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Madigan issues not so veiled threat

Thursday, Mar 31, 2011

* I told subscribers weeks ago that we might expect the General Assembly to use the long-dormant conference committee process to iron out differences between the House and Senate budget proposals. Senate President John Cullerton was the one who brought it up to me, but yesterday House Speaker Michael Madigan broached the topic as well, and in a way that appeared to be a shot at Cullerton

Reconciling those, and therefore the different chamber’s budget bills, could be troublesome.

Madigan laid out one possibility Wednesday during the Elementary and Secondary Education Appropriations Committee. When the Senate and the House can’t come to some kind of agreement on a specific bill, five members from each chamber meet and try to hammer out the details in a conference committee.

Because the House’s $33.2 billion revenue projection is more conservative than the Senate’s $34.3 billion projection, Madigan said Senate Republicans might be inclined to side with the House in such a meeting.

“In the Senate, I think the people that want to raise the numbers would be the Democrats, and they would have three appointments on that conference committee, and they ought to be out voted,” Madigan said. “The report coming out of the conference committee should be for the numbers contained in the House bill(s).”

Actually, conference committees were used during the early 1990s. But the system got out of hand as lobbyists and members started inserting major legislative changes into long conference committee reports. So, it was stopped.

* But the scenario might not work as Madigan envisions. The Senate Republicans aren’t yet willing to completely abandon their Democratic colleagues and throw in their lot with the Speaker

State Sen. Matt Murphy, R-Palatine, the Senate GOP’s budgeteer, said he’s not sure how a conference committee on budget legislation would play out.

His Republican colleagues in the Senate generally lean toward more conservative budget numbers and didn’t agree with the Senate’s adopted $34.3 billion projection, he said, with a caveat.

“We also felt like a number a little bit higher than what the House came up with is reasonable as well,” he said. “I think it’s a little premature for us to start to weigh in, and choose sides, in a conference committee that I don’t know is even going to happen.”

* Meanwhile, some in the media focused attention on the apparent detente between Madigan and House Republican Leader Tom Cross

A truce broke out in the Illinois House Wednesday as Democrats and Republicans embraced the outline of a budget plan that is more conservative than the one proposed by Gov. Pat Quinn and would cut money for schools.

In a rare side-by-side appearance, House Speaker Michael Madigan, D-Chicago, and House Minority Leader Tom Cross, R-Oswego, acted like old chums rather than political warlords out to crush each other. They led the House in allocating billions of dollars for debt and pension payments and setting out spending plans for areas including education.

Heh

As Madigan and Cross faced reporters, shoulder to shoulder, after a committee hearing, both brushed off the idea that there was ever bad blood between them.

“I don’t think there ever was a problem. Was there, Tom?” said Madigan, who routinely has bottled up Republican bills in the Rules Committee and repeatedly referred to Cross’ caucus as “nonparticipating dropouts.”

“I don’t remember a problem,” said Cross, whose political organization put up billboards throughout northeast Illinois blaming the state’s fiscal problems on Madigan.

“Maybe some journalists thought there was a problem,” Madigan said.

Yeah. OK.

Madigan teamed up with Cross and the Senate Republicans the last time he went up against a free-spending governor and Senate President. Cross eventually broke with Madigan over the capital bill (with Cross siding with Rod Blagojevich and Emil Jones) and the two have not cooperated since then. Until now, that is.

* The school cuts are just part of the package

The latest projection from Springfield is that schools can expect at least $600 million less than last year. […]

Rep. Will Davis, D-Homewood, said there will be $200 million fewer state dollars, and nearly $400 million fewer federal dollars this year. Davis, who will craft the education budget in the House, said he’s been told he can spend no more than $6.8 billion. […]

Although school districts have received less money and delayed payments from the state, ISBE is still advocating for more education funding. The agency recommends $7.6 billion in state funding for fiscal year 2012 budget, more than 5 percent more than the governor’s proposed $7.2 billion.

ISBE is going to be sorely disappointed, and this story about schools hoarding cash reserves won’t help their cause

The statewide total of $8.9 billion unspent at the close of the 2010 budget year is enough to cover the entire state portion of public school budgets across Illinois next academic year, though districts stress that the money isn’t just sitting around for no reason — some of it is meant for future school expenses, building projects and other uses.

