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*** UPDATED x2 *** Budget roundup

Wednesday, May 29, 2013

*** UPDATE 1 *** Cassiopeia’s comment was so good that I felt the need to front page it

This budget negates a significant part [of] the fiscal crisis argument that Madigan puts forth in SB1.

True dat.

From Madigan’s “statements and findings” passage

Notwithstanding these and many other steps and their major fiscal, economic, and human impact, the fiscal situation in Illinois continues to deteriorate. […]

The General Assembly finds that the fiscal crisis in the State of Illinois jeopardizes the health, safety, and welfare of the people and compromises the ability to maintain a representative and orderly government.

It’s difficult to see evidence of that in this particular budget.

[ *** End Of Update *** ]

* As usual, Illinois Issues has a great budget rundown

Both higher education and K-12 will be funded at essentially flat levels, compared to the current fiscal year. Human services would see cuts under the plan, but the outlook is not nearly as gloomy as it seemed just a few weeks ago. Sponsors of the various budget bills say that the situation would have been much bleaker if a windfall of $1.5 billion in unexpected revenues had not come in. “In April, there was a large surge because people sold a bunch of assets at the end of [Fiscal Year] ‘12 in anticipation of capital gains rate changes,” said Rep. Greg Harris, who sponsored the human services budget bill. […]

While Republicans blasted the spending in the proposal, Harris, who took over the human services budgeting committee this year, said this is the first budget in recent years that will fully fund human services. “We’ve made cuts across the board but we’ve retained funding in core community services such as mental health, substance abuse, homelessness programs,” he said. This year and several other times in recent history, human services agencies have had to come back to the General Assembly midway through the fiscal year and ask for more money to avoid the shutdown of programs. “In other years, they’ve not appropriated for a full year, and they’ve always come back for [supplemental spending bills]. … We wanted to pass something that was fully reflective of the realities of each department’s need,” he said. “I would say woe betide the department that comes back to us with a supplemental [request] this year.”

The budget does not explicitly include the raises promised to state union workers in a new contract. But personnel costs are provided in lump sums, and each agency is left to figure out how to work in the raises. “What we accounted for was their FY 14 raises, and they way we did that was to give our departments maximum flexibility.” […]

Some of the unexpected revenue would be used to immediately pay down nearly $600 million in old human services bills. Harris said many of those payments would be eligible for federal matching funds under Medicaid. Some of the additional revenues were incorporated to the revenue estimate for next fiscal year and will be used to defer cuts to education and corrections.

Go read the whole thing.

* Finke is also definitely worth a read…

Quinn’s budget office said it does not believe the spending plan approved by House Democrats will result in layoffs at state agencies. However, several agency directors said they will not be able to fill vacancies. […]

Rep. Greg Harris, D-Chicago, chairman of the House Human Services Appropriations Committee, said larger human services agencies will see about a 2.5 percent reduction in the amount allocated for their operations. Richard Calica, director of the Department of Children and Family Services, said his agency is looking at about a $7 million cut in staffing expenses, which will result in the department not filling vacancies. […]

Harris, though, said the budgets for human services agencies will maintain funding for mental health, substance abuse, community child care and homelessness-prevention services. Money for rape-victim assistance lost because of the federal sequester will be restored. Funding is also provided to the Department of Public Health to implement the medical marijuana program.

The Department of Corrections budget was also given a lump sum that agency officials could use as they see fit. Republicans argued that was giving Quinn and his agency directors too much leeway.

Again, read the whole thing.

* The Republicans said they weren’t happy

Republicans wanted to hold the line on spending and use some of the additional April revenue to help pay down the state’s mountain of old bills. They said Democrats should not count on the one-time April money to build the budget, especially when a temporary income tax is set to expire next year.

“We’re on the brink of financial collapse,” said Rep. David Reis, R-Willow Hill.

