CHICAGO (Reuters) - Billionaire political newcomer J.B. Pritzker took office as Illinois governor on Monday, pledging to pass a balanced budget and take on the state’s “challenging” financial problems with “hard choices.”

The inauguration address by the Democratic first-time government office holder promised a new direction for Illinois, “with leadership that abandons single-minded, arrogant notions.”

“I won’t hollow out the functions of government to achieve an ideological agenda - I won’t make government the enemy and government employees the scapegoats,” Pritzker said in his speech.

A political impasse under Republican Governor Bruce Rauner, whom Pritzker defeated in the Nov. 6 election, left Illinois without complete budgets for two fiscal years, worsening the state’s already precarious financial situation that includes a huge unfunded pension liability and billions of dollars in unpaid bills. As a result, Illinois’ credit ratings were downgraded to a notch or two above the junk level.

“Our fiscal situation right now is challenging. And the solution requires a collective commitment to embracing hard choices,” Pritzker said, adding the cost of government must be lowered, while still delivering high-quality services.

Democratic control of the Illinois House and Senate, which thwarted much of Rauner’s ambitious agenda, is expected to aid Pritzker.

Illinois Republican Party Chairman Tim Schneider characterized Pritzker’s agenda as “borrow, tax, spend, repeat.”

“Over the course of the election and again today, Pritzker promised billions of dollars in new spending, programs, and regulations, all of which our state cannot afford,” Schneider said in a statement.

Pritzker, a billionaire heir to the Hyatt Hotel fortune, called for a “fair tax system” that would replace Illinois’ flat personal income tax rate with graduated rates - a change that requires voter approval of a constitutional amendment. In the near term, Pritzker advocated for the sale and taxation of recreational marijuana.

Updating and fixing Illinois’ infrastructure is also on the new governor’s agenda, although his speech gave no clues on how that would be financed.

A five-year financial forecast released by the Rauner administration in November projected that Illinois’s general funds budget deficit could triple in size by fiscal 2021, while the bill backlog could surpass 2017’s record $16.7 billion starting in fiscal 2022.

The state’s unfunded pension liability is also growing, reaching $133.5 billion in fiscal 2018 from $129 billion at the end of fiscal 2017.