They say that while these balances can help stave off staff or program cuts, they cannot eliminate the need for them. Many districts that lay off teachers or cut programs have already spent down their reserves, and school officials say it’s irresponsible to use fund balances, which the state likens to checking or savings account balances, for ongoing expenses.

Fund balances are widely considered prudent by school officials weathering Illinois’ fiscal crisis, but they rile taxpayers who say districts are hoarding their money and should give some of it back by lowering tax bills.

The balances have grown by $3.6 billion since 2004-05 and now average about 40 percent of districts’ main operating revenue, up from 30 percent five years ago. The Illinois State Board of Education’s barometer for healthy fund balances is at least 25 percent — enough to cover three months of expenses.

The Tribune found that 8 of 10 school districts had fund balances exceeding that amount when the books closed on June 30, 2010. Nearly half of districts reported fund balances of 50 percent or higher, and 70 school districts — many in the Chicago area — had balances equaling 100 percent or more, enough to cover a whole year of expenses.

* And we can expect to see much more hand-wringing as reality sets in on the other appropriations committees

Madigan and Cross have settled on a revenue projection about $600 million lower than Quinn’s. After covering various fixed costs, such as pensions, they’re allocating that money to five different broad categories: $6.9 billion for education, $1.2 billion for general services, $2.1 billion for higher education, $12 billion for human services and $1.7 billion for public safety.

Now House appropriations committees are supposed to decide which particular programs get money and which ones don’t. The demand far exceeds the amount of money available.

“We’re going to try to figure out how to stick a 10-inch foot in a 5-inch shoe,” said Rep. Sara Feigenholtz, D-Chicago.

And don’t forget the lobbyists

Meantime, dozens of lobbying groups circulated through the Capitol Wednesday calling on lawmakers to reverse cuts proposed by Quinn.

In a letter distributed to members of the legislature, Southern Illinois Healthcare President Rex Budde, said Quinn’s proposal to reduce Medicaid spending by $552 million could result in delays to bricks and mortar improvements at its hospitals and other facilities as well as cuts in services and physician re-cruitment.

“We urge the General Assembly to reject the proposed Medicaid cut,” Budde noted in the letter.

* And the Tribune editorial board contradicted itself today in an editorial against a Pat Quinn borrowing plan that would capture a higher rate of Medicaid reimbursement

Quinn spokesman Kelly Kraft responds that paying interest costs on another $2 billion in debt might still leave Illinois with a good chunk of the $175 million Medicaid reimbursement. She notes that the Republican proposals couldn’t be enacted soon enough to produce $2 billion in the current fiscal year. And, she says, the higher income tax isn’t producing new money fast enough to meet the other demands on that revenue and also pay these Medicaid bills. We won’t argue. [Emphasis added.]

Um, so the state shouldn’t borrow, but it might be a good idea? I don’t get it.

* Related…

* Press release: Senate Democrats Respond to GOP Budget Suggestions

* John Cullerton: Give new era in state Senate a chance

* House bill would require state contractors to stay in Illinois

* Tuition bills fail; SIUE finances still troubling: Two bills pending before the higher education committee in the state Senate would have frozen public university tuition for two years.

* Press release: Cross and Madigan co-sponsor budget proposal

* Schools stockpile large amounts of money in fund balances - Taxpayers, school administrators debate how much is too much money in reserves

* Inspector General: City wastes $18 million a year on truck drivers

- Posted by Rich Miller        


32 Comments
  1. - shore - Thursday, Mar 31, 11 @ 9:53 am:

    “In a letter distributed to members of the legislature, Southern Illinois Healthcare President Rex Budde, said Quinn’s proposal to reduce Medicaid spending by $552 million could result in delays to bricks and mortar improvements at its hospitals and other facilities as well as cuts in services and physician re-cruitment.”

    So you delay some hospital improvements a few years, so what?


  2. - Cincinnatus - Thursday, Mar 31, 11 @ 10:12 am:

    So if I get it right, House Democrats and House and Senate Republican are aligning against Senate Democrats and Our Boy Pat® also a Democrat.

    To all of you who constantly harp that Republicans need to lead and provide alternates, I say it is the Democrats who have more of a problem than the Republicans.


