Posts filed under 'Illinois Budget'
February 21st, 2008
I am a couple weeks shy of my two-month anniversary here in the state capitol, but it didn’t take more than a few days to figure out one thing.
Whenever there is a major day here in the Legislature, lobbyists and interests groups flood the capitol with people wearing coordinated T-shirts, memorable gimmicks and news releases for the pressroom.
Wednesday was no different, in fact it is probably one of the most important days for lobbyists and legislators alike as the governor sets the year’s legislative agenda through his budget address.
Predictably, the news releases began streaming into the pressroom and into our e-mail inboxes even before the speech began. Of course, it is impossible to put every post-speech response into our stories, but since this blog is more for insiders this is a perfect place for them.
We’ve already given you many of the press releases from our local delegation. Now here some excerpts from a few more:
A statement from Illinois Federation of Teachers‘ President Ed Geppert, Jr.:
“We appreciate Governor Blagojevich’s recognition that preK-12 education needs additional funding and that school construction dollars must be madem available to build an repair schools throughout ILlinois. However, the funding methods listed in the Fiscal Year 2009 budget proposed by the governor today do not appear to be sufficient to address the underlying structural deficit under which our state struggles. …
Today we … urge members of the General Assembly and the governor to pass an income tax proposal that would once and for all fix the education funding problem in Illinois.
We are also concerned about the continued lack of funding for higher eucation. Our colleges and universities are constantly forced to raise tuiion because the level of state funding has decreased over the years. … This downward trend must stop. …”
From the Transportation for Illinois Coalition:
Leaders from the Illinois business, labor, local government and transportation industries today said they were pleased that the Governor proposed a transportation capital investment packagae in his Fiscal Year 2009 budget, but cautioned lawmakers and the public that the size of the capital program being proposed appears to be so modest that, if approved,woul require lawmakers to revisit tranporation funding in just two or three years.
“For years, the members of the Transportation for Illinois Coalition have worked to make ivestment in our transportation infrastructure a priority of state lawmakers and the Governor, and we are encouraged that the issue has risen to a level of prominence,” said Doug Whitley, president of the Illinois Chamber of Commerce and co-chair of the TFIC. “Unfortunately the modest size of this proposal makes it clear that, though some investment will be made, we won’t come close to meeting the needs of the infrastrucutre in any significant way. If a proposal of this modest size is approved thisyear, we will all be bakc in Springfield in two or three years to approvea new funding package that will enable the state to invest adequlately in our transportation infrastructure to ensure our economy is not crippled.” …
From the Illinois Community College System:
A coalition of Illinois community college supporters urged Governor Blagojevich and the Illinois General Assembly to invest in Illinois’ community college system at a morning news conference today at the State Capitol. Representatives included the leadership of the Illinois Community College Trustee Association, the Council of Community College Presidents, the Cook County College Teacher’s Union, and a Student Trustee from a suburban community college.
The Community College Coalition for Funding was formed to advance the cause of Illinois community colleges, which have suffered from declining state revenues.
“We are beginning a campaign to articulate the benefits of a community college education, not just to the students who attend, but to the public who benefit by the educated workforce our colleges produce,” said Kathy Wessel, president of the Illinois Community College Trustees Association and a board member of the College of DuPage in Glen Ellyn.
The campaign will kick off with an unveiling of billboards all across Illinois. It will then be followed by promotion of the Community College Impact Study, released in fall 2007, that describes the many economic benefits that Illinois community colleges provide to our state. Finally the campaign will bring its message to the General Assembly for consideration.
“Students are facing a much more difficult time affording the rising cost of tuition,” said Lesliefaye Gogins, student trustee at Prairie State College in Chicago Heights. “Community college tuition has risen by almost 50 percent in the last five years.”
Perry Buckley, president of the Cook County Teachers Union, noted that community colleges enroll the vast majority of minority students in Illinois higher education. “When you make access to higher education more difficult for students in community colleges, you are making it particularly painful to the students who need it most,” he said. …
February 20th, 2008
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.
February 19th, 2008
The Capitol used to have a reliable rhythm.
Early each spring, the governor would announce his budget plan. Lawmakers would spend the spring debating the governor’s plan, as well as their own myriad plans. And by May 31, the official end of spring session, they all would either have a deal or be close to one. Once they finalized the deal, they would all go home for the summer. The budget they approved generally contained most of what the governor sought when the session began.
That rhythm is gone.
Gov. Blagojevich and lawmakers spent last year in a bitter fight over the budget and other matters that dragged session from the spring straight into this year. There were many firsts, from the governor suing the House speaker over procedural matters, to the Senate president violating an agreement he made with other legislative leaders to stick with them even if it meant overriding the governor’s wishes on the state budget, to the governor cutting more than $400 million in spending from that budget and claiming he could somehow unilaterally re-appropriate the spending on his own priorities.
