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Our grim, grim budget

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* I have no idea why the media has completely ignored the governor’s offer of early retirement for the state police which I wrote about last Friday, but the Tribune editorial board picked up on it today

To be eligible for Quinn’s offer, troopers need to be 50 years old with 25 years of service, or 55 years old with 20 years of service. They can use accumulated time-off credits to help satisfy their years-of-service requirements. And, on their last day of work in 2010, they’ll receive 6 percent cost-of-living raises that are scheduled for calendar 2011.

Age 50? Think about that. Some of these retirees may spend the entire second halves of their lives — the next 50 or more years — drawing pensions from Illinois taxpayers. And while we have you: Has anyone offered you a 6 percent cost-of-living increase? In this time of low inflation? We didn’t think so.

The governor’s office told us Tuesday that many of these senior troopers were expected to retire as soon as they received their cost-of-living raises next year. Makes sense: Sticking around for those raises would feather their pension calculations with the highest possible final salary. Under this deal, the retirees don’t have to work at all next year — and they get the juicier pension benefits pronto. In return, the state saves money by offloading these high salaries: If 70 percent of the eligible troopers accept Quinn’s offer, the state expects to save about $500,000 in payroll expense.

If that were the end of it, Quinn’s offer might make sense. But the governor’s office couldn’t provide one crucial number: What will the troopers’ early arrival cost the state pension system? Taxpayers are on the hook for that, too, just as they are for the budget. We’ll bet the governor lunch at any place of his choosing that he’s shifting way more than $500,000 in burdens from his budget to the failing, flailing pension system.

They’d probably lose that bet. Since most were retiring anyway, the additional cost of the retirees for the next six months won’t total anywhere near $500,000. Still, it’s a cost shift. And one can only wonder if the governor has any more of these plans up his sleeve.

…Adding… Or not. From a reader…

If 80 troopers retire (the state expects 70 to 90) and each collects a mere $1,000 per month for six months, that’s $480,000. And these folks will collect far more than $1,000 a month. Their total pension payments for the first half of 2011 will
substantially exceed $500,000.

…On second thought…
Unless their pension payments exceed their salaries (highly unlikely), then that reader analysis is off.

* In other budget news, things may be easing somewhat, but they’re still bad

Even after cutting a combined $84 billion at the start of this fiscal year, 15 states face persistent deficits that must be closed over the next six months. Meanwhile, 35 states project deficits in the next fiscal year, which begins in July 2011.

Arizona sold the capitol building? Wow…

Arizona is another perennial budget disaster. Lawmakers have gone to extremes to try to close that state’s persistent budget deficit, selling the state Capitol building and cutting state payments for organ transplants. The latter move is likely to be reversed; some patients died once the transplants were halted.

And, of course, there’s Illinois…

The state in the worst shape is Illinois, which faces a deficit this year of a staggering 47% of its entire budget, about $13 billion. A sense of despair has settled over the state capital of Springfield, where various desperate measures, including a major expansion of gambling, have been kicked around.

* From that NCSL report

The task has been daunting: Lawmakers expect to have closed multi-year budget gaps exceeding $530 billion by the time the effects of the recession dissipate. And despite recent revenue improvements, more gaps loom as states confront the phase out of federal stimulus funds, expiring tax increases and growing spending pressures.

The full study is here.

* A real-world case study

Three weeks ago, one of the state’s largest social services provider almost ran out of money. It was saved by a multi-million dollar government infusion, but this was no bailout; Illinois was merely paying off part of what it owes Lutheran Social Services of Illinois.

“We were facing not being able to make payroll for almost 2,000 people,” said the Rev. Denver Bitner, the group’s president. “It’s an up and down kind of affair, and it’s resulted in our needing to borrow substantially from credit lines and reserves, and cuts in programs.”

The group, which runs dozens of programs serving vulnerable Illinoisans — children, the elderly, those recovering from addiction — has been left with IOUs from the state ranging from $5 million to $13 million over the past two years. The debt hangs over the head of Bitner, as vendors that supply LSSI’s foster homes, recovery centers and old age assistance programs demand payment.

