Illinois Is Playing a Dangerous Game with its Broken Annual Budget Process

Published September 1, 2008

For the second year in a row the Illinois state government started its fiscal year, which began July 1, without an approved budget. Legislators passed a 2009 budget by the May 31, 2008 deadline, but the governor refused to sign it.

Lawmakers acknowledged the budget was about $2 billion out of whack, and on July 9 Gov. Rod Blagojevich (D) vetoed $1.4 billion in spending.

About one week later the governor called lawmakers back to boost taxes or fees to stave off the cuts, but House members instead restored $480 million of cuts. Senators took no action, so the cuts remain. So does the budget imbalance.

Unfortunately, the budget game the state’s politicians are playing is far from harmless.

Ted Hampton, a Moody’s bond rating agency assistant vice president, recently issued a press statement saying a state that repeatedly starts its fiscal year without a budget is viewed as having “political polarization.” That could adversely affect bond ratings, cost taxpayers higher interest payments, and make it more difficult to place state bonds, he added.

Comptroller’s Warning

In a letter to Illinois Senate President Emil Jones (D-Chicago), state Comptroller Dan Hynes (D) noted the delay in enacting a budget “affects the issuance of tens of millions of dollars each and every day to state vendors and payees” and warned this could have a “grave impact” on entities that provide health care, social services, and transportation.

During last year’s extended budget process, Blagojevich repeatedly called legislators into special sessions that he sometimes did not attend. Legislators in both major political parties were infuriated by being stuck in Springfield while the governor jetted back and forth to Chicago at taxpayer expense.

The governor finally signed the 2008 spending plan on August 23, 2007, more than two-and-a-half months into the fiscal year.

Legislators’ Anger

The legislators’ anger grew when the governor then used vetoes to amend the budget and redirect more than $470 million to expanded health care programs. Lawmakers were especially upset by $183 million taken from projects spearheaded by individual members for their districts.

Nearly all that money came from projects supported by outspoken opponents of the governor. Projects supported by the governor’s political allies went largely untouched.

Democrat and Republican lawmakers alike have said they do not trust the governor. Such feelings have made the 2009 budget process almost impossible. House Speaker Michael Madigan (D-Chicago) and other legislative leaders have at times refused to be in the same room with the governor. When they do meet, other legislators, news reporters, and the public are kept out.

Leaders’ ‘Cloak of Secrecy’

State Rep. Jack Franks (D-Woodstock), one of Blagojevich’s harshest critics in the General Assembly, said he is frustrated by the “cloak of secrecy” surrounding the budget negotiations. He said he believes “budget negotiation should be done on the House floor after 5 o’clock and open to the public and the media.”

Franks complained, “I have in my possession a budget that is out of balance, out of whack, by [approximately] $2 billion.”

Franks also said the House had passed “reasonable” appropriation bills, but the Senate and governor crafted their own “bloated budget” that the House would not approve.

Replay of Previous Year

This year’s criticisms of the governor and the governor’s criticisms of lawmakers are reminiscent of what happened last year.

As last year’s budget battle dragged on, Hynes, a fellow Democrat, issued a statement saying, “It is astonishing that after signing four budgets billions of dollars out of balance, the governor is now finding a moral objection to a potentially out-of-balance budget while threatening to shut down state government in the process. The governor’s hypocrisy knows no bounds.”

Revenue Shenanigans

This year Blagojevich has admonished the state House for not adopting two “new revenue sources”– $530 million the governor wants to transfer from special-purpose funds, and $400 million that would be freed up through a refinancing of the state’s pension debt.

Calling transfers from special-purpose funds “revenue” is like believing you make money when you transfer funds from your college savings account to your checking account. And counting as “revenue” funds generated by issuing state government bonds is essentially recording loan proceeds as revenues.

For more than 20 years Illinois governors and legislators from both political parties have been playing games with the state’s balanced budget requirement. Those tricks include recording loan proceeds as revenues, delaying payments on bills the state receives, and inadequately funding the state’s pension systems.

An analysis of the state’s financial statements, conducted by the Institute for Truth in Accounting, shows the state has a funding shortfall of nearly $70 billion–some $14,000 per Illinois household.

Sheila Weinberg ([email protected]) is founder and CEO of the Institute for Truth in Accounting, a nonpartisan public interest group based in Northbrook, Illinois that encourages private and public entities to produce financial reports that are comprehensive, comprehensible, and transparent.