  3. - Pot calling kettle - Thursday, Mar 31, 11 @ 10:21 am:

    Since schools are not supposed to borrow in lean times and pay back when things are good, it makes sense for the reserve funds to fluctuate above and below the 25% mark. That 40% average is likely to decline quite a bit over the next couple of years as property tax revenues decline and state funding is cut. It may seem like a lot of money, but if you have ever put together a school budget, you know that the 40% reserve can drop to 10% very quickly.


  4. - Rod - Thursday, Mar 31, 11 @ 10:40 am:

    Rich in relation to school district’s supposedly big fund balances. The Tribune reporter Ms. Rado is comparing money on hand on June 30, 2010 to money on hand districts had in prior years. Her base line comparision year was June 30, 2005.

    What was unique about last year? Do we recall ISBE could not pay its bills on time to school districts? Districts recieved payments totally out of normal order and some recieved piles of cash owed them for 6-8 months only in June of 2010. Another pile of cash owed for the 2009-2010 school year came as late as December of 2010 well into the FY11 school budgets.

    I could see no indication in the article that critical issue was examined. As of last week the Chicago Public Schools was owed by the ISBE $263,771,989 million, if they get that money in June will the Tribune consider them flush with cash?


  5. - dave - Thursday, Mar 31, 11 @ 10:41 am:

    House Democrats and House and Senate Republican are aligning against Senate Democrats

    Huh? Did you even read the post? Lets quote Republican Senator Murphy again:

    “We also felt like a number a little bit higher than what the House came up with is reasonable as well,” he said.


  6. - wordslinger - Thursday, Mar 31, 11 @ 10:49 am:

    I don’t understand Sen. Murphy’s position. If the Senate GOP caucus objective is to reduce spending, wouldn’t you jump on the lower revenue estimate as a way to force that?

    Why would you want to consider a higher revenue estimate, except to facilitate more spending?


  7. - QRBNST - Thursday, Mar 31, 11 @ 10:53 am:

    Legislative maneuvers to “freeze” college tuition are always smoke and mirrors to hide the fact that the General Assembly continues to cut its support of public universities while attempting to make it appear as though it is doing something about the skyrocketing costs to attend them.

    Why is it smoke & mirrors?

    Because, the universities end up increasing their “fees” to cover the moneys they would have otherwise recovered by raising tuition rates!

    Pathetic legislative gimmicks such as the tuition freeze deserve to fail.


  8. - just sayin' - Thursday, Mar 31, 11 @ 11:19 am:

    I don’t think it’s much of a fight between Madigan and Cross. Madigan simply doesn’t respect Tom. It’s not even a worthy adversary relationahip.

    My sense is Madigan thinks about Cross much the same way as a lion thinks about a hamster, that is to say not at all, beyond maybe briefly now and then for snack purposes.


  9. - Anonymous - Thursday, Mar 31, 11 @ 11:22 am:

    Three Chicago Democrats control the State. I don’t know how the R members keep going to work….I’d go crazy. Sure MJM will have his picture taken with one or another, but he knows who makes ALL the decisions.


  10. - Small Town Liberal - Thursday, Mar 31, 11 @ 12:16 pm:

    - So if I get it right, House Democrats and House and Senate Republican are aligning against Senate Democrats and Our Boy Pat® also a Democrat. -

    I’d say you don’t got it right. I would venture to guess you’re going to see some compromise from Cross since he didn’t get the majority or the governor in the election. I’d also say the friendly act is just that, Madigan is going to use it to claim his bipartisanship. I could be wrong. Also, enough with the trademark, it was cute the first couple times but now its just annoying.


  11. - Wensicia - Thursday, Mar 31, 11 @ 12:20 pm:

    So much for ‘the income tax increase is for education’. I can already feel the coming referendum to raise my property taxes.


  12. - SouthernGirl - Thursday, Mar 31, 11 @ 12:22 pm:

    I’m confused. So Madigan doesn’t want to borrow to pay back old bills.

    I thought borrowing to restructure debt was a good thing — like refinancing the mortgage on your house from 12% to 4%? At this point there is mandated 1% per month interest due on all the unpaid bills, or 12% per year. Restructuring the debt will make it a less expensive borrowing proposition.

    Or is that just smoke and mirrors?

    And is it just that vendors will never get paid, therefore interest savings is moot?

    I’m a noob, so be patient.