Just a week before Thanksgiving, LSSI exhausted $9 million from its reserves and standing credit line. It was only able to pull back from the brink after the state borrowed money to begin paying down its unpaid bills.

The good news is that the comptroller’s office say the state will pay off last fiscal year’s late bills in the coming days. The bad news is there’s $5 billion in unpaid bills from the current fiscal year.

* Meanwhile, the governor is still cool to gaming expansion

Illinois Governor Pat Quinn is still showing no signs of support towards a bill to expand gambling. The bill approved by the Senate last week could add 5 new casinos, including one in Chicago. But Quinn said he doesn’t think the bill will get through the House of Representatives.

“I wouldn’t hold your breath,” he said. “It’s pretty top heavy. Illinois’ not going to be the Midwest venue for gambling second only to Las Vegas.”

* Related…

* Higher Ed Commission recommends performance-based funding: One controversial, yet key reform is a funding shift based on performance instead of enrollment. Performance-based funding creates incentives for institutions to boost performance because the more success they exhibit in meeting state goals, the more funding they receive, the commission states. “The fact is we have state colleges that have been historically performing at very poor levels in terms of graduation and retention rates,” said state Rep. Fred Crespo, a Hoffman Estates Democrat serving as the commission’s House speaker appointee. “That to me is not acceptable when you consider every college is being funded by state dollars.”

* Ill. casino plan could amp up gambling competition: Existing Illinois casinos, which have seen their business fall off by nearly one-third over the past couple of years, are fighting the idea vigorously. “This monumental expansion is like saying, ‘Homes have lost 32 percent of their value and the number of people buying homes is at an historic low, so let’s build more homes until we have three times the number we need,’” Tom Swoik, executive director of the Illinois Casino Gaming Association, said at a recent legislative hearing.

* Emanuel: Gambling not a “panacea” for budget woes

* Ill. plan could include Chicago casino

* Empress casino gets new look, name - Penn National Gaming revamped pavilion after fire, chose to go Hollywood

* Illinois sets auction for Thomson prison

* Villages hail legislation’s passage

posted by Rich Miller
Wednesday, Dec 8, 10 @ 9:45 am


  1. I predict the Feds will swoop in at some point and bail out. California, Illinois, and New York. If GM was too big to fail, the Feds will use the same justification. Illinois has an advantage with the positions held by Obama and Durbin. It also doesn’t hurt that a lot of the government employees are in large, influential campaign-contributing, unions.

    Comment by Holdingontomywallet Wednesday, Dec 8, 10 @ 10:20 am

  2. The state constitution requires a balanced budget right? Why don’t we hear more about that and how is the long standing violation allowed? What am I missing?

    Comment by just sayin' Wednesday, Dec 8, 10 @ 10:22 am

  3. ===how is the long standing violation allowed?===

    Because there are no statutory penalties.

    Comment by Rich Miller Wednesday, Dec 8, 10 @ 10:28 am

  4. Thanks Rich. One might hope shame would be enough. Silly me.

    I do wonder if issues like this ever come up at the Madigan holiday table.

    Comment by just sayin' Wednesday, Dec 8, 10 @ 10:31 am

  5. Emanuel: Gambling not a “panacea” for budget woes

    At some point the people of Illinois are going to need to come to terms with the fact that there will be no “panacea” for the state’s budget woes. There is no silver bullet. There is no painless answer. It’s time to stop looking for easy fixes. There won’t ever be any. The sad truth is that nothing but suffering, sacrifice and struggle will to get our house in order.

    And facing up to that fact is the easy part. Then we will need to decide who will suffer and sacrifice, how the will suffer and sacrifice, and for how long they will have to suffer and sacrifice. It’s going to be damn ugly for a helluvalong time.

    It’s past time for us to face up to that fact and start behaving like something resembling adults.


    – MrJM

    Comment by MrJM Wednesday, Dec 8, 10 @ 10:49 am

  6. JS, just for fun, I e-mailed an inquiry to AG Madigan’s office about this topic.

    Comment by Rich Miller Wednesday, Dec 8, 10 @ 10:58 am

  7. And, just as an FYI, this wouldn’t be the first time I’ve asked that question of her office.

    Comment by Rich Miller Wednesday, Dec 8, 10 @ 10:59 am

  8. Some great stuff in the NCSL report. Highly recommended reading.

    The good news for the country is that FY 2010 is over and that after a couple years of recessionary steep declines, virtually every state is forecasting increased revenues (although some of that can be attributed to the fact that half of the states raised taxes during the recession).

