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Illinois governor raises prospect of tax hike in budget speech

CHICAGO (Reuters) - Illinois Governor Bruce Rauner said on Wednesday he will entertain tax measures to address the state’s deep financial woes but continued to tie his possible support to the legislature agreeing to measures he thinks will spur economic growth.

FILE PHOTO - Illinois Gov-elect Bruce Rauner talks to the media after a meeting with U.S. President Barack Obama at the White House in Washington December 5, 2014. REUTERS/Larry Downing/File Photo

In his third budget address to the legislature, the Republican governor said a bipartisan Senate bill package aimed at breaking the state’s nearly 20-month budget impasse could win his support.

“First and foremost: the final result must be a good deal for taxpayers and job creators: a grand bargain that truly balances the budget once and for all, and really moves the needle when it comes to job creation,” Rauner said in a speech punctuated with Democratic snickering and laughter.

He conditioned his support for an income tax hike proposed by Senate leaders to a permanent freeze on local property taxes rather than for two years as the Senate package dictates. He also was open to broadening Illinois’ sales tax base but rejected taxing food and medicine.

Illinois is limping through a record-setting second consecutive fiscal year without a complete budget due to an ongoing feud between Rauner and Democrats who control the legislature. A six-month fiscal 2017 budget expired on Dec. 31.

Rauner’s fiscal 2018 general fund budget calls for $37.3 billion in spending but projects $32.7 billion in revenue, leaving $4.57 billion in unspecified cuts and revenue increases to be negotiated with the legislature.

The budget also depends on changes to state worker pay and health care benefits that unions have fiercely opposed.

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Analysts at S&P Global Ratings, which released a highly critical report on Illinois’ budget stalemate this month, said it was unclear how Rauner’s plan provides a spending framework supported by sufficient revenue.

“I’m not sure how far it moves the ball down the field,” said S&P analyst Gabe Petek.

Illinois’ credit ratings, the lowest among the 50 states, have been downgraded six times since Rauner took office in January 2015 and now are just two notches above junk level.

Before Rauner’s speech, some Democrats taped sheets of paper to their desks saying “Rauner Budget = Fake News” and “Rauner Budget = Alternative Facts.”

Democratic House Speaker Michael Madigan, who rejected a Republican call to remove the signs, condemned Rauner for having “failed to introduce a balanced budget” for a third straight year.

The Senate’s so-called grand bargain consists of 12 bills to raise income taxes by a third, borrow $7 billion to winnow down a $12 billion record-setting pile of unpaid bills and expand casino gambling.

It would also change how workers are compensated for on-the-job injuries and impose term limits on legislative leaders. A key bill to ease Illinois’ $130 billion unfunded pension crisis was rejected by the Senate this month.

Editing by James Dalgleish and Matthew Lewis