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State budget coverage roundup

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Illinois

* The Sun-Times has a pretty good budget roundup today…

Gov. Quinn will propose a $52.7 billion budget for next year that does not increase any additional taxes or fees, relies on massive borrowing and imposes spending cuts of about $1 billion, according to legislative sources briefed on the plan Tuesday. […]

Quinn’s budget plan does not include a $1.01-a-pack increase in the cigarette tax sought in January, nor does the governor intend to ask for any other additional fee or tax increases, sources said. Among the cuts Quinn is expected to lay out is the elimination of Illinois Cares Rx, a Medicare prescription-drug supplement impeached ex-Gov. Blagojevich launched in 2006 to much fanfare, legislative sources said. The move will save more than $100 million.

Quinn also intends to ask for about half a billion dollars in cuts from health-care providers who service the state’s Medicaid population and an additional $95 million in cuts in reimbursements the state provides public school districts for transportation costs, legislative sources said.

* Tribune…

While health care costs are still expected to rise, the Democratic governor also hopes to reduce Medicaid reimbursement rates to save $552 million, sources said.

The state is expected to lose hundreds of millions of dollars in federal funds for education as stimulus money expires but will boost general fund spending to make up for at least part of the difference, sources said. The governor is also targeting for elimination some transportation money for schools and encouraging school consolidations in some of the state’s smaller districts to save administration costs, the sources said. […]

Quinn also is expected to call for the elimination of a $24.2 million circuit breaker program that helps the poor pay property taxes and prescription drug costs, but it was unclear whether these programs will be replaced, sources said.

Money will be set aside to train prison guards as a way to save money in overtime costs, and the administration will seek to rebid medical services at prisons to get a better deal, sources said.

Quinn also may seek to borrow money from various special funds to help right the overall budget and pay back the funds with interest over about 18 months, sources said.

The governor will renew his call for borrowing to pay old bills, but Republicans on Tuesday already declared the idea “dead on arrival.”

“This is our opportunity to impose some fiscal discipline in Springfield, and we’re going to take it,” said Palatine state Sen. Matt Murphy, the Senate Republican point man on budget issues.

Quinn needs some Republicans on board because the borrowing requires a three-fifths majority.

But Senate Republican leader Christine Radogno of Lemont said cuts and efficiencies should be considered in public safety, child care and even education. She said spending for schools possibly should be held “flat for a while” after getting hundreds of millions of dollars in increases year after year.

* WBBM Radio has react from Republicans on the borrowing plan…

Republican lawmakers say they have yet to see the budget, but they already don’t like it.

“The governor’s $8.75 billion spending proposal is dead on arrival in the Senate,” state Sen. Matt Murphy (R- Palatine) said earlier this week. “We will not continue to help feed the governor’s insatiable appetite for more spending.”

Senate Republicans say not enough spending cuts have been outlined by the governor following last month’s income tax increase, which took effect retroactively at the beginning of this year.

* Quinn react…

In a statement, Quinn also said Republicans have been no help in determining where to reduce spending.

“The governor’s office has sought Republicans’ input on alternatives, and they have proposed none,” it said. “The governor has made actual spending reductions while they have called broadly for ‘belt-tightening.’ The governor’s office has proposed specific cuts only to hear Republicans say ‘not in my district.’”

The last was an apparent reference to Springfield’s Republican legislators, who complained when the Department of Agriculture cut funding for the National High School Finals Rodeo to save money.

Asked to name specific cuts they support, the 20 Republican senators at Tuesday’s news conference offered almost no specifics or details. Senate Minority Leader Christine Radogno, R-Lemont, said it’s possible education funding could be kept flat for a while or that changes could be made to child-care programs.

* I’m going to try out some new live-blogging software today. I’m not sure yet how much I’ll do during the governor’s budget address, but a post will be up so you can comment as it’s happening. You can watch the address by clicking here or here.

…Adding… Related…

* Quinn budget relies on borrowing, would increase spending overall

* Zorn: Borrowing –It’s not a bad answer to Illinois’ problems

* Posturing, policy problems ahead of Quinn’s budget speech

* Quinn to outline budget plan today

* Schools brace for state budget

* Anti-Austerity Alliance Wins in Illinois

posted by Rich Miller
Wednesday, Feb 16, 11 @ 9:38 am

Comments

–“The governor’s $8.75 billion spending proposal is dead on arrival in the Senate,” state Sen. Matt Murphy (R- Palatine) said earlier this week.–

Fair enough. Is there an alternative to paying back old bills, or is the status quo payment cycle acceptable?