    Anyone know why allegedly bad-for-business Illinois is forecasting a 19.8% increase in corporate income tax collections? Is it because:

    A. Business is picking up?

    B. There was a tax increase I missed.

    C. Or for you dreamy supply-siders out there, is there a tax cut I missed?

    Comment by wordslinger Wednesday, Dec 8, 10 @ 11:09 am

  9. woordslinger,

    One of the most often missed projections used in government budgeting is expected revenue in upcoming years. It would be interesting for someone to go back say 20 years and look at the projections versus the actual numbers. In fact, it would be useful in future budgeting discussions to have this error percentage which could then be applied to future budgets.


    Amen, brother. And the fact there is no silver bullet allows politicians to posture against any small spending cut or revenue enhancement. One of the things I always thought appealing was a Republican battle cry from the 2008 presidential elections concerning energy (not “Drill, baby drill.”) where some people were calling for expansion of all forms of energy. I think a similar approach can be applied to the Illinois budget, no spending cut too small.

    Comment by Cincinnatus Wednesday, Dec 8, 10 @ 11:37 am

  10. Cincy, they don’t miss by that much percentage-wise, in my experience, on state levels. It’s not like they’re pollyannish on personal income tax receipt growth (2.7% for Illinois).

    The truth of the matter is that corporate profits are robust. Now start making with the trickle down.

    Comment by wordslinger Wednesday, Dec 8, 10 @ 11:47 am

  11. Could it be that the template used for revenue growth will overstimate Illinois’ share of the national and regional growth projected?

    When you consider how many revenue estimates have failed over the past few years, there is no reason to celebrate until the money is deposited in the State coffers.

    Comment by plutocrat03 Wednesday, Dec 8, 10 @ 11:58 am

  12. word,

    From the NCSL:

    “State revenue collections consistently underperformed forecasts throughout the recession, and they continued to struggle even after the recession ended. The revenue decline was unexpected, both in its depth and duration. But that is the impossible challenge associated with economic downturns in general: Predicting how long they will last and projecting how deep their impact will be. During the recession even pessimistic forecasts were missed. This widened the gap between spending needs and available revenues, causing lawmakers to resolve budget shortfalls during budget enactment and after the new fiscal year began. The task has been daunting: Lawmakers expect to have closed multi-year budget gaps exceeding $530 billion by the time the effects of the recession dissipate. And despite recent revenue improvements, more gaps loom as states confront the phase out of federal stimulus funds, expiring tax increases and growing spending pressures.”

    One of the bright notes in 2011 is that economists are predicting that corporations will begin to increase their investments in infrastructure, even though they are predicting weak sales and employment

    The trickle down will occur as the corporations convert their profits to assets and up their production to meet what is now flat but hopefully soon increases in consumer demand. Until this happens, we stagger along…

    Comment by Cincinnatus Wednesday, Dec 8, 10 @ 12:03 pm

  13. Cincy, understood that forecasts were off during the recession, but what are you suggesting?

    The projection is 19.8% growth in corporate income tax growth. What are you saying? 15%? 10%?

    Any way you slice it, it seems like corporate America is doing quite well, even in allegedly anti-business Illinois, which was my original point.

    Comment by wordslinger Wednesday, Dec 8, 10 @ 12:08 pm

  14. wordslinger,

    The point I was trying to make, probably poorly, was that legislators use overly optimistic revenue projections when establishing budgets.

    Nobody can predict the future, I know, but after the poo-poo hit the fan in late 2008 (too late for 2009 budgeting, granted), it would have made sense to revise 2010 revenues downward, and adjusted spending to meet these lower revenues. If Illinois had taken this approach, instead of our deficit being 46% of the budget, we might be at a lower percentage. We’d still be in trouble, but perhaps less trouble than we’re in now.

