Posted by Barton Lorimor

Had the General Assembly not passed the tax increases in January, the fiscal year 2012 budget would be nearly $16 billion, according to a report published earlier this week by the Center for Tax and Budget Accountability.

The Chicago-based non-profit says the budget introduced by Gov. Quinn now has a $7.3 billion deficit - a figure that includes expenses held over from fiscal year 2011.

The report comes at a time when Senate Republicans are standing by their spending cuts proposals, which total nearly $6.7 billion.

Also this week, Illinois Statehouse News reported tax receipts dropped by $2.2 billion between tax years 2009 and 2010. The increases passed in January retroactively went into effect on Jan. 1, 2011. However overall spending increased by $1.8 billion in the same time frame.

More…

The Republicans say their pension reforms will save the state $1.35 billion annually in unfunded liability. Dillard said under the Republican measure, current employees could contribute more to stay in their current “Cadillac pension plan,” or move into a defined contribution system similar to a 401(k), or utilize the new pension plan implemented for new hires.

From the CTBA’s report…

The FY2012 budget proposal continues to prioritize funding the same four core services of education (36.2% of the budget), healthcare (29.9%), human services (19%) and public safety (6%) as have historically pertained. Collectively, these four core service areas account for over $9 out of every $10 appropriated in the FY2012 General Fund budget proposal.

• Of those four core service areas, only human services—which collectively includes the Department of Aging,
Department of Human Services, and Department of Children and Family Services (“DCFS”)—is scheduled to receive nominal dollar cuts from FY2011 levels, with aggregate appropriations being $211 million less in FY2012 than in FY2011.

• In both nominal dollar and inflation adjusted terms, proposed FY2012 appropriations for the other three major service categories of education, healthcare and public safety, are greater than they were in FY2011.

• Despite the one-year upward trend in spending noted above, after adjusting for inflation and population growth, overall General Fund appropriations proposed for FY2012 will be less than they were over a decade ago in FY2000, with total appropriations down 15.9 percent; PreK-12 down 2.7 percent; higher education down 35 percent; healthcare down 13.4 percent; human services down 30.4 percent; and public safety down
25.2 percent.

• The FY2012 human service cuts were not evenly distributed among the three human service agencies. In fact, aggregate appropriations for the Department of Aging will increase by $170 million or 27.1 percent from FY2011 levels, while DCFS receives a small 0.8 percent or $7 million increase from FY2011. The Department of Human Services, however, is targeted for a cut of $389 million or 10.6 percent from FY2011.

The Republican proposal also outlines $1.3 billion in Medicaid reductions. At the same time, Quinn is looking to borrow $2 billion to inject more federal dollars into the program. As I told you yesterday, this particular type of borrowing does not require the Treasurer’s or Comptroller’s approval, but it would have to go through the Legislature.

More on Medicaid…

Republicans have put their foot down on borrowing - at least until they see more savings. They’re not alone.

States nationwide are preparing for up to 16 million new Medicaid participants when the bulk of the requirements of the new federal health care law go into effect in 2014. Illinois is expecting 500,000 to 800,000 new participants, mainly low-income childless adults able to participate for the first time. That would add the equivalent of $2.6 billion to $4.2 billion a year in costs to taxpayers, using FY2010 HFS data.

According to HFS data, the average annual cost for a Medicaid participant in FY2010 stood at $5,264. Average annual costs among the key five groups are:

Children up to 18, $2,372;
Adults with disabilities aged 19 to 64, $22,790;
Other adults aged 19 to 64, $4,584;
Senior citizens 65 and older, $16,623
Partial benefits for all ages, $1,287.

The federal government is expected to pick up most of the tab of new participants until 2020 when its share drops to 90 percent, but states are nonetheless downsizing their Medicaid services where they can to save money now and in the future.

As far as the other borrowing idea, valued at $8.75 billion, Zorn has more…

The proposed FY2012 budget includes a borrowing initiative that has yet to become law. Under that initiative, introduced as Senate Bill 3, the State of Illinois would issue a general obligation bond in the principal amount of $8.75 billion. Although this bond is being touted as a “restructuring” of debt the state already owes—primarily in the form of past due payments to service providers left over from FY2011—the actual intended uses of the proceeds of this bond issuance are more nuanced than that.

According to SB 3, $5.45 billion of the proceeds from the proposed bond issuance would indeed be used to cover unpaid bills left over from FY2011, by the end of FY2012 (June 30, 2012). Another $1 billion would be used to pay for the delivery of current services funded through the General Fund in FY2012, while just over $400 million would go to covering the FY2012 debt service cost of issuing the bond. The balance of the bond proceeds would be “deposited in Other State Funds, including the Health Care Provider Fund for Medicaid supplemental match to receive higher federal match, the Income Tax Refund Fund (for corporate tax refunds), and the Group Health Insurance Fund (to reduce backlog).

Meanwhile…

Just a week or so after suggesting that Illinois maybe should begin taxing some retirement income, the Chicago Democrat indicated he could support three other equally controversial ideas: requiring suburban school districts to pay more of the cost of teacher pensions, trimming free health care for retired state workers and eliminating many township governments.

As you know, Cullerton’s counsel filed an opinion saying the state could not alter pension benefits. I guess we will have to see how that one plays out.

And…

In the past eight years, more than 10,000 state employees have joined unions, a four-fold increase over the previous eight years, according to records analyzed by The Associated Press.
If pending requests are approved by the Illinois Labor Relations Board, nearly 97 percent of state workers would be represented by unions - including many employees once considered management. Only 1,700 “bosses” would be left out of nearly 50,000 state employees. […]

Gov. Pat Quinn’s office is pressing a key union to give up several thousand new members. If negotiations fail, Democratic lawmakers will likely resurrect proposed legislation to limit union-eligible jobs and rescind union coverage for thousands of people.

Quinn said earlier this month that Wisconsin GOP Gov. Scott Walker “should be ashamed of himself” for pushing through a new law that rolls back state workers’ right to collective bargaining. But Quinn’s effort to scale back union growth is “incongruous” with his and other Democrats’ statements on Wisconsin, said Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees.

A Quinn aide said there’s no contradiction between the governor’s two positions.