–Senate Minority Leader Christine Radogno, R-Lemont, said it’s possible education funding could be kept flat for a while or that changes could be made to child-care programs.–

Okay. What exactly are you talking about and what’s the dollar figure?

How can you call press conferences on a budget and not have have any real proposals with hard numbers? The tax hike vote is over, the election is over. When will this silliness end?

Comment by wordslinger Wednesday, Feb 16, 11 @ 9:52 am
I’m glad the Senate Republicans waited a few days after giving their staff big raises, before attacking the Democrats for excess spending.

Are there any Republicans in Springfield who know what they’re doing? Serious question.

Comment by just sayin' Wednesday, Feb 16, 11 @ 9:58 am
Calling the Illinois Cares Rx program a Blago creation misses the real history of the program. The coverage had been around for years as Circuit Breaker/SeniorCare. All he did was rename it so he could try to take credit for a successful program that provided Rx assistance to low income seniors.

Comment by More Courage Wednesday, Feb 16, 11 @ 9:59 am
The republican’s know that this debt restructuring will save the state money by reducing the rate of interest that is currently being paid on the state’s overdue bills. They’re stonewalling obviously, to extract more cuts that they refuse to specify, at the same time they’re saying that PQ’s cuts aren’t enough.

The problem is that if you know PQ’s aren’t enough, you ought to have a target level of cuts that you think is needed, and at least be able to specify the bulk of the cuts needed to reach that target. Everybody wants to cut spending, but no one will take you seriously until you specify what the cuts are. That’s why Illinois Republicans made minimal gains this last election.

Comment by PublicServant Wednesday, Feb 16, 11 @ 10:04 am
So, who is telling the Republicans not to put any cuts on the table? Who is saying to them they should just be obstructionists? What sage out there is giving them this advice? A lot of them are smart people. They actually do know that SB3 is a smart move.

If they are simply taking their cues from the congressional counterparts, they should notice that they just but tens of billions in specific cuts on the table. I disagree with the vast majority of those cuts and the philosophy behind them, but at least they are actually contributing to the conversation.

I say it again - this is going to be a very ugly session.

Comment by Montrose Wednesday, Feb 16, 11 @ 10:14 am
It bears repeating: No budget numbers were presented by the GOP. Instead, “Senate Republican leader Christine Radogno of Lemont said cuts and efficiencies should be considered in public safety, child care and even education.”

Impressive. Bold. Declarative. Not! Picture a small child on the first day of swimming lessons stepping to the edge of the pool, dipping her toe in the water an inch saying, “ohhh, that water is sooo cold! So very, veryyy cold!”

Do they not even make the basic effort to simply read this blog to know they are being called upon to produce their own alternative budget with real numbers. They are just playing a shell game using words and attitude instead of numbers. The details we want to hear involve mega-billions in immediate cuts, since they are so positive that borrowing is not needed.

Comment by Statewide Wednesday, Feb 16, 11 @ 10:16 am
-That’s why Illinois Republicans made minimal gains this last election-

No its not. Its because Madigan is a map drawing genius.

Comment by Jaded Wednesday, Feb 16, 11 @ 10:25 am
The Dems kept control despite a bad economy, widespread voter dissatisfaction, and Blago. The GOP is showing us why. Maybe the voters are not as dumb as I thought.

Comment by Excessively Rabid Wednesday, Feb 16, 11 @ 10:25 am
Rich and everyone, keep on the good work on the budget “stuff”. This blog has been a great source of information. I, too, worry about the fiscal future of our state and hope that we can find a solution that works.

Comment by Trusth Seeker Wednesday, Feb 16, 11 @ 10:31 am
Somebody really needs to explain the concept of hostage-taking to Illinois Republicans. When you hold a hostage, it is customary to demand a ransom for the safe return of said hostage.

In this case, the hostage is the borrowing bill. Everyone knows that this will in fact save the state real money. So the fiscal excuses about spending don’t hold water. The Republicans want something specific in return for releasing the votes for the borrowing bill. At some point, they’re going to need to tell us what they want.

Comment by 47th Ward Wednesday, Feb 16, 11 @ 10:40 am
47th Ward,
The problem is, I don’t think they know what they want.

Comment by Jaded Wednesday, Feb 16, 11 @ 10:52 am
47th: I think were past that point…I believe the hostage-takers to be unreasonable, and quite possibly unstable. Time to call in the swat-team…Rich, go get em!

Comment by PublicServant Wednesday, Feb 16, 11 @ 10:59 am
Re: borrowing bill
I’m all for swapping out 12% prompt payment interest with 4% bond interest, but I keep feeling that this is another excuse for Governor’s bond guy to rationalize another world tour. Wonder how many bills could be paid with his hong kong hotel bill from a week or so ago?
What ever happened to vendor payment program that was in the Wall Street Journal?

