Illinois faces a $4.6 billion deficit for fiscal year 2011, and unpaid bills from previous years total almost $6 billion, after Prairie State lawmakers left Springfield with few answers on how to address the state’s looming budget deficit.
The General Assembly ended up approving a general appropriations bill at the end of May that kept spending at roughly the same levels as last year.
“This is the second year in a row when we have not done a budget by the normal process,” said State Representative Rosemary Mulligan (R-Des Plaines). “The good way of doing a budget is to go through each agency. We didn’t do that this year.”
A few days later the Moody’s credit rating agency lowered Illinois’s general obligation bond rating by one notch, to A1—four notches below AAA—and warned significant risks to the rating remain.
Legislators were under pressure to complete the state’s budget by May 31 before a supermajority vote requirement went into effect for the remainder of the year.
Reform Stopped in Committee
State Representative Elaine Nekritz (D-Des Plaines) had led an effort to find roughly $1.3 billion in spending reductions and efficiencies, but leaders couldn’t round up enough support to get most of the reform ideas out of committee.
Illinois’s state budget remains out of balance by billions of dollars, and questions about how to address the gap still remain. In particular, how the state will make its required annual pension payment has yet to be decided.
Democratic leaders in the House and Senate had hoped to pass a plan to borrow $4 billion in general obligation bonds to fund the state’s pension payment, similar to last year’s pension borrowing. Critics charged reliance on borrowing to cover state operating costs was compounding the problem.
‘Borrowing Way out of Debt’
“Those in charge in Springfield are trying to borrow their way out of debt, but it is not working,” said State Senator Tim Bivins (R-Dixon). “For example, on June 10 the remainder of the $2.25 billion they borrowed last year is due—about $1.75 billion. So in essence, since all the money comes from the same pot, they are proposing borrowing billions more to pay off what was borrowed last year and is now due.”
The borrowing package was so unpopular that House Speaker Mike Madigan (D-Chicago) had to bring it up for a vote twice in order to pass it. Rep. David Miller (D-Dolton)—a candidate for state comptroller—changed his original “no” vote to a “yes” on the second vote. Miller was joined by Rep. Bill Black (R-Danville) and Representative Bob Biggins (R-Elmhurst)—both of whom are retiring at the end of session—thereby providing enough votes for passage.
The borrowing plan didn’t sit well with fiscal reformers.
“It would be helpful for Rep. Miller to better explain his motivation, or perhaps the tradeoffs he made, for quickly changing his vote on borrowing billions of dollars while he runs for state comptroller—a top steward for fiscal responsibility in state government,” said John Tillman, CEO of the Illinois Policy Institute.
“As for Biggins and Black, maybe it is easier to stick the next generation with a bigger bill when you’re retiring from office, or perhaps seeking another state job, and won’t have to deal with the consequences next year,” added Tillman.
Senate Balks at Pension Plan
Although the Democrats have a supermajority in the Senate, President John Cullerton (D-Chicago) was unable to round up enough support within his caucus for the pension borrowing plan and found no Republican takers. The Senate adjourned without sending the House-approved plan to the governor’s desk.
In the face of legislative gridlock, some legislators, including State Representative Jim Watson (R-Jacksonville), are pointing to the need for “big picture” process reforms.
“Interest groups on both ends of the spectrum have talked about the need for simple budget solutions. Some want spending cuts while others want tax increases. I think both fall short in that they don’t institutionalize long-term reforms to the budgeting process,” said Watson. “If you were to ask me how I would define success in this process, it would be implementing spending restraints that make it more difficult for the machine to spend your money.”
Income Tax Hike Goes Nowhere
Illinois Governor Pat Quinn (D) had proposed an income tax increase of 33 percent during his 2010 budget address. The idea was poorly received by legislators keen on growing Illinois’s economy and making the state more competitive. The 2010 ALEC-Laffer State Economic Competitiveness Index rated Illinois 48th for economic performance and 47th for economic outlook.
“As a small-business owner, I understand that a mix of higher taxes, additional government spending, and more regulations would be toxic to Illinois’s struggling economy,” said State Senator Kyle McCarter (R-Decatur). “We need to stop kicking the can down the road and pursue fiscally responsible solutions like reforming workers comp and cutting waste in government spending.”
The General Assembly may return to Springfield this summer if enough Senate votes are cobbled together to support the pension borrowing plan. Many legislators are leery of voting for billions more in borrowing just months before an election.
Kristina Rasmussen ([email protected]) is executive vice president of the Illinois Policy Institute.