By Kevin McDermott and Kathleen Foody (direct contributions in bold)

SPRINGFIELD, Ill. — After failing last year to persuade the Legislature to raise taxes for the good of Illinois’ fiscal stability, Gov. Pat Quinn has turned to a more personal and politically explosive argument: Raise taxes for the good of the kids.

It’s an argument that is already infuriating some lawmakers, who may now have to decide — in an election year — between hitting voters with a major tax hike or letting schools languish.

Quinn on Wednesday proposed upping the state’s 3 percent flat-rate income tax to 4 percent to prevent massive budget cuts to education. Without it, he warned, some 17,000 teachers statewide could get pink slips in the coming months.

“We are in a crisis of epic proportions” due to a $13 billion projected budget deficit, Quinn, a Democrat, told lawmakers in his annual state budget speech in the state Capitol.

Without the tax hike, he said, the state would have to cut $1.3 billion in school funding this year and “starve public education at every level, in every community.”

Republican leaders quickly accused Quinn of manipulation and scare tactics in his ongoing effort to push a tax hike through the Legislature.

“This is a fellow … who likes to hold people hostage. Last year it was college kids. … This year it’s K-through-12,” said House Republican Leader Tom Cross, referring to Quinn’s threat last year to cut college student grants if lawmakers didn’t raise taxes.

“Scaring people and creating fear and frustration is not leadership,” said Cross.

Quinn’s proposed spending plan for the fiscal year that starts July 1 totals $55 billion (a 4 percent drop from this year), about half of it for the state’s general revenue budget and the rest set aside for special purposes like road construction.

The state faces a projected $13 billion deficit next year. Quinn would address it by cutting about $2 billion in spending, borrowing an additional $4.7 billion and rolling over about $6 billion in unpaid bills that the state owes to vendors, hospitals and others.

The proposed cuts include $1.3 billion from schools, likely forcing teacher layoffs and higher local property taxes. It’s that cut that Quinn says could be avoided if the Legislature agrees to his tax hike, which would raise $2.8 billion, allowing the state to also catch up on this year’s late payments to schools.

Quinn’s proposal now goes before the Legislature, which will have to approve any budget before it can go into effect. Generally, the governor’s proposed budget becomes the starting point of negotiations between the governor and legislative leaders, with the final product likely to be different than what Quinn proposed Wednesday.

Quinn proposed the education cuts before he mentioned the tax increase, deriding the reductions as “taking a chain saw” to the schools. He called it the “most painful cut of all” but insisted that “our current fiscal emergency leaves me no choice.”

But then he offered one.

At the end of the 20-minute speech, Quinn unveiled the tax hike alternative. The increase was the one part of the budget proposal that the administration hadn’t revealed to the media and others in the days before the speech.

Quinn last year fought unsuccessfully to raise the state income tax to 4.5 percent. Unlike that measure, the new, 4 percent proposal would dedicate the increased revenue to education.

Though the Legislature is controlled by fellow Democrats, Quinn was unable to get his previous tax proposal through Springfield because House Speaker Michael Madigan has said he wants Republicans to join in the measure, and none would.

That dynamic appeared to remain Wednesday. Republicans slammed Quinn for what they said was a calculated attempt to box them in on a tax hike by focusing such a big portion of his threatened cuts toward schools. Senate GOP Leader Christine Radogno dismissed the proposed budget as “a tactical document.”

“We’re not going to be bullied into it,” she said.

Quinn took office in January 2009 after the removal of ex-Gov. Rod Blagojevich, and he is running for his first full term in the November election. His Republican opponent, state Sen. Bill Brady of Bloomington, has vowed not to raise taxes but to balance the budget with spending cuts and job growth.

Quinn took an obvious swipe at his opponent with identifying him during the speech, deriding the notion that the deficit can be overcome with cuts alone as “both heartless and naive.”

Brady later swiped back, predicting that Quinn’s proposed tax hike would drive jobs out of Illinois. “This truly was an embarrassing day,” Brady said of the speech.

Under Quinn’s plan, municipalities would receive only 7 percent of the income tax the state collects within their boundaries, instead of the current 10 percent. It would mean holding back $300 million of the $1 billion that the state normally sends out to the cities every year.

Metro East officials said that would create gaping holes in their own budgets, with predictions of layoffs and local tax or fee increases. Edwardsville City Clerk Dennis McCracken said the city would lose $600,000. Granite City would be short $900,000, according to Oney, the city comptroller.

“We’re not prepared for another $900,000 loss,” said Granite City Mayor Ed Hagnauer. “You can only take so many hits before the problems spread out.”

Members of Quinn’s staff have said municipalities must share the pain of the state’s budget deficit, but city leaders noted they’ve already made tough decisions at home. The proposed cuts to the cities come even as many of them are still awaiting late payments the state was already supposed to have made under the current year’s budget.

“There’s no timetable on when we could get the payments the state has already missed this year,” McCracken said. “I’m already down $400,000 for this year. I don’t know how much more pain we have to endure.”

Granite City is still owed $700,000 this year. The combined effect of Quinn’s proposal and the state’s inability to pay what’s already owed would force more difficult decisions on local officials, Oney said.

“The city would probably have to look at reducing salary or staff or some kind of tax increase,” Oney said. “We’ve already put a stop on any spending for new equipment or programs. This would have a dramatic effect on our city.”