* Tribune

One major issue that appears headed toward resolution between lawmakers and Quinn was the issue of back pay for members of the American Federation of State, County and Municipal Employees for the current and previous budget years. The $140 million was part of the union’s lengthy and often confrontational bargaining with the Quinn administration over a new contract.

But if union workers are to get contractually mandated raises in the upcoming budget year, state agencies will have to carefully manage the money they get.

In other budget developments, House Democrats approved an $844 million supplemental spending measure, largely to cover bills through the June 30 end of the budget year. Supporters said the measure would fund the payroll of state prison workers and allow the state to capture federal money and pay down past-due bills.

* Hmm

Harris is quick to point out the state will spend a little less of its own money next year, but will spend “hundreds of millions more” in federal dollars.

Bellock’s arithmetic differs. She said Illinois will spend anywhere between $45 million and $85 million more on human services this year. Much of that new spending will go to state workers.

* From Sen. Chapin Rose’s Facebook page this morning, regarding an appropriations hearing

Gov’s guy just said they won’t adhere to all provisions of the newly signed AFSCME contract minted last month if the Dems budget bill passes.

*** UPDATE 2 *** Sen. Rose clarifies

To be clear on the AFSMCE contract issue- Gov’s guy said they will need $140 million over and above the dem’s proposed budget to fund this and that they would have to come back and ask for more $ to pay it before they would.

* Related…

* Quinn promises to sign Medicaid expansion after Senate’s passage

* State lawmakers looking to spare schools’ bus money

* How a retired teacher’s pension adds up to $400,000 - Little-known pension program sparks debate

- Posted by Rich Miller        

36 Comments
  1. - Cassiopeia - Wednesday, May 29, 13 @ 10:43 am:

    This budget negates a significant part the fiscal crisis argument that Madigan puts forth in SB1.


  2. - Rich Miller - Wednesday, May 29, 13 @ 10:43 am:

    Good point, Cassiopeia. Excellent point, even.


  3. - Aldyth - Wednesday, May 29, 13 @ 10:58 am:

    Fully fund human services? When we’ve had entire limbs amputated via the cuts that have been inflicted on human services? When there are twenty thousand people on a waiting list for services for people with developmental disabilities? When we are rated #50 in the United States for services to peosple with disabilities?

    My real gut response would get me banned for life due to extreme use of profanity.


  4. - Dude Abides - Wednesday, May 29, 13 @ 11:04 am:

    Agree, I was just thinking the same thing. On the one hand they claim that it’s necessary to invoke the police powers doctrine to override the constitution, but then they turn around and increase spending in the budget. Tom Cross claimed that the budget is almost 2 billion over last year. I haven’t confirmed if that’s accurate but they are certainly increasing spending. There’s also a half billion in pet projects.


  5. - One of Three Puppets - Wednesday, May 29, 13 @ 11:05 am:

    It is a great point. Things are so bad (according to SB 1) but we can still hold the line on the budget, make this years pension payment, and expand our Medicaid rolls.


  6. - east central - Wednesday, May 29, 13 @ 11:09 am:

    Suggestions of a crisis have been grossly exaggerated unless expiration of the income tax increase is assumed. Eliminating the income tax increase would result in a $7B+ hole, while the debate over the pension bills is between a $1B and $2B annual reduction. Based upon rough numbers in past discussions here, pensions would have to be cut 70% to cover $7B+, it seems. Add to this the 4% increased cost for health insurance for many retirees.


  7. - Skirmisher - Wednesday, May 29, 13 @ 11:15 am:

    A corolary to Cassiopeia’s excleent observation is that this budget will severely undercut Madigan’s arguments in the inevitable lawsuit that will result from his pensions reduction proposal (I refuse to use the term “pension reform”). Everyone wonders about Madigan’s grand strategy, and at this point I wonder if he even really has one.


  8. - archimedes - Wednesday, May 29, 13 @ 11:26 am:

    East Central 11:09AM. Bingo. The crisis was created with the income tax sunset in 2015. No reduction in income tax - no crisis.

