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Budget details begin to leak out

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[This post has been bumped up to Wednesday from Tuesday night for visibility purposes.]

Lawmakers have entered what could be the final stages of negotiating a budget that would limit state spending to $38.5 billion by cutting funding for prisons and human services and buying out some state pensioners, according to budget documents obtained by the Tribune. […]

The budget blueprint envisions spending $5.9 billion on human services, $1.8 billion on colleges and universities, $1.7 billion on public safety and $1.2 billion on government services, the documents show. A new $25 million scholarship program would be created to encourage students to attend school in Illinois. Universities would be asked to match it. Early childhood education and K-12 schools would get a total of $8.4 billion, which represents an increase of $50 million for early childhood education and $350 million for primary and secondary schools — the yearly increase that was envisioned in a new education funding formula that was enacted last year.

The plan lays out spending $20.4 billion on pensions, debt payments, Medicaid and health insurance for state workers — all expenses over which lawmakers have little control.

It would make $124 million in cuts at state agencies, including $47 million from both the Department of Corrections and the Department of Human Services. And pension costs would go down by $444 million, largely due to two new “buyout” plans that were not explained in the outline documents.

* Sun-Times…

With fingers crossed, lawmakers say they’re hoping to pass the budget framework entirely as soon as Thursday morning. And sources said Gov. Bruce Rauner’s administration is on board with the proposal, so far. […]

According to the budget document, budget reductions include $124 million to state agencies, including nearly $47 million each for the Departments of Corrections and the for social services and $55 million less for the Department of Juvenile Justice.

Pension costs would drop by nearly $445 million. The documents attribute $41 million of that to an “inactive buyout,” which would include a group of workers who haven’t reached retirement. Another $22 million would be cut by limiting salary spiking to 3 percent. […]

According to a budget framework, the budget does not include a shift of the normal cost of employee pensions to the local employer and removing the state group health insurance program from collective bargaining; or eliminating health insurance subsidies for retired teachers. […]

The framework includes an additional $350 million for evidence based funding for school districts; an additional $50 million for early childhood; an increase of 2 percent to universities and community colleges; $25 million for a new tuition grant program that will provide additional tuition assistance to try to stem the tide of students fleeing Illinois; a $0.50 wage increase for Direct Service Providers; and an increase in rates to child providers by 4.26 percent.

* SJ-R…

Rep. Greg Harris, D-Chicago, also said “there are several decisions that are yet to be made by the leaders” before the final touches can be placed on the budget. He said the issues include how to handle certain infrastructure projects like replacement of the Illinois Veterans’ Home in Quincy and funding for the Obama presidential library in Chicago.

One thing that is not on the table is an expansive capital construction plan that would involve issuing bonds and finding a new revenue source to pay for them.

“We’re not talking about raising gasoline taxes or (imposing) a vehicle mileage tax,” said Sen. Andy Manar, D-Bunker Hill, one of the budget negotiators.

* WTTW…

Lawmakers will try to boost enrollment at Illinois’ public universities via a new program (Senate Bill 2927) on the fast track that would create a merit-based “AIM HIGH” scholarship available to Illinois residents with qualifying grade point averages and incomes. Regional schools like Southern Illinois University and Western Illinois University have seen steep enrollment declines that administrators attribute to higher education funding cuts over the years, and particularly during the recent years-long budget stalemate.

Such spending could trigger nips and tucks in spending on other priorities.

The budget is not predicated proceeds from an expansion of gambling, after opposition from the city of Chicago helped to fell a massive gambling expansion package that would allow it and five other locations to host casinos. […]

While there’s a general sense of optimism in Springfield, there is a constant undercurrent of unease: Democrats doubting that under pressure from conservatives or with an eye toward November’s election Rauner will not sign a deal into law, Republicans who fear that Democrats will use the levers of legislative power to pull a fast one and will tuck a new, expensive program into a budget bill at the last minute.

Subscribers will have more tomorrow.

posted by Rich Miller
Wednesday, May 30, 18 @ 2:15 am

Comments

== Pension costs would drop by nearly $445 million. The documents attribute $41 million of that to an “inactive buyout,” which would include a group of workers who haven’t reached retirement. Another $22 million would be cut by limiting salary spiking to 3 percent. ==

$445 - $41 - $22 = $382M

Seems to be a bit math challenged. Really curious where that $382M is coming from.

Maybe all the GOP directors and executives that will be out of a job in January and not eligible for a pension? /S

Or maybe the time honored practice of just shorting the pension funds a bit?

The $41M buyout for inactive members has been floated before. It’s pretty much the people who have left government service, don’t have the minimum 8 years in (or may never return to government employment), and probably never will collect a pension. But it cleans up the books and the State can stopping pretending to calculate they might collect a pension.

