* The BlueRoomStream.com video of the budget briefing for reporters last night by Gov. Pat Quinn’s chief of staff, budget director and chief flak is here. Make sure to keep a close eye on our live session post today for constant updates on this and other topics.
* The SJ-R has some info about how the new AFSCME contract impacts the budget…
While pension pressures continue and some programs face cuts, Quinn is expected to tout an estimated $900 million savings over three years in state employee health care costs, which the administration said will result from the tentative contract recently negotiated with the American Federation of State, County and Municipal Employees. The contract calls for higher insurance payments by active workers and also for retirees to begin paying premiums for their state-subsidized health insurance.
However, the administration will need $140 million this year to pay for back wage increases that must be paid under the contract and $72 million to pay for cost-of-living adjustments and step increases next year.
The state also expects to save about $10 million through a new provision allowing newly hired workers to be paid less than the current starting wage for their jobs.
* Meanwhile, serious conflict is coming with the House. Gov. Quinn’s budget calls for $35.6 billion in General Funds spending. That’s a half a billion dollars more than the House’s official revenue estimates…
Just a day before Gov. Pat Quinn is scheduled to deliver his budget speech, the Illinois House adopted its own estimate of state revenues and warned the governor not to exceed it.
On Tuesday, the House adopted resolutions saying they believe the state will collect just over $35 billion in revenue next year from state taxes and federal aid.
That’s the amount the House will use to craft its own spending plan over the coming weeks. Rep David Harris, R-Arlington Heights, the ranking Republican on the House Revenue Committee, said the House budget will not spend more than that amount.
“If the governor walks into this chamber (Wednesday) and proposes to spend more than $35 billion, then he puts himself at odds immediately with this chamber,” Harris said.
* The Tribune looks at increases…
Quinn budget chief Jerry Stermer said the governor wants to add more state police and prison guards to replace a growing number of retirees and to hold down overtime costs.
Spending on social services also would increase from $4.6 billion in the current budget to $5.3 billion in the new budget. Stermer said the extra money would be aimed at “ending gimmickry” that is now “kicking the cost” into other years.
* Big cuts outlined by the Daily Herald…
Quinn today will propose cutting about $400 million for schools, including a 5 percent cut to universities. He’ll also advocate ongoing reviews of cuts into what the state pays for health care for the poor.
And he’s also eyeing possible cuts to local communities’ share of state income taxes, an idea that has drawn loud protests from suburban mayors in recent years.
Quinn isn’t calling for a specific cut to that program, but aides said it could be an item in a larger menu of similar reductions the governor wants.
Keep in mind that those and all other cuts will have to be deeper if the House sticks to its revenue estimate, which it has in the past.
* The Sun-Times has the pension impact…
The budget proposal the governor will present to state lawmakers Wednesday represents a 3-percent increase in spending over current levels but contains no tax or fee increases or sweeping new programs that might be salted within a typical election-year budget.
Instead, the growth in spending goes toward covering $6 billion in pension obligations, up from $5.1 billion this year. Next year’s pension tab amounts to 19 percent of all state spending compared to just 6 percent of the state’s spending pie six years ago.
In fact, while the Quinn administration forecasts $817 million in new revenues coming into state coffers during the budget year beginning July 1, all of that money and more — $929 million — will go toward paying for added pension costs.
“This budget is a direct result of the inaction on stabilizing pensions,” said Jack Lavin, Quinn’s chief of staff.
* News-Gazette on the bill backlog…
The budget also calls for continued progress on the effort to reduce the state’s backlog of unpaid bills, now estimated at around $9 billion.
By the end of 2013, the backlog will be down to $7.5 billion, the budget outline says, and will be reduced to $6.8 billion by June 30, 2014.
* Lee Enterprises on facility closures…
Unlike a year ago when he announced the closure of dozens of state facilities, Gov. Pat Quinn has no plans to add to the list of shuttered properties when he unveils his fifth budget proposal Wednesday.
Although the Chicago Democrat still plans on moving forward with two closures left over from 2012 budget speech — the Dwight Correctional Center and the Murray Developmental Center in Centralia —aides say there will be no repeat of the controversy he stirred last year with the closure of facilities in Tamms, Murphysboro, Carbondale and elsewhere.