    Comment by Cincinnatus Wednesday, Dec 8, 10 @ 12:14 pm

  15. If so much of the recovery depends on corporate hiring, does Quinn plan to raise their taxes when he raises the income tax on the middle class. Or will the corporates be leaving the sacrifice table (like public employee unions, who already left). Actually, we haven’t heard much about Quinn’s income tax plan lately. Given that the Dems in the WH are taking considerable heat from their own because of their defense of middle class tax cuts, I wonder if it is becoming politically incorrect to tax the middle class. In any case,we haven’t heard much from the Quinn admin on this issue lately. Maybe wait until the spring and see how things go?

    Comment by cassandra Wednesday, Dec 8, 10 @ 12:26 pm

  16. From the omnibus spending bill released this morning by congressional democrats and which will probably be voted on within the next week:

    “None of the funds provided to the Department of Justice in this or any prior Act shall be available for the acquisition of any facility that is to be used wholly or in part for the incarceration or detention of any individual detained at Naval Station, Guantanamo Bay, Cuba, as of June 24, 2009,” the bill says.

    Not clear if it is the death knell for the Feds acquiring Thomson prison for use for other high risk federal prisoners– but for sure Gitmo isn’t closing anytime soon.

    Comment by Responsa Wednesday, Dec 8, 10 @ 12:27 pm

  17. If corporate America is doing well it is because it has cut costs and improved output. More is done by fewer people.

    That results in fewer taxes being collected per unit of corporate output. If you make your estimates based on the old templates you will simply overstimate the projected tax revenue.

    No one yet knows what the new normal is. Predictions based on the old models are little more than guesses.

    Comment by plutocrat03 Wednesday, Dec 8, 10 @ 12:28 pm

  18. Some of the more interesting news is that the Build America subsidy program will be ending December 31st. Obama’s tax cut bill does not contain an extention to this program meaning that there will be less subsidies availiable to good ole Illinois. Meanwhile the people there continue to dream up new ways to spend money on social engineering programs. To coin an old campaign line, “What are they thinking of?” in Illinois?

    Comment by Laughing all the way Wednesday, Dec 8, 10 @ 12:28 pm

  19. A minor point, but the State police retirees pay no state income tax on their retirmenet, but they do pay taxes on their income. So their is also a slight loss to the state of their income tax as well.

    Comment by Ghost Wednesday, Dec 8, 10 @ 12:28 pm

  20. Responsa, they gave up on moving Gitmo prisoners to that prison months and months ago.

    Comment by Rich Miller Wednesday, Dec 8, 10 @ 12:34 pm

  21. ===So their is also a slight loss to the state of their income tax as well. ===

    Which is more than made up for by their leaving state employment and by hiring lower-paid replacements.

    Comment by Rich Miller Wednesday, Dec 8, 10 @ 12:37 pm

  22. Rich, I know. But today’s bill seems to make it “official”. Mainly, I mentioned it because of your link above to the Thomson auction and Durbin trying to secure funding. Does any body here know if selling Thomson to the government (for other use) is still in the cards?

    Comment by Responsa Wednesday, Dec 8, 10 @ 12:47 pm

  23. Responsa, if you click the link to that story you referenced, you’d see the answer to your latest question.

    Comment by Rich Miller Wednesday, Dec 8, 10 @ 12:49 pm

  24. JS
    when the only other budget option was to allow the GOPs, ‘Boards Cross et al to bring about a government shut down the efforts of recent years are not as bad as you want us to believe.

    The budget picture is still bleak, Bushie and his pals on Wall Street and the predatory lenders laid real doozie on this country.

    But now that we have the Bush Tax Cuts in place for two more years business will have the “certainty” they have been yelping for and will take some the three trillion dollars out of the mattress and put people to work.

    Actually, we are guessing they won’t. They will continue to hire consultants and other “out sourcers who don’t show up as workers, howl about uncertainty and slide more unreported cash to the RGA, et al to fund the 2012 campaigns.

    Comment by CircularFiringSquad Wednesday, Dec 8, 10 @ 12:50 pm

  25. “The state in the worst shape is Illinois……….” And, the voters returned Pat Quinn to the office.

