Guv Proposes Slimmed-Down Budget Updated X2

February 20th, 2008 at 12:00pm Aaron Chambers

Gov. Blagojevich today put aside his big-spending vision and proposed something of a maintenance budget for the fiscal year beginning July 1. Here is a copy of the governor’s budget plan.

But while the governor’s budget plan lacks the huge spending and tax increases he sought last year, it nonetheless rests of several tenuous assumptions and no doubt will meet stiff resistance from lawmakers.

For instance, Blagojevich is again seeking to privatize the state lottery to generate cash necessary to support his spending priorities. But this year, he wants to lease just 80 percent of the lottery — allowing the state to keep 20 percent — rather than part with the entire asset.

His budget assumes this 80/20 lottery lease would raise $7 billion for the state over the long term. Still, the governor’s lease/sale plan last year won little traction — if any at all — among lawmakers. These dollars would be the central revenue support for a capital construction plan the governor also proposed on Wednesday.

Here is the capital budget. Here are the highlights:

The governor’s plan provides $1.9 billion in state funds and $1.9
billion in local matching funds for construction and maintenance of
schools, including $1.75 billion in school construction projects and
$150 million for school construction maintenance projects, plus $30
million to fund a new early childhood facilities program. The program
proposes $642 million to expand and make capital improvements
and repairs at the state’s public universities, $200 million to support
the capital needs of the state’s private colleges and universities and
$250 million for the state’s community college system to construct
new buildings, repair existing facilities, and replace temporary
facilities.

The $14.4 billion highway portion of the Capital Budget funds bridge
repair needs, maintenance and improvements to the state’s system
of roads, highways and interstates, and provides for new system
expansion projects; $250 million of this will provide direct assistance
to local communities to make improvements to transportation
infrastructure. Funding for rail totals $160 million, which will be used
to improve rail tracks and signals, enhance Amtrak stations,
purchase new rail passenger equipment, and make improvements to
rail freight facilities. Capital funding for airport projects total more
than $300 million for airport improvements throughout Illinois.
Illinois Works Capital Program invests $2.7 billion in funding for mass
transit agencies to purchase buses and rail cars, build train stations,
bus garages and rail yards, and reconstruct commuter rail bridges
and elevated rail structures, among other projects.

Over $1.0 billion will provide access to capital in communities
throughout Illinois to stimulate job growth, provide affordable
housing, improve community healthcare centers, make investments
in energy, improve infrastructure, develop new industries and
technologies, and attract new businesses to Illinois.

The governor’s energy plan, a component of Illinois Works, will
reduce Illinois’ dependence on foreign oil and gas, stabilize gasoline
and home heating prices, create jobs, and reduce energy use while
protecting the environment. The energy plan includes the
development and construction of ethanol, cellulosic and biodiesel
production facilities, construction assistance for up to 10 new coal
gasification plants, and the addition of 900 more E-85 pumps at
fueling stations statewide by 2010.

The governor is not seeking an increase in the income or sales tax rate, but he does propose raising a series of user fees. For instance, the Department of Natural Resources would charge “a consultation fee … for performing threatened and endangered species or natural area reviews, which are currently done for free,” under his budget. “Another example will be charging for work done on processing floodway permits, which will allow the Water Resources Program to recover its direct costs.”

Blagojevich aides said during a morning briefing that they could not immediately produce a list of all fee increases in the governor’s budget plan.

The budget does not call for entrance fees at state parks, despite published reports indicating his budget might include them.

Blagojevich also proposes selling $16 billion in bonds to bolster public pension systems — another plan that failed to gain traction last year.

The governor proposed another $300 million in spending on Illinois public schools, but he did not specify how exactly he would like the state to allocate those dollars.

The governor’s plan acknowledges that the current budget, which runs through June 30, has a $750 million deficit. Blagojevich’s budget director went out of her way to blame lawmakers for this budget hole, saying their revenue forecast was too optimistic when they approved the budget last summer. The budget plan says this hole could be filled through “fund transfers and loophole closures.” Otherwise, said Blagojevich budget aide John Filan, the state will need to cut spending.

Nonetheless, the governor’s budget plan assumes new revenue totaling $1.7 billion in the next fiscal year, which begins July 1. Blagojevich aides could not provide an exact accounting of this figure, but said it includes $300 million in new revenue from higher taxes on riverboat casinos and $575 million from the sale of the state’s 10th casino license, which has long been mired in litigation. It also includes $140 million from closing corporate tax “loopholes” and $40 million from the sale of unspecified state assets.

UPDATE 1

There are two basis prongs of Blagojevich’s budget plan: tax breaks for families and businesses, and a capital plan for Illinois infrastructure. His plan for universal health care apparently is on hold; he offered no specific plan in this budget.

The address he just delivered was as modest as his actual budget proposal. It was the most conciliatory State of the State/budget address of his administration.

Gone was the super-charged rhetoric that defined his previous speeches. He did not vilify businesses for “not paying their fair share” in taxes, as he did last year. He did not attack the State Board of Education as a “Soviet-style bureaucracy,” as he did in a previous year.

Instead, he said he looked forward to working with lawmakers and highlighted the resounding defeat last year of his own legislative agenda. He joked that he now understands the meaning of the Hank Williams tune, “I’m So Lonesome I Could Cry.”

He told lawmakers, referring to his failed plan last year for a gross receipts tax, “Needless to say, I’m not asking you to do that again.”

At one point, the famously self-centered and single-minded governor had to this to say about how best to pay for a capital plan: “I’m flexible.”

He challenged lawmakers directly at just one point, saying it’s their responsibility to send him a capital plan he can sign.

UPDATE 2

Blagojevich’s critics are not impressed. Local Republicans called the governor’s budget more of the same — feel-good programs the state can’t afford (tax credits), borrowing (bonding to bolster public pension systems) and selling assets (the lottery).

Doug Whitley, president of the Illinois Chamber of Commerce, noted that the budget plan includes a new tax on business payroll — a tax Blagojevich unsuccessfully sought last year. Whitley said businesses would rather not pay the payroll tax than get the proposed tax credits.

The payroll tax is designed to fund the expanded health care, a program the governor calls Illinois Covered. From the governor’s budget:

Illinois Employer Assessment – The costs of
Illinois Covered will be fully funded in fiscal year
2009 and thereafter, entirely through its own
revenue sources including the enactment of an
employer healthcare assessment. The proposed
employer assessment, to commence January 1,
2009, will require that all employers of more than
10 employees who spend less than 4 percent of
their payroll costs providing healthcare to
employees pay an assessment of 3 percent each
pay period. The Employer Assessment is
estimated to generate $417 million in fiscal year
2009 and nearly $1 billion per year when fully
annualized.

Entry Filed under: Illinois Budget, Rod Blagojevich