* And despite claims that there would be no tax hikes proposed, Sneed says there is one such item on the agenda…
Sneed has learned Quinn, who will release his state budget Wednesday, plans to roll out a proposal that may give major corporations doing business in the state agita — but could pay the state’s debt more quickly.
◆ Translation: Quinn wants to temporarily suspend a $100 million tax loophole enabling major corporations that produce good outside the state to shield a portion of their income from taxation under the Illinois tax code.
◆ The loophole lop: “The governor feels this is no time for ineffective loopholes, when the state has bills to pay,” said a Sneed source. “The suspension would only be temporary, but it will enable the governor, who inherited billions of dollars in unpaid bills from decades of fiscal mismanagement — compounded by the worst recession — to pay down the debt faster,” the source added.
* Some individual videos of last night’s presentation…
* Quinn admin on tax hike: Brooke Anderson with Gov Pat Quinn’s office answers around a question about how the governor will be able to allow Illinois’ 67% income tax increase expire in 2015, given the current budget constraints on the state.
* Lavin on IL AFSCME Contract 1: IL Gov. Pat Quinn;s Chief of Staff, Jack Lavin, briefs reporters on the details of the new contact with the American Federation of State County and Municipal Employees
* Lavin on IL AFSCME Contract 2: Jack Lavin with the Quinn administration answers more questions on the contract for IL AFSCME workers, including details about back pay, step increases, and how the contract will break down in the next IL budgets.
* Quinn admin on IL budget transfers: Jack Lavin, Brooke Anderson, and Jerry Stermertry to explain the Quinn administration’s view on taking money that would be transfered out of the state budget, and spending it on schools or pensions. The biggest transfer from the state budget is money collected by the state for local governments. Stermer would not say how much the Quinn budget expects to take from transfers. At about the 3:30 mark, reporters get frustrated with the lack of clarity from Stermer
- PublicServant - Wednesday, Mar 6, 13 @ 9:39 am:
Sounds like they need to get busy and change that unsustainable pension ramp law that Stermer directly referenced as the cause of increased payments this year. Ralph Martire and the CTBA have a plan that reamortizes the amt borrowed from the pension over a sustainable timeframe and funding target. If you want to solve the problem of the state’s borrowing from the pension, replacing the 1994 ramp repayment law must be done.
- Rich Miller - Wednesday, Mar 6, 13 @ 9:40 am:
===Ralph Martire and the CTBA have a plan===
Stermer flatly rejected that plan last night, refusing, he said, to put this burden on yet another generation.
- DisgustedOne - Wednesday, Mar 6, 13 @ 9:50 am:
=yet another generation==
Nobody was worrying about THIS generation when raiding the coffers, were they? When you can’t afford the house payment, you remortgage your house. Same here. Payments that are not realistic are part of this hysteria. Fix the ramp. Martire is the only one who seems to have a head on his shoulders.
- dupage dan - Wednesday, Mar 6, 13 @ 9:55 am:
So, if we aren’t going to burden yet another generation, where is Illinois going to get the 94 billion dollars they say we need to get to the magic 90% funded figure? It took many years to create that problem, how do we resolve it immediately? In reality, the pension system was never funded anywhere near the 90% that is expected. Where should that number be, realistically? It is a numbers game. While that certainly isn’t my forte, it wouldn’t take a genius to figure out how to address the liability. How many people are gonna retire in a time frame? How much do we need to cover it? How do we deal with a spike in spending, like baby boomers retiring, etc? How much can we expect to receive in payments given hiring trends, etc. What does the constitution require? This is NOT rocket science. And yet, there seems to be little reckoning from the point of view of an accountant - just wild speculation in the press, dire predictions from ratings agencies and the like. Martire has the kind of plan that I could envision a debt counselor giving to the guy who ran up some huge credit card debt. “Cut up the cards and spend less”
This avoidance of responsibility on the part of the GA is maddening.
- PublicServant - Wednesday, Mar 6, 13 @ 9:56 am:
=== Stermer flatly rejected that plan last night, refusing, he said, to put this burden on yet another generation. ===
So, instead he’s for letting 50 years of state debt aggregation and its repayment from a 1994 law that has an artificial timelime and no ties to a sustainable percentage of state revenues cripple the state’s ability to deliver needed state services to the current generation?