  13. - steve schnorf - Thursday, Mar 31, 11 @ 12:44 pm:

    ws, perhaps so that one can argue that old bills can be paid without borrowing. And, maybe even to suggest that if spending can be sufficiently constrained, then the income tax increase can be rolled back.


  14. - Cincinnatus - Thursday, Mar 31, 11 @ 12:46 pm:

    SoutherGirl,

    Borrowing on a house is similar to borrowing for a capital project, like a road or bridge. The borrowing here is for past operating expenses (sorta like mortgaging the house for a meal at a restaurant), and other past missed obligations. In addition, Quinn’s plan calls for $1B additional funds (the number is a bit of a moving target) for future operational expenses.

    I think there may be agreement that can be reached on restructuring our past debt (still controversial to those that think the state should meet it needs with current revenues, and object to the structure of the loan which balloons after the end of the loan), but I also believe many object to borrowing for the future expenses.

    So while repaying out past debts (which have a larger interest rate than if we restructured the debt) may provide sufficient justification for many to borrow money, as things are now, Quinn’s plan for borrowing for the future is a non-starter for many Republicans.

    Plus, Republicans are still objecting to the future spending numbers (see the Republican Senate spending plan) and revenue projections that make up the baseline of currently submitted proposals.

    Or maybe it is really smoke and mirrors!


  15. - Jaded - Thursday, Mar 31, 11 @ 1:21 pm:

    Madigan knows that it doesn’t matter how many signatures a conference committee report gets, the Senate President still has to call it and it still has to get 30 votes. The last time I checked there were still only 24 Senate Republicans.


  16. - Yellow Dog Democrat - Thursday, Mar 31, 11 @ 2:07 pm:

    I seem to recall a handful of Conference Committee Reports between 97-2001, but now I’ve forgotten them…Gaming?


  17. - 47th Ward - Thursday, Mar 31, 11 @ 2:59 pm:

    ===(sorta like mortgaging the house for a meal at a restaurant)===

    No Cinci, it’s more like taking a home equity loan at 4% to pay off credit card debt at 24%.

    Rich, I thought your fax today was one of your best of all time. Thanks for breaking this whole thing down for us.


  18. - Ghost - Thursday, Mar 31, 11 @ 3:21 pm:

    Translation: nothing brings the house together like a bad governor.

    only 3 years 9 months to go….


  19. - Cincinnatus - Thursday, Mar 31, 11 @ 3:29 pm:

    47th,

    I am trying to differentiate typical bonds, normally used for capital programs, from these proposed bonds which are begin used for operating expenses, but I’ll go along with you if you stipulate that we are using a home equity loan (not that there is any equity collateral in this state) to pay off the credit cards you used at the mall.


  20. - mokenavince - Thursday, Mar 31, 11 @ 3:30 pm:

    Good call by Ghost, keep anythig to do with money away from Quinn. He was a world class Gov Lite. lets just keep him cutting ribbons.


  21. - wordslinger - Thursday, Mar 31, 11 @ 3:34 pm:

    Steve, if that’s what Murphy’s saying, I can see the argument for less borrowing, certainly a restructuring with a a shorter term and more money upfront, as has been recommended by others.

    I’m curious that the vendors who are owed money haven’t been raising Cain for a borrowing plan. If they don’t, who do they expect to carry the ball for them? Maybe they’re happy getting the extra juice without borrowing, if their cash-flow allows it.

    A rollback of the tax increase would be just political posturing at this point, I think. I understand it, but I’m flush with political posturing.

    I’m happy that the Senate and House GOP are constructively engaged in the process now. The more eyes and brains in the game the better.

    There should be conflict among the House, Senate and Governor, regardless of party. That’s the way the system is supposed to go, various interests working it out.


  22. - 47th Ward - Thursday, Mar 31, 11 @ 3:43 pm:

    Thanks Cinci,

    But these are past due operating expenses. Sort of like when you buy your house, then discover that you need furniture. Even disciplined consumers rack up big credit card debt for old operating expenses. Even with non-Medicaid debt, Illinois owes 12% per year in interest. A consolidation loan can be had for half or less than 12%.

    It really is the same thing. Illinois lived large and charged it all. Now the bill is due and the interest is killing us.

    Capital isn’t the only legitimate need for governments (or consumers) to borrow. Cash flow is critical too. You can make borrowing sound reckless, but in this case, borrowing to pay past-due, pre FY 2011 bills, is the smartest thing Illinois can do given the market on debt right now. Right now, money is cheap. It doesn’t cost us more to borrow, and not borrowing this way costs us double.


