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*** UPDATED x1 *** Budget roundup

Wednesday, Mar 10, 2010

*** UPDATE *** I missed this one

[Illinois State Superintendent of Schools Christopher Koch] once again told lawmakers that schools across Illinois will be looking at $500 less per-student next year in general state aid. Koch reiterated that the 13,000 layoffs he talked about last week is the best-case scenario. He said if lawmakers ordered cuts for the last three months of this school year, or Gov. Pat Quinn followed through with a billion-and-a half dollars in cuts to education, the number of layoffs could triple.

But the newest warning from Illinois’ school chief is that he cannot tell local schools when, or if, they’ll get money for the mandated categorical of special ed and transportation, or for early childhood education programs.

[ *** End of Update *** ]

* Not encouraging news from the Senate Democrats…

“I’d not be comfortable saying [the governor’s proposed budget is] dead on arrival. But if I was simply assessing how I thought it would fare in the Senate, we’d have to assume we’d have to get Republicans on board to the idea of borrowing . . . and I do not see that happening,” said Rikeesha Phelon, a spokeswoman for Senate President John Cullerton (D-Chicago).

Borrowing beyond a fiscal year requires a three-fifths majority, and that means Republican involvement. It’ll be tough, for sure.

More on the borrowing and the deferral

Even if lawmakers go along with Quinn’s cuts, the state still would be $11 billion short next year, Quinn budget officials said.

That’s where the options of a tax increase or borrowing come in.

Quinn aides said the administration will propose borrowing $4.7 billion and carrying over $6.3 billion of the state’s debt.

“Carrying over” means “not paying bills anywhere near on time.” That’s the biggest component of the Quinn plan, but it got the least media attention today.

* The GOP leaders speak

Senate Minority Leader Christine Radogno (R-Lemont) and House Minority Leader Tom Cross (R-Oswego) issued a joint statement urging ruling Democrats to cut spending and rein in Medicaid expenses and state pension costs before asking taxpayers “to invest more of their hard-earned money into a state government that has not and is not serving them well.”

There aren’t nearly enough Medicaid and pension cuts in this proposed budget to satisfy the GOP. Then again, I kinda doubt that satisfying them is possible at this stage of the game. Going in relatively low leaves room for negotiations.

More on pensions

Stermer also said there was “an agreement in the works” within the legislature that would institute a two-tier pension plan with lesser benefits for future state workers. Such a plan, he said, would provide up to $300 million in savings in the budget proposal. While pushed by prominent politicians in both parties, a two-tier system has been fought by state labor unions.

* As I told subscribers this morning, Murphy proposed borrowing as a solution when he was a gubernatorial candidate, so this is more than a bit disingenuous

“They want to borrow their way past the election so they can pass the tax increase without risk of retribution from the voters, and that’s what this is set up to do,” said Sen. Matt Murphy (R-Palatine).

* If you watched the briefing videos, you know that the governor’s people had to be pushed and prodded over and over to come clean on just what some of this stuff meant. One of the big questions was about the missing tax hike component

“The General Assembly has not acted on a tax increase and has given symbols that they don’t want to act on a tax increase,” said Jerry Stermer, Quinn’s chief staff. […]

As to whether Quinn would propose a specific revenue increase in his budget address, or divulge what he plans to do with the money that would come from one, no one in the room would answer that question.

“Quinn’s not included a tax increase in this budget, and that’s a conversation that has to happen,” Stermer said. When pressed on the issue, Stermer said, “The governor will talk about that tomorrow — noon sharp.”

* Here’s the skinny on the K-12 cuts…

About $1.2 billion in cuts will come from aid to local grade and high schools — a reduction of 17%

House GOP Leader Tom Cross is at least partially right

“I don’t think he intends to cut a billion dollars out of education… He’s doing it to get the education community upset and to call lawmakers and say, ‘Vote for a tax increase so we don’t have this cut.’”

There have to be cuts, but education’s share is disproportionate to its budget size. The Sun-Times also rails against the education cuts today

But we think his education cuts are too severe. We prefer a plan by the conservative-leaning Civic Federation to exempt from cuts Medicaid and a significant portion of the state public school budget, known as general state aid. The Civic Federation recommends across-the-board 7 percent cuts to bring Illinois back to 2007 spending levels, given how revenues have been whacked by the recession. Quinn also will propose a two-tier pension system today, with less generous benefits for new hires. This is both the right thing to do and a good way to bring around recalcitrant Republicans who refuse to support an income tax increase without pension reforms and budget cuts.

As I said earlier, I’m not sure those pension reforms are quite enough yet. The Republicans don’t really want to get in front of this issue because they also fear upsetting the unions. They’ve been content to hang back and demand the Democrats take the lead, which is what the minority party does. So, we’ll just have to wait and see what the actual agreement looks like, if they ever get one.