This year promises to be yet another step toward the chaos of last year. The governor’s annual State of the State/budget address, the spring session’s formal kickoff, is Wednesday. But House Speaker Michael Madigan and Comptroller Dan Hynes, two of his fellow Chicago Democrats, have already moved to put the governor’s back against a wall — before he has a chance to get both feet on the ground.
Madigan and Hynes have attempted to redefine, or at least reframe, the spring session. Read more about Madigan’s strategy here, and about Hynes’ move here.
By the time state officials settled on a new state budget last fall, it little resembled the one Blagojevich introduced last spring. The governor’s ambitious plan for universal health care did not pass. Neither did his plan for a gross receipts tax on Illinois businesses (it would have been the largest tax hike in state history). Lawmakers took the budget in another direction. Blagojevich retaliated by cutting more than $400 million of their earmarks and other spending.
When Blagojevich announces his next budget plan on Wednesday, the question will be: How much does his budget plan even matter?
UPDATE 1
So much for keeping lawmakers in the loop on his budget plans. In a befuddling break from tradition, the governor’s office has not scheduled briefings for the staff of any legislative caucus.
Spokespersons for the four legislative caucuses — Senate Democrats, Senate Republicans, House Democrats and House Republicans — say the governor’s office has not alerted their budget staff to any briefing before the governor’s budget address on Wednesday.
In past years, budget staff for each of the four caucuses were briefed before the address. The staff are responsible for analyzing and explaining the governor’s budget plans to their respective lawmakers. Without a briefing, and the budget documents that come with a briefing, the staff obviously cannot do this.
Fascinating.
UPDATE 2
Cap Fax Blog weighed in on the no-budget-briefings fiasco, adding:
Reporters, legislators and a whole lot of others are pretty upset today because the governor will not hold any budget briefings tonight. Historically, off-the-record briefings are held the evening before a budget address, which allows reporters to get their stories ready (or simply break the embargo altogether) and allow appropriations staffs to prepare analyses for their respective caucuses.
So, no briefing means no analyses tomorrow, and no analyses means seriously grouchy legislators. I’ve talked to several today (in the House and the Senate in both parties) who all had about the same response: “This is not a good way to start off the session.”
Indeed.
February 18th, 2008
As Gov. Blagojevich prepares to announce his budget plan on Wednesday, business groups are convinced he will propose a tax on carbon emissions to generate more dollars for state coffers. The State Journal-Register reports:
The (Illinois) chamber fears that Blagojevich will ask lawmakers to approve a tax on carbon emissions from power plants and other industries. While acknowledging it has no details about what Blagojevich plans to propose, the chamber thinks a “carbon tax” could be imposed to generate more than $2.6 billion for cash-strapped state government.
“We are planning as though this will be a major initiative,” Todd Maisch, vice president of the chamber, said Friday. “His (financial) needs are substantial.”
Blagojevich aides refused to confirm — but also did not flatly deny — the plan.
Since taking office in 2003, Blagojevich has looked to Illinois businesses as a source for the revenue he needs to support expanded state spending. That approach topped out last year when he proposed a multi-billion-dollar gross receipts tax on Illinois businesses to cover the cost of a universal health care plan and other spending priorities.
In the SJ-R story, the Illinois Chamber notes that the suspected plan for a carbon tax would be just the latest incarnation of Blagojevich’s desire to more heavily tax businesses:
Maisch said a carbon tax would have the same effect as the ill-fated tax on businesses’ gross receipts that was proposed by Blagojevich last year.
It’s difficult to imagine big-spending Blagojevich going a year without a big-spending initiative. Yet, before state officials consider one dime of new spending, they first must deal with a revenue hole in the existing budget. Crain’s Chicago Business has more.
In other words, the pressure is on Blagojevich, et al., to raise more money — and fast. Hold on to your wallets.
February 15th, 2008
State officials haven’t approved a major capital construction plan since 1999, the first year of former Gov. George Ryan’s administration.
Whether they pull it off this year — amid continuing, maybe growing, acrimony in Springfield — is anybody’s guess. But even if they manage to clear their political obstacles, they may an emerging financial one. As Stateline.org reports, bonding — the type of borrowing the state must do to support a capital plan — is getting more expensive.
The problem isn’t with cities or states issuing the securities but with the insurance carriers that promise to pay interest and principal on municipal bonds in the unlikely event that states or local governments default. In recent years, the insurance carriers also began guaranteeing securities based on car loans, commercial real-estate deals, credit card debt and mortgages, including subprime loans that are now defaulting.