Comment by Annoyed Wednesday, Feb 16, 11 @ 11:13 am
Only tangentially related to budget matters but what about counting the state employees’ pension contribution (and perhaps the state’s match as well) as taxable income at the time of the contribution? Since we can’t reduce the benefit for current employees, this would be another way to go about it. It’s really only fair because I believe a private worker pays federal and state income taxes on their pension contribution (social security). We should also be taxing retirement income for everyone since the state doesn’t tax that money when it’s earned OR distributed currently.

Comment by thechampaignlife Wednesday, Feb 16, 11 @ 11:18 am
There are NO taxes on FICA contributions, champaignlife! Also the federal government makes those kind of tax decisions, not the state. Additionally, it appears you believe state employees should be treated detrimentally to public employees?? As to your idea of taxing pension income, it would be ok as long as there is a corresponding drop in school district support taxes for those folks who no longer have need of the public schools.

Comment by lincolnlover Wednesday, Feb 16, 11 @ 12:33 pm
should have said “to private employees”. You just had me so doggone riled!!

Comment by lincolnlover Wednesday, Feb 16, 11 @ 12:34 pm
Worthless comes to mind as I read of these latest exploits of the Illinois Republican party.

Comment by MikeMacD Wednesday, Feb 16, 11 @ 1:04 pm
lincolnlover,
Absolutely not on the lower school district support payments for seniors. I’ve never made use of the public schools as a parent (I did as a child), yet I’ve paid my school support taxes as a way to pay back the state and citizens who paid my way. School support taxes aren’t tuition in any way, shape or form.

Comment by cermak_rd Wednesday, Feb 16, 11 @ 1:20 pm
Very interesting that none of the usual Republican commentators are here defending this. It’s because it’s indefensible.

There is a dedicated revenue stream to pay off the bills and bring the State’s deficit to zero (while saving the state money long term, creating a stimulative effect, giving providers and vendors the stability they need, etc etc etc). It’s a no brainer.

Comment by Little Lewbowski Wednesday, Feb 16, 11 @ 1:24 pm
Republican senators like Murphy are telling vendors in their districts with unpaid bills ($42 million in Murph’s district) to pound sand.

Comment by reformer Wednesday, Feb 16, 11 @ 2:07 pm
The ILGOP has become a farce. They seem to forget that three GOP Governors started kicking the can down the road back when the can was still shiny. Now they want to abdicate all responsibility for the budget mess and be obstructionists? They are voting down the borrowing bill but offering no alternative plan. Maybe a real good source of cuts would be to eliminate any GA member’s seat who does not come up with a viable, positive, idea for paying off the debt owed to vendors and others. If they are not doing their job who needs them?

Comment by Irish Wednesday, Feb 16, 11 @ 2:53 pm
Irish, I have a better idea. Let’s just withold payment to those owed money in the district’s of Legislators that hold up the borrowing bill and make payments in districts of Legislators ready to vote “yes!” Bet it would get passed real quick!

Comment by Both Sides Now Wednesday, Feb 16, 11 @ 5:22 pm
A private sector worker pays 7.65% in FICA taxes on their gross income (minus medical expense deductions). 6.2 points of that is for Social Security and the remaining 1.45 is for Medicare. That private sector worker then pays federal and state income taxes based on that same gross income (minus some additional deductions like retirement).

So for a private worker with no retirement savings or medical expenses, $40000 in annual income, an effective federal tax rate of 10%, and an effective state tax rate of 5%, they will owe 7.65% of $40000 to FICA, 10% of $40000 to the IRS, and 5% of $40000 to the state.

For that same worker but in a public job with no Social Security portion of FICA and 8% paid into their pension instead, they’d owe 1.45% of $40000, 10% of $36800 ($40000 minus 8% for the retirement deduction), and 5% of $36800, respectively. They did not pay federal or state taxes on their pension portion of their gross pay while the private employee did. Neither pay state taxes on the pension payout. The public employee pays federal taxes on the pension payout while the private employee does not pay federal taxes on Social Security but that negative is more than made up by the fact that the public pension pays out at a much higher rate.

Based on Social Security’s benefits estimator, the maximum benefit for someone making $40000 per year for some 62 years and retiring at 85 is somewhere around 56.7%. The maximum state pension benefit as little as 6 years ago was 80% at 30 years and I personally will be eligible to retire based on that when I’m 50 years old, drawing on the system for 30+ years. But even assuming the public and private employees both worked 45 years and retired at 67 and factoring in the lack of federal taxes on the Social Security payout and the time value of money difference in the pension contribution rates, the public employee gets the better deal after just two years of being retired (and way better for each additional year).