* The very conservative, anti-tax Daily Herald appears to be coming around on tax hikes

Solving this crisis surely must involve a creative mixture of revenue increases and spending cuts from which no person or group can be exempted.

* And Jim Edgar gets the last word…

“Anything meaningful is gonna be very politically unpopular. You’re gonna be cutting programs, eventually you got to look at a tax increase, I just don’t think that’s gonna happen during an election year. What worries me is I’m not sure that’s gonna happen after the election. I’ve become very pessimistic.”

Edgar says his biggest hope is that politicians don’t make the state’s budget mess worse during the upcoming legislative session.

* Related…

* Quinn budget to mean painful choices for Ill.

* Governor’s budget plan calls for painful choices

* Quinn budget: Borrow more, cut more

* No tax hike? Then it’s loans under Quinn’s budget

* Quinn will propose budget with over a billion in cuts

* Quinn to Unveil Budget With No Tax Hike

* State Capitol Q&A: Quinn’s budget speech

* Municipalities Losing Revenue in FY 2011 Budget

* Illinois mayors upset with Governor Quinn

* Daley Reiterates Support for Quinn, Disdain for Budget Proposal

- Posted by Rich Miller        

22 Comments
  1. - SAP - Wednesday, Mar 10, 10 @ 9:11 am:

    Isn’t cutting the municipal share of income tax a none too suble way of attempting to get mayors to support tax increase? Check my math, but I believe that 7% of a 5% pie is more cash than 10% of a 3% pie.


  2. - RJW - Wednesday, Mar 10, 10 @ 9:17 am:

    It really irks me when people say that the cuts are just for show or to get people riled up. On the one hand cuts are demanded, yet on the other when those cuts are made everyone cries foul. Education and Human Services are big ticket items are are going to be cut significantly. Also, I don’t see the cuts as being a ploy to get a tax increase. With the cuts there is still $11 billion to go in order to close the hole.

    As for Medicaid, you can reform it but the Republicans are simply misinformed or are deliberately lying about the savings involved. It’s just not there. I’m not saying its a bad idea but the subject has been studied since the 1990’s and it was never implemented on a mass scale because it wasn’t the gold everyone thought it would be.

    If these jerks in the legislature were really brave they would just come out and say right now that they only intend to pass a 6 month budget or some other disaster of a budget and then tell everyone they will deal with it after the elections.

    It’s too bad everyone in the legislature couldn’t be impeached for malfeasence for failing to do their duty on a budget. Same goes for the Governor - either the current one or Mr. Brady, as he has no clue either.


  3. - Pot calling kettle - Wednesday, Mar 10, 10 @ 9:21 am:

    Government services cost money. To pretend that this is not true, as has been done for the past decade (and then some) has gotten us to this point. It cannot continue. Telling people what will be cut is not a gimmick, it’s reality. While the choices are political, everyone has a favorite part of the budget, and $11 billion (or even 5) in cuts will impact every part of the budget.


  4. - Former Card Carrying Repub - Wednesday, Mar 10, 10 @ 9:21 am:

    Am I not understanding something here? It seems that no matter how you attempt to cut and slice the budget, there’s no pleasing everyone and services are being cut. Is it the big, pink, invisible elephant that no one wants to address? Isn’t it obvious that a tax increase is the ONLY way to deal with all these budget problems?

    I would sooner vote my legislator out of office for cutting education or medicaid services rather than voting for a statewide tax increase.

    I think politics is the issue here, protecting your seat in the legislature (or the number of seats your party has). And that is a complete disservice to the people of the Illinois.


  5. - dupage dan - Wednesday, Mar 10, 10 @ 9:27 am:

    =If these jerks in the legislature were really brave they would just come out and say right now that they only intend to pass a 6 month budget or some other disaster of a budget and then tell everyone they will deal with it after the elections.=

    How long are you gonna hold your breath on that one? Why don’t you just ask for everyone to resign? That ain’t gonna happen either.


  6. - cassandra - Wednesday, Mar 10, 10 @ 9:44 am:

    I don’t think the borrowing part of this budget is going to bring about a huge outcry and demand for a tax increase to reduce borrowing, even if borrowing is getting pretty expensive. After all, heavy personal borrowing is well-accepted in the US, not to mention at the federal level, with its eye-popping deficits. The Obama admin is telling us that massive federal borrowing is necessary to revive the economy. Really, the money they send out to the states these dates is, well, borrowed. So why not at the state level. And one reason we citizens borrow is because we believe things will get better and the loan will become less burdensome. And so do the feds.

    Looks to me like this budget is fixed,,,and probably without a tax increase–income or service.