    Great wisdom!

    Comment by Wally Wednesday, Dec 8, 10 @ 1:18 pm

  26. Although I doubt that they realize what they have done; through the passage of SB0051 the GA has inadvertently cut State spending dramatically. The obstacles to purchasing even at the lowest levels will mean that many projects will not get done, many repairs will not be made, and subsequently money will be saved. This bill might end up being the most work the GA has done to date in cutting the deficit.

    Comment by Irish Wednesday, Dec 8, 10 @ 1:42 pm

  27. Part of the city’s pension problems is all the buyouts that Daley offered. It was an easy-way-out for him to cut headcount, the fact he often replaced the retirees with outside contractors (electricians retire, hire Aldridge) is a discussion for another day. But it was the easier, softer way; always preferred by RMD.

    Comment by Jim Wednesday, Dec 8, 10 @ 1:44 pm

  28. Technically, there is no requirement for a “balanced budget” in Illinois. Here’s the relevant language from the Constitution:

    “Proposed expenditures (in the Governor’s budget) shall not exceed funds estimated to be available for the fiscal year as shown in the budget.
    (b) The General Assembly by law shall make
    appropriations for all expenditures of public funds by the State. Appropriations for a fiscal year shall not exceed funds estimated by the General Assembly to be available during that year.”

    There are huge loopholes here. “Funds available” are not the same as revenues. If I borrow $10 billion tomorrow, I’m going to have a ton of funds available. But it would be a stretch to say that I have just balanced my budget. And “appropriations” are not the same as expenditures. So if revenue projections are low, the Leg can just under-appropriate for various programs and make it up later in supplemental approps without regard to revenues. Then those unpaid bills can be pushed forward, etc…

    And I don’t think the Legislature passed a budget that exceeded estimated funds available. they just passed a deficient budget with big lump sums, handed it to the Governor and said, “Here, you fix it.”

    Shady, but not unconstitutional.

    Comment by soccermom Wednesday, Dec 8, 10 @ 2:06 pm

  29. ===And I don’t think the Legislature passed a budget that exceeded estimated funds available===

    Yes, they did and MJM admitted it.

    Comment by Rich Miller Wednesday, Dec 8, 10 @ 2:15 pm

  30. I’m sure they felt sorry afterward, Rich.

    Comment by soccermom Wednesday, Dec 8, 10 @ 2:29 pm

  31. –”The state in the worst shape is Illinois……….” And, the voters returned Pat Quinn to the office.

    Great wisdom!–

    Because as everyone knows, in a global economy, and a capitalist system, and a federal republic, with separation of powers, the governor controls all and can simple wave the wand and make everything better. Or worse.

    Next time, I’m voting for that Harry Potter guy.

    Comment by wordslinger Wednesday, Dec 8, 10 @ 2:39 pm

  32. Well, as fAr as trooper pensions and early retirements go, I can’t think of more deserving people. For my career, the worst think I had to fear every day on the way to work was not getting up early enough to get a good breakfast… and too-long Monday morning planning meetings. A trooper who has gotten up and gone to work for 20 years, knowing that any time he could take a bullet to the face, or get run over by a truck, and never come home to his family again… yet he (or she) goes out there and does the job, with professionalism and care… well. I feel for the them same way I do for veterans. You can’t pay those people enough, really, for what they do, and if there is anyone in the state payroll who is deserving of a sweet pension, it would be troopers who work the roads and street of Illinois. Crunch all the number you want, but this for me is a case of heart over head.

    Comment by Gregor Wednesday, Dec 8, 10 @ 7:28 pm

  33. There is an early out incentive in the agreement with AFSCME also. If an AFSCME employee submits notice of intent to retire before May 31, they get the full cost of living increase that was defereded for all employees. Thats a 7% boost on the way out.

    Comment by Reformed Wednesday, Dec 8, 10 @ 9:26 pm

  34. Emanuel is certainly right that gaming is no panacea for our budget problems. Of course, neither are tax increases or spending cuts, because there are NO panaceas for our budget problems. MRJM is exactly on target.

    Comment by steve schnorf Wednesday, Dec 8, 10 @ 9:50 pm

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