Here’s where it may hit home:
The bad loans are threatening to cause securities ratings firms such as Moody’s Investors Service, Fitch Ratings Ltd. and Standard & Poor’s to drop the credit rating of the insurers, which in turn would drop the credit rating of bonds they insure.
A ratings drop would drive up costs for state and local governments, forcing them to pay higher interest rates to borrow, or could keep investors away in a time of tight credit.
The Wall Street Journal has more, but you must be a subscriber to read the whole thing.
February 11th, 2008
Dan Hynes, the state’s generally low-key comptroller, today moved to undercut any attempt next week by Gov. Rod Blagojevich to paint the state’s fiscal picture as rosy. He said Illinois is poised to “retain its status of having the worst deficit in the nation for the fourth year in a row.”
Hynes issued a “special” report on state finances from 2003 — the year Blagojevich took office as governor — through the current fiscal year. The report’s conclusion:
The fiscal outlook for Illinois is not optimistic. The state has failed to build up reserves or address the underlying structural problems of the state’s budget – in particular, the pension and Medicaid liabilities. At the same time as the economy appears to be slowing, the Governor has promised expansions in health care without a permanent revenue source to pay for them. This lack of reserves – and the Medicaid and pension payments “albatrosses” – will be a drag on the state when it faces an inevitable economic downturn, likely already underway.
Blagojevich is scheduled to deliver his annual state of the state/budget address next week, Feb. 20. Presumably, Hot Rod will not be pointing to the state’s ongoing fiscal problems, which continued under his watch. Hynes apparently is doing his part to let folks know what’s up. He touted his souring report as a “fiscal state of the state.”
It’s just the latest look at the state’s increasingly ugly fiscal situation. More here. I asked the governor’s office for a response to the Hynes special report, but they never got back to me.
Hynes suggests that Illinois, during Blagojevich’s tenure, blew a tremendous opportunity to get its budget in the black during Blagojevich’s tenure.
During this period of national economic growth, most other states took advantage of their increased revenues to stabilize their financial positions. Illinois, when measured on the more comprehensive GAAP (Generally Accepted Accounting Principles) basis, still sustains a deficit, ending fiscal year 2007 nearly $3.6 billion in the red based on preliminary unaudited estimates. While this is an improvement from the record $4.166 billion GAAP deficit recorded in fiscal year 2003, it provides Illinois the dubious opportunity to retain its status of having the worst deficit in the nation for the fourth year in a row.
In greater detail, he first describes the revenue side:
Since the end of the last recession in
2001, Illinois has been unable to regain its fiscal
footing despite impressive and consistent revenue
performance.
The state’s fiscal position bottomed out in fiscal
year 2003 as General Funds revenues from individual
and corporate income taxes fell when compared
to the prior year and sales taxes were flat.
Now for the bill backlog:
The backlog of General Funds bills awaiting payment
in the Comptroller’s Office that spring
peaked at $2.4 billion and the payment delays after
bills were filed with the office reached 51 days.
The state was forced to short-term borrow $1.5
billion in May 2003.
At the end of fiscal year 2003, even in spite of the
short-term borrowing, Illinois was holding $874
million in bills, plus delaying income tax refund
payments and holding bills at state agencies. The
state’s GAAP (Generally Accepted Accounting
Principles) deficit reached an all-time high of
$4.166 billion.
Back to revenue. Hynes says Illinois failed to capitalize on rebounding economy:
However, a rebounding economy provided Illinois
with strong revenue growth. General Funds revenues
in fiscal year 2007 totaled $28.6 billion,
nearly $5.6 billion higher than the amount collected
in fiscal year 2003. This reflects a trend increase
of $1.4 billion a year, or over 5.5% annually.
The kicker:
Yet, financial stability has remained out of reach.
Illinois’ spending in many programmatic areas has
grown, but several key areas of governmental activity
have not been addressed, leaving the state
poorly prepared for the next economic downturn,
a phenomenon that may already be underway.
In July 2006, the Register Star was the first to report that Illinois had logged the worst deficit in the nation. We examined audited financial reports from all 50 states and concluded:
The rebounding national economy meant extra cash in the coffers of nearly every state in the union.
Nearly every state, except Illinois.
Illinois was one of three states to finish the 2005 budget year with a deficit — of $3 billion, to be exact — in its central checking account, a Register Star analysis found. Illinois’ deficit was the largest in the nation. Wisconsin and North Carolina are also in the red; every other state finished with a surplus.
A few days later, WGN asked Blagojevich about the $3 billion deficit.
“That is not true,” the governor said. “In fact, we have a balanced budget. The law requires it. You can’t have a budget unless it’s balanced.”
In fact, it was true. A column I wrote explained the state Constitution’s “balanced budget” provision, which states that, “Appropriations for a fiscal year shall not exceed funds estimated by the General Assembly to be available during that year.”