    So - for years and years we underfunded pension payments so we wouldn’t have to raise the income tax. We raise the income tax (which, if we had done earlier, we wouldn’t have the unfunded liability for penions) - but we put in a sunset to revert back to where we were. And now that makes the pension payments unaffordable.

    We have met the enemy and he is us.


  9. - illinifan - Wednesday, May 29, 13 @ 11:27 am:

    Congratulations to Cassiopeia for effectively winning any lawsuit filed by retirees if SB 1 passes. Hopefully Madigan’s aide is paying attention to this site and let’s his boss know what he just stepped into……


  10. - Captain Illini - Wednesday, May 29, 13 @ 11:33 am:

    “Gov’s guy just said they won’t adhere to all provisions of the newly signed AFSCME contract minted last month if the Dems budget bill passes”

    Geez…there is ink stains on their hands and they STILL can’t adhere to an agreement! Maybe during the next union meeting, they’ll hand out knives so we can stab ourselves in the back…


  11. - The Old Professor - Wednesday, May 29, 13 @ 11:37 am:

    By the way, $187 billion savings, divided by 700,000 people in the system, means that, on average, retirees will have to find a quarter of a million dollars more to fund their retirement.


  12. - Frenchie Mendoza - Wednesday, May 29, 13 @ 11:48 am:

    I suspect Madigan’s strategy is one thats fairly simple: ask for the most you think you can get and see what happens.

    If it passes the courts — bingo. Good as gold. If it doesn’t, then raise taxes.

    I still think — although I’ve been scolded several times — that a “thumbs up” from the courts means that pensions will go away -completely. If it’s possible to diminish based on emergency fiscal issues, then it’s equally possible to eradicate based on emergency fiscal issues. I wouldn’t see why one is possible whereas the other isn’t. The continuum of fairness will continue to slide to the “get rid of pensions” the more they’re diminished.


  13. - RNUG - Wednesday, May 29, 13 @ 11:56 am:

    Cassiopeia @ 10:43 am:

    Defintely the best post of the day …


  14. - biased observer - Wednesday, May 29, 13 @ 11:59 am:

    I don’t see this as a negation of the “police powers” argument. I don’t see this evidence of the state of Illinois not having significant financial issues.

    I see this as a continuation of the sort of behavior which got us into this mess in the first place. The general assembly continuing to behave as if there were no financial issues, even though there are.

    just see what happens in about 2-3 years if nothing is done to address this situation. it’s pretty sad really, to see problem solving stifled by crass political considerations. this is why the people who would be most qualified to be leaders and solve these complicated issues, run as fast as they can away from govt and civil service. the smart guys run, leaving a predominant confederacy of dunces to run the show.


  15. - reformer - Wednesday, May 29, 13 @ 12:04 pm:

    Frenchie makes a good point about the slippery pension slope.

    If a fiscal crisis makes it constitutional to claw back pension benefits, then there will be a strong temptation to resort to the same solution to the next fiscal crisis circa FY 16 if the income tax hike has mostly expired.

    Since neither the constitution nor fairness would be a barrier, Katie bar the door. It might not lead to shutting down the system, but to further reductions and to even higher employee contributions.


  16. - titan - Wednesday, May 29, 13 @ 12:12 pm:

    ===- biased observer - Wednesday, May 29, 13 @ 11:59 am:

    I don’t see this as a negation of the “police powers” argument. I don’t see this evidence of the state of Illinois not having significant financial issues. ===

    The courts will likely view this as a negation. If things were SO DIRE that the Consitution must be ignored to preserve the integrity of public safety and welfare, then the the legislature can’t otherwise continue on its spendthrift ways (propped up on the backs of the pensioners).