  23. - Cincinnatus - Thursday, Mar 31, 11 @ 3:49 pm:

    Oh, I am not trying to lay out a case for or against borrowing, 47th. I was just trying to break things down with analogies for SouthernGirl who I thought was asking for a simplified explanations, and describe what, to the best of my understanding, are the positions of the various sides in the debate.


  24. - 47th Ward - Thursday, Mar 31, 11 @ 4:05 pm:

    Thanks again Cinci,

    So you’re agnostic on borrowing, like Madigan?


  25. - jerry 101 - Thursday, Mar 31, 11 @ 4:11 pm:

    Cincinnatus -
    You’re right. That’s part of what’s so frustrating about being a democrat to many democrats.

    Who needs an opposition party when the Democrats are in power? We’re perfectly good at opposing ourselves!!

    It’s like Will Rogers said: “Democrats never agree on anything, that’s why they’re Democrats. If they agreed with each other, they would be Republicans.”


  26. - Cincinnatus - Thursday, Mar 31, 11 @ 4:53 pm:

    47th Ward,

    I think you know the answer to the questions if I am agnostic, and what side of the coin I’m on! I thought I played the explanation pretty well down the middle for SouthernGirl.

    jerry 101,

    I’m pretty sure that Democrats aren’t the only ones that are good at opposing each other. We Republicans can give you a run for your money any day. We are especially adept at stepping on our own dorks.


  27. - wordslinger - Thursday, Mar 31, 11 @ 5:21 pm:

    – Even with non-Medicaid debt, Illinois owes 12% per year in interest. A consolidation loan can be had for half or less than 12%.–

    You’ve got that right. Politics aside, right to left, the state would be nuts not to borrow as much as they can at current short, front-loaded terms to get square with their high-interest liabilities.

    Banks are borrowing from the Fed and depositors at historically low rates. Despite the hysterical and sinister shorting of munis months ago, they’re hungry for that spread.

    Put it this way: if you could rollover your 12% debt for 3%, would you do it?

    I imagine the GA will come around to a borrowing plan at some point, shorter term and more upfront than Quinn has proposed.

    But if those who are owed money really want it — and not the extra juice — they better get on their bicycles and move. Because it’s not a slam dunk.


  28. - wordslinger - Thursday, Mar 31, 11 @ 5:33 pm:

    –Oh, I am not trying to lay out a case for or against borrowing, 47th. I was just trying to break things down with analogies for SouthernGirl who I thought was asking for a simplified explanations, and describe what, to the best of my understanding, are the positions of the various sides in the debate.–

    Well, that’s clear.

    If the folks who are owed money don’t start putting up a squawk about a borrowing plan,, it’s fair to assume they’re content with taking the extra juice over time.

    The home-schoolers and ISRA can rock the Dome in a New York minute — and no money is involved.

    If those who are owed money can’t muster the energy to demand payment, then, as a good businessman, I’ll say you’ll get it when you get it. Have a nice day.


  29. - SouthernGirl - Thursday, Mar 31, 11 @ 7:39 pm:

    Thanks Cinci and 47th. I was looking for definition of both sides of the debate, and you provided it well!


  30. - Vibes - Thursday, Mar 31, 11 @ 9:35 pm:

    Are there formal House and Senate rules on conference committees? In Congress, each chamber gets one vote. So it doesn’t really matter if the minority of one house votes with the other chamber, it’s just a stalemate. But it’s great theater!


  31. - wordslinger - Thursday, Mar 31, 11 @ 9:40 pm:

    –Are there formal House and Senate rules on conference committees?–

    LOL. The old gag on interns in the Capitol was to assign them to cover or staff a conference committee.

    Like a snipe hunt.


  32. - Norseman - Thursday, Mar 31, 11 @ 9:50 pm:

    As Rich mentioned in an earlier post, the Speaker’s budget process is going to run into a lot of resistance from his members. These guys can’t even accept an agency opposing a bill because of cost. According to Franks, the bureaucrats shouldn’t be telling the lawmakers not to spend money. They’re the policy makers and they make the spending decisions. Moffitt joined in on this chest thumping. Disgusting!

    Somebody needs to stop these people.


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