Pretty much no matter how you shake the stick, the public pension is hands down better. In my opinion, the pension should be more in line with social security in terms of benefit level, particularly in terms of how long you have to work until you can draw the benefit and the maximum level. If that means they have to start paying wages closer to the private sector, so be it. But that would eliminate the argument that state employees are dragging down the state with their fat cat pensions. If our benefit package was comparable to common private sector packages, it would be more of an apples to apples comparison between wages to see one way or another if certain state employees are overpaid relative to the private sector.

Not that I presume to have convinced any state workers that their pension is too good but, for those that could fathom that thought and are still reading, there are a couple ways I can think of to legally reduce the net pension for current employees. Taxing the benefit at a higher level is one option. Increasing the employee’s contribution is another. Perhaps a third option might be to use one or both of the first two options in conjunction with an offer to allow the current employee to switch to Social Security in order to avoid a big increase in contribution or future tax penalty.

I’m just throwing out ideas. Certainly others can come up with more and keeping things the way they are is one but I’m going to need more convincing on that one in order to support it. My experience as one of the state workers receiving these benefits is that they are too generous, regardless of how well or poorly the state has funded the system or managed its money over the years. I would gladly give up some of my benefits to get more in line with the private sector but I cannot do so alone or I’d be letting myself be taken advantage of relative to other employees. We’re all over-benefitting and we should all share in the burden.

Comment by thechampaignlife Wednesday, Feb 16, 11 @ 5:56 pm
@Both Sides Now- know that as a member of the General Assembly I’ve proposed thaat very idea to my leadership.

Comment by Mark Buerhle Wednesday, Feb 16, 11 @ 7:23 pm
Champaign, you clearly know something I don’t. I retired with more than 30 years of credit and my pension was nowhere near 80% of my salary.

As to the borrowing, I’m not sure the Rs are saying no to borrowing, I think they may be saying no to $8.75B for 15 years with the payment schedule in SB3 backloaded and $1.45B of the cash carried over into ‘12, wondering if we’re in a hurry to pay old bills why the luxury of carryover.

Comment by steve schnorf Wednesday, Feb 16, 11 @ 9:14 pm
Champaign, either you’re describing the old State pension system that people before about 1972 had … they got to choose between state only or split state / social security or you’re describing a teacher / university system … not the state employee (SERS) system. As Steve said, we state employees didn’t get that kind of deal. The normal “split” state formula is simple; 1.67% per year of creditable service and it is capped at 75% max after 44 years and 9 months. So something like 35 years gets you about 58%.

And Steve is on to something about the borrowing … seems like about $1.5B is not for back bills or pension payments, just funds to keep spending more this year and next. Suspect if it was $7B just for the back bills it would meet a lot warmer reception.

Comment by Retired Non-Union Guy Wednesday, Feb 16, 11 @ 9:43 pm
Ah, the private sector. Use to be they had the higher salaries, benefits, paid expenses, annual bonuses, perks…come join us, Champaign, in the Land of Lincoln, serving the public and safeguarding the taxpayer’s monies. Our five figure salaries and defined benefit pensions are starting to look good, aren’t they? Of course, you’d have to stay until you’re 65 in order to get a pension. None of this early retirement stuff. Not sure if they changed the number of years to get vested? Use to be 8. Might be changing that. Bring your pen. Oh, also bring your own broom and toilet paper, too. The state hasn’t paid the landlord in 8 mos so he quit providing janitorial services. You won’t get any training. Training is on your own. They call it self-directed. But, you’re self-reliant, aren’t you?

Comment by Budlong Woods Wednesday, Feb 16, 11 @ 11:32 pm
My experience is only with SURS, not SERS. If SERS is as you describe, that sounds like it may already be in line with Social Security and perhaps no change is needed there. But at least for university employees hired before 2005 such as myself, it’s 80% at 30 years regardless of how young you are. That needs to be changed because it’s just too much.

On the borrowing, I agree that the payment schedule shouldn’t be backloaded and if anything should be front loaded and repayment as short as possible, ideally 10 years or less. And it should only be borrowing for what we owe now in an ideal world but, since we still have a deficit, I imagine they’re just looking ahead at the 12% interest they’re going to owe next year on some bills and trying to save on it. It’s a decent idea but of course what we all want is a truly balanced budget so that we don’t need to borrow the extra money to begin with.

Comment by thechampaignlife Thursday, Feb 17, 11 @ 7:58 am