  17. - Bill - Wednesday, May 29, 13 @ 12:13 pm:

    There are many constitutional ways increase revenue to fund existing pension benefits. Ergo, no emergency. Just the fact that Madigan wants to protect his majority does not constitute an emergency.Just the fact that Nekritz says votes aren’t there for a tax increase doesn’t constitute an emergency. Madigan can write a hundred pages in the preamble of his bill predicting doomsday and that doesn’t constitute an emergency either. If the court gives Madigan “police powers” based on his flimsy and self serving arguments we all better get out of Dodge.


  18. - illinifan - Wednesday, May 29, 13 @ 12:23 pm:

    Agree with Bill….I think a city in California tried this argument of fiscal crisis not to pay pensions and the court ruled that the city has at its power the right to raise taxes or eliminate other expenses to meet the contractual obligation of the pension payment so they lost the fiscal crisis argument.


  19. - Cook County Commoner - Wednesday, May 29, 13 @ 12:23 pm:

    The budget would be just one piece of evidence presented at trial regarding the dire financial condition in Illinois. Actuarial projections using differing rates of return on pension investments, projections on aging, health care cost, etc. would come in. Actually, a trial on how dire is Illinois’ fiscal stuation may be the best exposition of facts and figures because they could be scutinized by an evidentiary process, not politics and special interest group bloviation. The local pensions would be looked at. Population shifts. Tax revenue forecasts. Unemployment rates. There could be intervenors aplenty bringing in outside experts.
    Come to think of it, it seems like a trial like this could last a long, long time. And then an appeal? If retirees are successful in obtaining a preliminary injunction to forestall implementation of any pension reform, foot dragging in the courthouse could buy a lot of time in which to see just how bad Illinois is.


  20. - biased observer - Wednesday, May 29, 13 @ 12:39 pm:

    anyone out there basing their decisions on “how Illinois is doing financially” upon how the general assembly is behaving from a budget perspective is certifiably insane. you cant be serious trying to make this argument. they haven’t got it right on the budget in 20 or 30 years….what makes you think it would be any different this year.

    cook county commoner is correct, actuarial projects should be used, etc….

    do I really need to remind people on here that Illinois has struggled to meet pension obligations recently (only can due to recent tax increase, all of which went to pensions), that schools are being funded at 89% of what “was promised”, that vendors (including many “non-elite” organizations like public hospitals) are up to 2 years behind at times on payments?

    Illinois does not have enough money to meet its obligations and this will grow worse unless something (pension reform and revenue increase) is done.


  21. - Bill - Wednesday, May 29, 13 @ 12:46 pm:

    There is no “emergency” as long as the state continues to follow the ramp and make its payments. There are constitutional ways to “reform” pensions without resorting to the draconian, one sided slashing of benefits in SB 1. If they don’t want to follow the constitution then they should try to amend it, not just ignore it and then try some phony argument in court. That ain’t gonna fly.


  22. - Quinn T. Sential - Wednesday, May 29, 13 @ 12:52 pm:

    {“We’re on the brink of financial collapse,” }

    Insolvent: unable to pay debts as they fall due in the usual course of business

    Illinois has already collapsed; the state treasury has only maintained liquidity by the use of Other People’s Money (OPM)


  23. - Harry - Wednesday, May 29, 13 @ 1:19 pm:

    If they pass a budget and no pension reform this session, all they have to do next year is extend the 5% income tax and they’re done. Per COGFA’s annual report on State pensions, after 2014 the State’s pension contribution only grows slowly, and the big pension numbers will already be in the baseline and there won’t be the sense of crisis about pension cuts. It’ll cost a lot every year but there won’t be any more huge year-on-year increases.

    A while back, MJM said he thought Labor (Bayer) was trying to run out the clock on pensions—I wonder if this is what he was thinking… and if he was right about Labor.


  24. - LINK - Wednesday, May 29, 13 @ 1:23 pm:

    Unless I am mistaken then according to Sen. Rose, Quinn will continue to not pay some 30,000-40,000 state employees what has been owed them since July 1, 2011 once again…

    Great leadership.