Good plan…not
- Arthur Andersen - Wednesday, Mar 6, 13 @ 10:04 am:
For someone who was put on Earth to fix pension funding, PQ still sounds like he is wandering around trying to remember what the problem was.
Didn’t see any python food or upkeep in the budget, either.
#solongSqueezy
- unbiased observer - Wednesday, Mar 6, 13 @ 10:10 am:
there is not enough money to meet the state’s current obligations…..taxes will not be able to be raised enough to meet these obligations. it is not politically possible. there will be some degree of revenue increase, there will be some degree of pension decrease (whether unconstitutional or not). i’m not sure i would place much faith in the unconstitutional argument of those against pension reform. no money is no money, and benefits will go down even if it means changing the constitution at some point down the road, although i doubt it will come to that.
i think it will take about 2 years from now \,essentially when the crisis really begins to be obvious even to the somnolent public at large who dont follow these things too closely. in 2018 over 30% of the yearly budget will be going only to pension obligations and this number will rapidly go up unless changes are made.
its time to make very tough, extremely difficult decisions. but i think it wont happen for another couple years, as i mentioned above. the pols wont act until they absolutely have no choice whatsoever.
- Cincinnatus - Wednesday, Mar 6, 13 @ 10:13 am:
Core inflation is about 2% and has held steady for the past 4 years. Spending is proposed to increase 3%.
- PublicServant - Wednesday, Mar 6, 13 @ 10:19 am:
@Unbiased Observer - Thanks for the biased, unsubstantiated opinion. I disagree.
- DisgustedOne - Wednesday, Mar 6, 13 @ 10:28 am:
The 90% funding goal is also unrealistic. The pension funds have never ever been anywhere even remotely close to that, yet never missed a payment to anyone. IMRF is funded at something like 80% and is held up as an exemplary model for retirement systems. Sounds like the hysterical just have it in for reducing pensions no matter what.
- Cassiopeia - Wednesday, Mar 6, 13 @ 10:29 am:
The time for really tough decisions would have been possible when Quinn first became Governor. Now that it is reaching the point where the pain will be even greater there appears to be a lack of political will all around.
Maybe it is time to just throw all of them out and get a totally new set of leaders, no matter how untried they may be.
- Cincinnatus - Wednesday, Mar 6, 13 @ 10:50 am:
I think that all people interested in pension funding percentages should read this:
http://www.wikipension.com/images/0/0a/80_percent_funding_threshold.pdf
- RNUG - Wednesday, Mar 6, 13 @ 10:55 am:
Two observations:
At one point during the dot com boom, the pension funds were close to 90%. It was primarily because of the stock market gains back then …
I can’t see the claimed $900M in health insurance savings over two FYs regardless of how I work the numbers. It may be there but I’m not that creative with math …
- Small Town Liberal - Wednesday, Mar 6, 13 @ 10:58 am:
- Core inflation is about 2% and has held steady for the past 4 years. Spending is proposed to increase 3%. -
I don’t have time to verify these numbers, but what’s your point?
Should we base our budget on core inflation or on revenue? What cuts are you looking for?
As repeatedly noted, the obvious big money right now is in the pensions.
Next is local government sharing, you ready for a big property tax increase?
Mindlessly quoting numbers doesn’t mean anything.
- Cincinnatus - Wednesday, Mar 6, 13 @ 11:04 am:
STL,
If inflation were soaring, would you be saying that the budget should keep up with inflation? I think so. Why can’t the opposite be true, too? Is it because it is unthinkable that government NOT grow?
- Small Town Liberal - Wednesday, Mar 6, 13 @ 11:14 am:
- Is it because it is unthinkable that government NOT grow? -
Cinci, the increase is because of pension payments, state government has been shrinking since the start of the recession. Look at education, facilities, services.
This is not rocket science.
So, again, what cuts do you want to see? Should we inflict further pain where it’s already been inflicted?
- mythoughtis - Wednesday, Mar 6, 13 @ 11:32 am:
RNUG
The savings most likely comes from the fact that all MEDICARE eligible retirees will (supposedly) be moved to Medicare Advantage plans on Jan 1 2014, would remove any need to have Quality Care at the Medicare level. The state would just have to pay the Medicare Advantage company their portion of the premium, and not have to worry about the actual payments to providers, hospitals, pharmacies, etc.