    As someone who is completely debt-free and has been for decades, I don’t agree with any of this. But I can certainly understand how the average taxpayer, in the 2 or 3 minutes he/she has to devote to this in between working two or three (non-government) jobs to stay afloat, would hear borrow and hope things get better, no tax increase and say it’s fixed, let’s move on.


  7. - wordslinger - Wednesday, Mar 10, 10 @ 9:49 am:

    If there isn’t going to be a tax increase, the GA might as well take this and go home early. What’s there to talk about, really? A punt’s a punt.

    That is, if you really can borrow long-term to pay current obligations and kick another $6.3 billion down the road.


  8. - PalosParkBob - Wednesday, Mar 10, 10 @ 9:53 am:

    RJW, the cuts ARE there in Medicaid. What needs to be done is to pare back the eligibility to about 100% of the poverty level, and correct the unsustainable increase that Blago made to 400% of the poverty level to expand his political “entitlement” base.

    It added about 700,000 to the Medicaid rolls, at an average state cost of approximately $2,600 per person. This resulted families of four being eligible for state subsidy with incomes of $80K.

    We couldn’t afford it then, and we certainly can’t afford it now.

    Although the average subsidy may be less than $2,600 per person because of varying subsidy for income adjustments,there’s a potential savings of about $1.8 billion to get the eligibility back to 125% of poverty level. Reducing it to 100% of poverty level to take care of the truly needy should save even more, but I don’t believe Quinn’s people have even costed it out.

    There needs to IMMEDIATE reform in the pension system, not just for employees to be retiring 30 years from now.

    Prohibiting ANY end of career sweeteners would reduce current obligations to new TRS retirees by about 20%. they’d still be getting the constitutionally protected 75% of their REAL base salary at retirement, which is more than fair.

    Actually, Hynes proposed this on his campaign web site.

    We also need to end the ridiculloously costly TRS and SURS early retirement benefits when the current law expires in 2011. It will minimize current pension payouts and long term obligation dramatically.

    I won’t even go into the 9-10 figure annual savings to the state and municipalities by ending the prevailing wage mandates on non-federal public construction.

    We also need to change the distribution method for education funding. Schools that unfairly pay $150K per year for drivers ed instructors should be penalized with loss of state aid, and those that are struggling to pay $40K under the most difficult situations imaginable should be getting the money.

    This budget appears to cut to the bone in the legs, but pays for manicures on the hands.

    We need debate on what the minimum core services of state government are, and fund them. Cut the rest!


  9. - Former Card Carrying Repub - Wednesday, Mar 10, 10 @ 9:56 am:

    Who the heck would want to loan money to this State? EVERY vendor we use hasn’t been paid in over 6 months and they call ALL THE TIME asking where and when payment might be made. Half of these vendors are local business who can barely afford to have their revenue stream stopped.

    I’ll never understand this logic: If you owe the state money, they want it NOW and will pursue you to the point of harassment. If the state owes you money…HA…forget it. You’ll get it when you get it, quit asking.


  10. - VanillaMan - Wednesday, Mar 10, 10 @ 10:02 am:

    We need courageous leadership. New Jersey found themselves a new governor who is taking straight to voters. He is telling them bad news. The voters knew that the bad news is coming. They are still supporting the governor as he makes drastic cuts and upsetting favored political constituents.

    Voters have been seeing the writing on this wall for years. We are not Greek. There won’t be rioting over every cut. Get it done!

    Whichever gubernatorial candidate is willing to emulate New Jersey Governor Chris Christie right now, gets my vote - as long as it’s neither Quinn or Brady.


  11. - Rich Miller - Wednesday, Mar 10, 10 @ 10:08 am:

    ===Who the heck would want to loan money to this State?===

    Lots of people. The annual interest rate on the state’s last loan was a tiny fraction over 1 percent, according to GOMB.


  12. - inpatient in il - Wednesday, Mar 10, 10 @ 10:11 am:

    Isn’t borrowing one of the principal reasons we’re in such a mess right now? Not borrowing from bondholders, but borrowing from the pension systems by underfunding them for decades.


  13. - zatoichi - Wednesday, Mar 10, 10 @ 10:29 am:

    Cut all you want and costs of remaining services will catch up in a short while. Move the budget back to 2007 levels sounds wonderful, except which retail store/health insurance/restaurant/utility rate /wholesaler and many other costs are also going back to 2007 levels? Just how many 2010 costs can you cover with 2007 bucks? Just what is the 2010 cost of concrete or asphalt and how many miles can a road construction crew cover when paid at 2007 levels? Your local hospital gonna keep providing comprehensive services when Medicaid/no pay/self pay become the primary funders? Sure,push the problem off to satisfy election needs. The problem will not wait or stop growing.


