lawmakers then spent the evening dancing at the Illinois Inaugural Ball as the noon Wednesday deadline looms for the current General Assembly to act.
Also part of the plan is a 46 percent business tax increase. The 4.8 percent corporate tax rate would climb to 7 percent instead of the 8.4 percent rate previously sought. The higher rates would last four years, though how much would be temporary is still a subject of negotiations.
Powerful House Speaker Michael Madigan, D-Chicago, said "not yet" when asked by a reporter if he had the votes. "Well, tomorrow is do or die," he said, later adding that Tuesday would be a long day in the legislature.
Democrats scrambled for ways to help alleviate an expected $15 billion budget deficit, including an $8 billion backlog of unpaid bills to providers of state services. The changes reflected the concerns of Democratic lawmakers to a plan tentatively agreed upon late last week.
In addition, lawmakers are looking at a $1-a-pack increase in the state's current 98-cent tax on cigarettes. Money from the cigarette tax hike had been geared toward pumping new money into schools. A House panel advanced the legislation Monday.
Also being negotiated among top Democrats was the creation of tough limits on state spending increases, a move aimed at winning the votes of fiscal conservatives who oppose using any new tax money to create additional programs or added spending, said Rep. Frank Mautino, D-Spring Valley. Downstate lawmakers pushed for limiting state spending at a 1 percent level of growth or risk that the tax increases be rolled entirely back.
"You have to have cuts, and if we put that (hard) cap on (spending), make no mistake about it, there will be cuts," said Mautino, a state budget expert. "This will never be easy to pass, but it makes it easier. It moves people toward it."
Mautino and others said money from the potential income tax increase would be used to leverage billions of dollars in borrowing to reduce the backlog of overdue bills to providers of state services and to pay public employee pensions.
"You're looking at a structural deficit, where before the end of next year, the state will be out of money, and that has strong implications on our bond ratings," Mautino said. "Folks, we're one step above junk right now."
Still under discussion was a plan to replace the state's current property tax credit for homeowners on their personal income taxes. An earlier proposal to drop the income tax credit in exchange for a direct $325 annual check was rejected by suburban Democrats who said it would shortchange some Cook County homeowners of a tax credit worth thousands of dollars.
Though Democrats will still control the new General Assembly that gets sworn in Wednesday, their numbers were eroded by Republicans in the November election. With virtually no Republican support for higher taxes, Democratic leaders contend it will be easier to gain support for a tax hike in a legislature with some retiring members no longer worried about facing the voters.
"We have to do something within the next 48 hours," said Sen. Donne Trotter of Chicago, the lead budget negotiator for Senate Democrats. Trotter noted the clock is "ticking, but the bottom line is we don't want it to explode."
Quinn's day illustrated the strange nature of goings-on in Illinois government. The governor privately lobbied some lawmakers on the tax-increase proposal in between being sworn into a four-year term at noon and taking the dance floor at the Inaugural Ball at night.
But Quinn only touched on the state's massive budget woes and did not use the words "tax increase" in his half-hour inaugural address.
The state "must deal with a fiscal crisis, and I'm here today to say that we will pay our bills, that we will stabilize our budget. We will strengthen our economy. We will do that, and we will do that very, very soon," said Quinn, who was sworn in by Illinois Supreme Court Justice Anne Burke, the wife of Chicago Ald. Ed Burke, 14th.
Quoting at various points from the Bible, Abraham Lincoln, Carl Sandburg, "America the Beautiful," Jacqueline Kennedy, Martin Luther King Jr. and the late Illinois poet laureate Gwendolyn Brooks, Quinn alluded to the circumstances nearly two years ago that led him to become governor with the impeachment and removal of disgraced ex-Gov. Rod Blagojevich.
"I'm here today to say that we've restored integrity and honesty in the office of governor," Quinn said. "We have replaced a government of deals with a government of ideals, and I believe that that ... must be our principle every day that we are alive."
It was Republican Judy Baar Topinka, who lost a 2006 bid against Blagojevich but was elected in November as state comptroller, who sounded the strongest financial alarm. Noting that Democrats and Republicans contributed to build a sea of red ink, Topinka urged bipartisan problem solving.
"It's time we got together to find the courage, the will and the civility to get us out of that ditch and make Illinois great again," she said.
Also inaugurated on Monday were other statewide officeholders including Democratic Lt. Gov. Sheila Simon, Democratic Attorney General Lisa Madigan, Democratic Secretary of State Jesse White and Republican Treasurer Dan Rutherford. About 2,000 people applauded after passing through increased security at the Prairie Capital Convention Center. There were metal detectors on hand, and police searched bags.
Quinn attended a morning church service accompanied by Monica Walker, who was described by a spokeswoman as the governor's "guest" and "friend." At the evening ball, she was to be Quinn's partner for the first dance.
A little less than 6,000 were expected for the ball at the convention center, where the main hall was covered in blue drapes. Billed as a cost-saving measure, instead of a seated dinner, there were food stations, including ones for tacos, pasta and burgers. There were no floral arrangements, as there were in years past.
The ball was paid for by donations from interest groups and corporations including ComEd, Comcast, Union Pacific and the Illinois Hospital Association.
Todd Wilson contributed to this report.