- wordslinger - Wednesday, Mar 6, 13 @ 11:39 am:
Cinci, the pension contribution is going from $5.1 billion to $6 billion, and increase of 18%. Core inflation is meaningless.
- Cincinnatus - Wednesday, Mar 6, 13 @ 11:53 am:
18% of the pension cost, but it’s $900M increase on a $35B budget, no?
- Small Town Liberal - Wednesday, Mar 6, 13 @ 12:00 pm:
- but it’s $900M increase on a $35B budget, no? -
So there’s nearly 3%. Throw in paying down the old bills by $2 billion and you can clearly see government is not growing.
- Cincinnatus - Wednesday, Mar 6, 13 @ 12:36 pm:
STL,
It has already grown… Are we to accept the past increases in expenditures as the “new normal” or make up for the past mistakes? How much is the State spending on bullet trains (sorry Rich), subsidies for green energy, bike paths or beautification programs? Are those programs more important than caring for the most needy individuals or are they worth increasing taxes?
- Anon. - Wednesday, Mar 6, 13 @ 1:19 pm:
==When you can’t afford the house payment, you remortgage your house.==
This is actually a good idea — if the state would issue bonds to pay off the pension “underfunding,” the debt service would be less than the ramp (existing or under any proposal that actually pays the unfunded balance down) because interest on the bonds would be lower than the expected earnings on the fund.
- unbiased observer - Wednesday, Mar 6, 13 @ 1:36 pm:
the mortgage payment analogy is not exactly accurate. a better analogy would be the state has 10 mortgages, and can only afford to pay for 6 of them in full.
- DisgustedOne - Wednesday, Mar 6, 13 @ 2:22 pm:
Well, would reamortizing the pension debt help the state and the repayment or not?
- Demoralized - Wednesday, Mar 6, 13 @ 2:49 pm:
@Cinci:
Discretionary spending has gone down for the past few years. Your argument about an increase is a false argument because the increase is entirely due to the pensions. Also, pensions increase $900 million in FY14 but revenues are only projected to increase $800 million. There are cuts to the budget. You don’t get it.
- RNUG - Wednesday, Mar 6, 13 @ 2:52 pm:
mythoughtis @ 11:32 am
That might be it but I don’t think it can account for the huge gap I was seeing.
- unbiased observer - Wednesday, Mar 6, 13 @ 3:09 pm:
with the exception of pension obligations, state spending is shrinking. and you aint seen nothing yet. wait and see how many services are cut in 2-3 years, how much less general state aid to school systems, how big a backlog of unpaid bills from the state. this will get very interesting….and painful to all. and i predict “unconstitutionally” painful.
- unbiased observer - Wednesday, Mar 6, 13 @ 3:10 pm:
state discretionary spending is shrinking.
- Lost in the Weeds - Wednesday, Mar 6, 13 @ 9:42 pm:
===Ralph Martire and the CTBA have a plan===
=Stermer flatly rejected that plan last night, refusing, he said, to put this burden on yet another generation.=
So in one year we pay down the pension debt about 6% for the next 32 years of pension obligations, and we wonder why it is 20 percent of the budget.
90/6 = 15 years. So in 15 years nothing would need to be paid into the pension system, which obviously is the goal of some.
I know it is simple math, but this is a created crisis caused by the ramp.
On a seperate matter it seems like if we could borrow through bonds at about 6 percent and then pay vendors we could avoid the approximately 10 percent interest being paid to those vendors that are owed money. This would save money right now and the state would owe less money in the current and future budgets. This country has record low interest rates yet the state will not take advantage of it.
- Ruby - Wednesday, Mar 6, 13 @ 9:56 pm:
Our state government does not have a credible plan to save Illinois from the mismanagement of state pension funds. Fortunately the stock market is having a rally that may save us from financial disaster. Today’s encouraging number: 14,296 the new all time high of the Dow Jones Industrial Average.
- truthteller - Thursday, Mar 7, 13 @ 7:03 am:
In what chapter of the Bible was the current ramp written?
Martire’s plan has the virtue of being affordable, less costly than the current regime, and constitutional because it doesn’t slash pension benefits.
I know there are folks who think that the only good plan is one that inflicts severe pain on retirees. If that’s the way you feel, then Martire’s plan is no good. Otherwise it makes eminent sense.
Common sense is a hard sell at the Capitol.