The state does have both a “balanced” budget and a deficit. It’s been that way since before Blagojevich. It remains that way under him.
The state Constitution says lawmakers may not appropriate spending in excess of the cash the state is expected to take in over the budget year. It does not prohibit a deficit.
Each year, lawmakers simply don’t delineate spending on bills the state won’t have enough money to cover. They shove the other bills, primarily those from health-care providers, into the next year.
This is how they comply with the constitution. Last summer, Blagojevich’s administration rolled $3 billion of these bills to the next budget.
This is a ton of info, I know. If you’re still craving more, check out this article by Charlie Wheeler, director of the public affairs reporting program at the University of Illinois at Springfield.
February 8th, 2008
State revenue through the end of this fiscal year may well fall $600 million or more short of expectations, according to the Legislature’s revenue forecasting agency. The year ends June 30.
Yes, $600 million is real money. A shortfall that large could mean serious problems for a state whose backlog of unpaid bills already is endemic. Doctors, hospitals, other health care providers, and other state vendors often wait months to get paid.
The full report is here. Discussion of the projected revenue shortfall begins on page 3.
In summary:
While the FY 2008 budget was implemented with the hopes of recording approximately $1.6 billion in revenue growth–actual performance through January, teamed with a slowing economy, point to revenues falling well short of those expectations. While the Commission will be providing an official estimate at a scheduled March 5th meeting, receipts to date coupled with an anticipated slowing in personal income tax growth could result in overall growth struggling even to reach $1 billion.
The State Journal-Register has more.
What about the next fiscal year, which begins July 1? The revenue picture does not look good. The forecasting agency’s report continues:
Given the current uncertain status of the economy the revenue picture for FY 2009 is far from clear. However, it would appear that limited base growth is the best that can be hoped for. Unfortunately, appetites for expanded health care, education, capital needs, and other worthy programs continue to build. Add to that the continued pension funding pressure, bills incurred but unable to be paid, and the resulting budgetary difficulties continue to build without any signs of slowing.
UPDATE 1
What does all this mean? It’s hard to say.
Certainly, we’ll know much more on Feb. 20, when Gov. Blagojevich announces his budget plan for the next fiscal year. Blagojevich, like many of his fellow Democrats, has a penchant for feel-good, expensive new programs. Remember last year when he proposed (unsuccessfully) his version of universal health care, backed by the largest tax increase in Illinois history?
It’s hard to imagine the governor going a year without a major spending initiative. And he’s not the only one craving more spending. Lawmakers of both political parties typically have their own new spending priorities, which may well be very different (therefore, on top of) the governor’s priorities. They want the state to build new roads, put more money in classrooms, etc.
What do you get when you combine huge appetites for more spending and a general reluctance to raise the income or sales tax, not to mention a governor who refuses to acknowledge the state’s dire fiscal realities? A potential fiscal trainwreck.
February 7th, 2008
First it was slowing state revenue, thanks to the slowing economy. Now it’s slowing interest income on the state’s investments, thanks to the slowing economy.
Over the next two years, that lost interest income could add up to real money, and that could only aggravate the state’s deteriorating fiscal position. So says a letter released Thursday from state Treasurer Alexi Giannoulias.
In the last fiscal year, which ended last June 30, Giannoulias said the state earned nearly $426 million on its investments. But during the current fiscal year, which ends June 30, he predicted the interest income would total less than $400 million.
The big hit is expected to occur in the next fiscal year, which begins July 1. Giannoulias predicted interest income could drop by roughly half:
The state will feel the full impact of the lower rates and asset size in fiscal year 2009 when we project that interest income will only total between $184 million and $243 million. Previous economic downturns produced declining yields and declining investment balances for up to two years.
Even if the yields return to fiscal year 2007 levels faster than anticipated, total interest income will probably not rise to previous levels because the amount of funds invested will still be smaller. We anticipate that our interest income will not recover to fiscal year 2007 levels for quite some time.
The treasurer concludes:
This anticipated reduction in interest income poses significant challenges for the state’s fiscal outlook going forward, and I urge the Governor and members of the General Assembly to provide the fiscal responsibility and leadership necessary to offset this decline. At the same time, the State Treasurer’s Office will work to further enhance the state portfolio and continue to protect and secure state investments from unnecessary risk.
The interest income is allocated under a statutory formula. In the last fiscal year, the state’s general revenue fund — its central checking account — got 47 percent of the dollars. The rest went to special-purpose funds.
UPDATE 1
The State Journal-Register has more.
UPDATE 2
I should have noted this earlier. State officials are mulling a short-term borrowing plan to help play down a backlog of bills.
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