  14. - Yellow Dog Democrat - Wednesday, Mar 10, 10 @ 11:09 am:

    If Quinn actually proposes a budget today that doesn’t include a tax increase, I’ll take back everything I said about his lack of legislative and political common-sense.

    As a follow-up, I think he just needs to respond to the accusations from Republicans that this is a scare tactic.

    His response should go something like this:

    “Of course I’d like to sign a budget that fully funds education, public safety, and vital human services, but Republicans have made it clear that they prefer a budget that relies on cutting these programs instead. If they change their mind before May, they need to let the public know.”


  15. - Louis G. Atsaves - Wednesday, Mar 10, 10 @ 11:13 am:

    Makes sense to me YDD.

    Budget increases for all of them, then just don’t pay them! Hasn’t that been the plan lately?


  16. - The CARDINAL - Wednesday, Mar 10, 10 @ 11:35 am:

    JUNK bond status here we come. There is no bond house with any sense that would float a loan to the “Land of Lincoln” By the way the Gs office folk are trying to get the municipalities to support a tax increase just as his predecessor tried to extort the mayors to do the same


  17. - cassandra - Wednesday, Mar 10, 10 @ 11:40 am:

    I thought state governments were still considered to be among the less risky investments in a risky
    marketplace these days. After all, the bondholders get paid back first, I believe, and the state has the comparatively unlimited resources of its citizens to fall back upon, not to mention the federal bailout option. Municipalties might be iffy. Not states in the USA.


  18. - Pot calling kettle - Wednesday, Mar 10, 10 @ 11:55 am:

    ==If these jerks in the legislature were really brave they would just come out and say right now that they only intend to pass a 6 month budget or some other disaster of a budget and then tell everyone they will deal with it after the elections.==

    That’s bravery? If they were brave, they would pass the tax increase necessary to cover the budget.


  19. - ispretired - Wednesday, Mar 10, 10 @ 11:57 am:

    PalosParkBob

    That 10-10-20% TRS thing ended a few years ago , now 6% is the most Teachers can get their last year, unless the school dist. pays more into TRS.

    How about all state retirees have their pension based on the ave of their final last 4 years. Some now go out on their last day pay. You won’t believe how many state police retire within 6 months of a promotion or the last day of their acting pay for filling in on a position because of a vacancy. You Reps do the same, they leave their position and get a 6 figure income with a state agency and then go out with 85%, the best pension in the state. Also no one wants to deal with the vacation perk as Blago called it where state employees can leave on Dec 31st of a year and if planned it right can get paid for 75 days of vacation if they were a 28 year plus employee. Also how about the health insurance for retirees, they get 5% of health care plan paid for for every year employed. That means if you just work for 20 years you get free health care( I bet that is about to change),who do you think pushed that , I would say all you reps. because most don’t do 30 years , if they just do 8 years they get 40% of their health care paid for. If you work for less that 20 years you shouldn’t get any health care paid by the state, maybe if you work for 30 years perhaps 50 % should be paid for.Also for the police pension you shouldn’t be able to collect till 55 after 30 years, by law they have to retire by age 60, but now days most go as soon as they max out because job is not what it once was, can can no longer be the police, they have to work for a bunch of bureaucrats that don’t have a clue what police work is about, an example is there new boss a 29 year old kid that was a banker and yes he also served in the military( thank you for your service)but no way should you be the Director of ISP. I’ve said enough.


  20. - Secret Square - Wednesday, Mar 10, 10 @ 12:16 pm:

    “correct the unsustainable increase that Blago made to 400% of the poverty level to expand his political “entitlement” base.

    “It added about 700,000 to the Medicaid rolls, at an average state cost of approximately $2,600 per person. This resulted families of four being eligible for state subsidy with incomes of $80K.”

    Where did you hear that? HFS rolled back Family Care eligibility to 185 percent of FPL last year. As part of a settlement agreement in the lawsuit against the Family Care expansion to 400 percent FPL, those who had already signed up in good faith were allowed to keep their coverage, but no new clients could sign up after June 30 of last year. HFS says that fewer than 5,000 people signed up under the expansion, which was known to be legally questionable from the start. It wouldn’t be the first time one of Blago’s vaunted health care expansions went over like a lead balloon — remember Veteran’s Care?


  21. - hisgirlfriday - Wednesday, Mar 10, 10 @ 2:25 pm:

    “Who the heck would want to loan money to this State?”

    Probably banks that are buying credit fault swaps that will also pay out if Illinois defaults so either way they win.


  22. - downstate hack - Wednesday, Mar 10, 10 @ 2:39 pm:

    “Who the heck would want to loan money to this State?”

    How about Broadway Bank and Alex Giannoulias.


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