  25. - Demoralized - Wednesday, May 29, 13 @ 1:28 pm:

    @LINK:

    Back pay is being processed. I believe he is speaking of the new contract. Still bad but a separate issue from what you refer to.

    I think it’s wrong not to honor a contract but I just can’t bring myself to feel sorry for too many in the union. When they are subjected to furlough days and years and years without raises then maybe I’ll feel a little sympathy. That being said the contract should be honored.


  26. - wtf - Wednesday, May 29, 13 @ 1:42 pm:

    @ Demoralized. The compensation of state employees, including deferred compensation in the form of a pension, is not a gratuity. Do you decide which other contracts the State must honor on the basis of how much sympathy you feel for the party owed money?


  27. - Loop Lady - Wednesday, May 29, 13 @ 2:23 pm:

    Demoralized: Yours is the most ignorant post of the day. Congrats!


  28. - Formerly Known As... - Wednesday, May 29, 13 @ 2:50 pm:

    @Cassiopeia - comment of the year so far.

    @Frenchie Mendoza - I missed your previous posts making that point. You raise some troubling, and accurate, questions.


  29. - MOD - Wednesday, May 29, 13 @ 3:23 pm:

    Keep in mind this one-year fix does not negate the fiscal crisis argument of SB1. The $1.5 billion in extra revenues is a one-time thing, the unpaid bills remain (especially because the money being “restored” to education etc. is just funds that could have been sent to reduce that unpaid pile), the pension payments are scheduled to increase again next year without revenues to match and the income tax increase is set to expire. Taken collectiely, the crisis is still very real and this snapshot should not be misunderstood as taking any of the immense pressure off the system.


  30. - RNUG - Wednesday, May 29, 13 @ 4:10 pm:

    Just got back home from listening to Ralph Martire speak on the budget, pensions, etc. at the monthly RSEA meeting. From the numbers he presented, mostly based on COGFA and IDOR information, no amount of pension theft will ever solve the State’s revenue problem.


  31. - truthteller - Wednesday, May 29, 13 @ 5:11 pm:

    Legislature drives the state pensions into the ground, then produces findings that pensions have to be cut.Asks court for relief.

    Boy kills parents. Then asks court for mercy because he is an orphan.

    Is there a parallel here?


  32. - jake - Wednesday, May 29, 13 @ 5:11 pm:

    To RNUG

    I think you (and Martire) have it absolutely right. The entire pension debate is, in the Shakespearean phrase, “much sound and fury, signifying nothing.” The real issues are the structures of the income tax and the sales tax, and how the pension debt is being amortized, none of which are being addressed at this point.


  33. - RNUG - Wednesday, May 29, 13 @ 6:01 pm:

    jake,

    Were you there too? I know several regulars were there. Expected to see AA but he apparently couldn’t make it.

    I requested a copy of the presentation slides. Too bad no one thought to make a video; he did a good job of covering all the major issues.


  34. - Anonymous - Wednesday, May 29, 13 @ 6:20 pm:


    The real issues are the structures of the income tax and the sales tax, and how the pension debt is being amortized, none of which are being addressed at this point.

    Why not? I ask because I’m curious. Why go through all this stuff — put the actives and retirees through what will certainly be years of uncertainty — when there are specific, clear, constitutional steps that could be taken?

    What’s the political point?


  35. - RNUG - Wednesday, May 29, 13 @ 6:58 pm:

    SJ-R is reporting the Medicare Advantage Emergency Procurement bill passed and is being sent to Quinn. I’d guess the CMS procurement staff aren’t real happy; because of the time pressure, it’s a lot easier to mess up emergency procurements.


  36. - Chris - Wednesday, May 29, 13 @ 8:20 pm:

    MOD is exactly right. Saying the budget is fixed and everything is rosy based on a one year “windfall” is as financially smart as balancing the city budget on the Skyway deal.


Sorry, comments for this post are now closed.


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