Limiting salary spiking to 3% might depend on various district teachers’ contracts. Might not be legal … but when did that ever stop the GA from counting things as savings to balance a budget?

Comment by RNUG Tuesday, May 29, 18 @ 11:47 pm
A few glitches here and there and we may actually get this done by midnight Thursday.

Comment by Norseman Wednesday, May 30, 18 @ 12:58 am
===…and incomes.===

This is a fatal mistake.

Merit scholarships based on academic achievement only is in large part what is driving the Illinois higher education exodus .

Schools like Iowa State, Kentucky, Alabama, the Michigan directional schools will breathe a sigh of relief.

“You make too much money. Lucky for you, you can come here, and based on your academic success, your achievements will allow us to pay for your education.”

Yep.

This will change very little…

===…and incomes.===

… it’s like no one paying attention to why students are leaving who can get an education based on academic achievement.

Comment by Oswego Willy Wednesday, May 30, 18 @ 2:55 am
I’m usually skeptical of any retirement buyout. We’ll see how this goes when we get more details though.

Comment by Snapper Wednesday, May 30, 18 @ 6:51 am
Evidence based. Data driven. Love it.

Comment by BlueDogDem Wednesday, May 30, 18 @ 6:59 am
This is strange but a very welcome sign—no hijacking of budget negotiations and hostage-taking with nonbudget items, no anti-union poison pills. Imagine if it was this way from the beginning.

Comment by Grandson of Man Wednesday, May 30, 18 @ 7:04 am
If they plan on cutting $47M from the DOC they better get busy on that whole legal weed thingy.

Comment by Gruntled University Employee Wednesday, May 30, 18 @ 7:18 am
Offer the full blown ERI.

Comment by Anonymous Wednesday, May 30, 18 @ 7:43 am
= salary spiking to 3% =

3% increase isn’t salary spiking by any stretch of the imagination. For the foreseeable future that may not even keep up with CPI.

Comment by JS Mill Wednesday, May 30, 18 @ 7:48 am
According to the budget document, budget reductions include $124 million to state agencies, including nearly $47 million each for the Departments of Corrections and the for social services and $55 million less for the Department of Juvenile Justice.”

The Sun-Times must be commemorating the 60th anniversary of the “New Math”–I thought that (in millions) 47+47+55=149 (million). I wonder how they came up with that $124 million figure–unless that $47 million was actually the combined total for Corrections and Human Services rather than $47 million cuts for each.

And I would be shocked if only Corrections, Human Services, and Juvenile Justice were the only 3 agencies singled out–I’m sure other state agencies will get their budgets trimmed too.

Comment by Leatherneck Wednesday, May 30, 18 @ 8:10 am
–And sources said Gov. Bruce Rauner’s administration is on board with the proposal, so far. […]–

I think I’ve seen that movie, already. The acting was terrible and the ending was predictable.

Comment by wordslinger Wednesday, May 30, 18 @ 8:35 am
If Governor Nonfeasance agrees with 90% of it, based on past experience, he’ll still veto it.

Comment by Steve Rogers Wednesday, May 30, 18 @ 8:42 am
== 3% increase isn’t salary spiking by any stretch of the imagination. ==

A lot of teachers contracts allow for 6% per year (it used to be higher but now the district has to pay pension costs over 6%) the last 2 or 3 years when they agree to retire on a specific date in the future. This apparently is an attempt to role that 6% back to 3% … or at least not pay the pension costs for anything over 3%.

Comment by RNUG Wednesday, May 30, 18 @ 8:49 am
How does buying out inactive pensions save any money

Comment by Anonymous Wednesday, May 30, 18 @ 9:09 am
==How does buying out inactive pensions save any money==

It gets them out of the system. And if it’s saving money it means that the deal they will be offered won’t be a very good one.

Comment by Demoralized Wednesday, May 30, 18 @ 9:11 am
If they are less than 8 years Not vested wouldn’t the value never increase anyway

Comment by Anonymous Wednesday, May 30, 18 @ 9:14 am
== How does buying out inactive pensions save any money ==

If the pension gets bought out for just the contributions made by the employee or a bit more, that is less than the present value of the future payments.

Plus, by eliminating that future payment stream, you don’t have to make any contribution towards that portion of the calculated debt. In the overall scheme of the pension debt, it is pretty much a rounding error but at the debt levels the State has reached, every little bit helps.

I’ll give you a personal example. Wife worked for the school district for a few years and paid into TRS. When she quit, she took a refund of her contributions because she was never going to have enough years to get a pension. But because of some bookkeeping error or delayed payment into the account, she still has about $15 with TRS. We get a statement every year. Hasn’t been worth the paperwork hassle to get the money back. So she’s one of the idle accounts they are talking about.

Comment by RNUG Wednesday, May 30, 18 @ 9:22 am
== If they are less than 8 years Not vested wouldn’t the value never increase anyway ==

They have to assume that the person might become vested at some point.

Comment by RNUG Wednesday, May 30, 18 @ 9:24 am
Anybody know what the cuts are to DHS?

Comment by Honeybear Wednesday, May 30, 18 @ 9:33 am
To follow up on my own comment…

===…create a merit-based “AIM HIGH” scholarship available to Illinois residents with qualifying grade point averages and incomes===

Again, this sentence.

To be clear, if a merit scholarship through AIM HIGH has to be married, (required, a must), to an income prong, the two wedded requirements are not the same as the merit scholarships used to poach Illinois’ best and brightest.

If there are two separate scholarships, one for merit, another for income, maybe a third as a hybrid, that is far different, but without merit scholarships uninhibited with income benchmarks, Illinois will see the poaching continue, maybe even ramped up, going after students that are exceeding income levels.

Comment by Oswego Willy Wednesday, May 30, 18 @ 9:34 am
Human Services Screwed again. I work for an agency that is largely state funded for children that every citizen of the state is their legal guardian. We have so eroded funding to serve them (staff barely make over minimum wage these days)so they leave. SHAME!

Comment by Proud Wednesday, May 30, 18 @ 9:35 am
Honeybear–I heard just their ops lines were cut, and no services should be cut. Hopefully nothing changes…

Comment by Miss Marie Wednesday, May 30, 18 @ 9:58 am
Thanks Miss Marie- that’s what worries me. My job is one of those ops lines. It’s why I believe the brought IES online. To replace HSC’s

Comment by Honeybear Wednesday, May 30, 18 @ 10:14 am
OW is right on about the merit scholarships.

Universities that take the long view know that undergraduates turn into all alumni donors. My experience is that those who get good scholarships tend to pay it forward. I did.

The reasonably well off excellent students are among those most likely to contribute. The state is now 200 years old. We should be farsighted.

Comment by Last Bull Moose Wednesday, May 30, 18 @ 10:15 am
RNUG and JSM, once they figure out they impair existing CBAs by going from 6 to 3 percent “spiking,” they’ll be right back to “grandfather” all those agreements just like last time and poof, there go the “savings.”

Getting inactives off the books is not a bad idea, but the actuaries assume very few inactives actually return to service, so I would be cautious with booking “savings” there as well.

The balance of the cut may be another bit of “smoothing” actuarial assumption changes and experience.

Comment by Arthur Andersen Wednesday, May 30, 18 @ 10:18 am
Human Services takes a hit again……
Not real proud of our state!

Comment by Proud Wednesday, May 30, 18 @ 10:35 am
Rahm is going around claiming the city is broke yet is opposed to revenue enhancing bills like gambling. Chicago opted out of the video poker in bars costing the city 10’s of millions, he ii willing to bankrupt the city to get what he wants.

Comment by just sayin Wednesday, May 30, 18 @ 11:27 am
Pension buyouts are like the “house” offering insurance against the dealer’s 21. The house isn’t going to offer a wager that doesn’t favor them.

Comment by Stones Wednesday, May 30, 18 @ 11:31 am
“The house isn’T going to offer a wager that does not favor them”. They did in 2002. Though I’d agree that something like the 2002 ERI isn’t in the cards this time around. Still say they could let people buy some years at a premium to what is normally paid by the employee.

Comment by Just A Dude Wednesday, May 30, 18 @ 12:13 pm
== Still say they could let people buy some years at a premium to what is normally paid by the employee. ==

Might be a hard sell. As generous as the 2002 ERI purchase plan was, a lot of people didn’t understand how much they could benefit by buying the service time even if they did not need it. I know for several people I had to actually run the numbers for them before they got it.

If they offered such a plan and wanted to avoid the past mistakes, they would need to add a restriction that you could not retire for, say, 10 years in order to let compounding work a bit. They would probably need to charge double whatever the normal contribution rate for that employee. The one part of the 2002 deal they might want to offer again is for the State to loan the service time purchase cost (so people didn’t have to come up with a lump sum) over 5 years and deduct the loan payments plus interest from the employee’s paycheck. Or just charge interest for spreading the buy-in payments over 5 years.

Comment by RNUG Wednesday, May 30, 18 @ 12:28 pm
It’d be cruel, but I’d offer to buy out any pension at 50% of life expectancy value - if Richard Daley was willing to sell parking revenue for pennies on the dollar, who knows how many takers there would be.

Comment by lake county democrat Wednesday, May 30, 18 @ 12:30 pm
Lake County - considering the number of ppl who take 2-3 days off every payday, it would shockingly high.

Comment by Nola Wednesday, May 30, 18 @ 1:52 pm