Illinois budget fix will require years to reduce debt, discipline to avoid frivolous spending

Posted: Mar. 26, 2012 9:50 am Updated: Apr. 9, 2012 10:15 am


Herald-Whig Senior Writer

Illinois lawmakers have projected that state revenues will be $33.7 billion in fiscal 2013, which starts July 1.

They also know the state has somewhere between $6 billion and $8.5 billion in overdue bills.

In a normal year, reaching an agreement on those two things in March would be a big accomplishment in the Illinois Statehouse. This year, however, the size of the budget challenges have lots of people concerned about the chances of a balanced and workable budget.

"It's like a household budget. We've got to have a roof over our head, and water and utilities. Then it comes to what we can pare down," said state Rep. Jil Tracy, R-Quincy.

Gov. Pat Quinn announced his budget plans weeks ago. He would like to cut $2.7 billion from the state's Medicaid program. That might be difficult in a program that now serves 2.9 million Illinois residents, or about two of every nine people living in the state.

Quinn, a Democrat, also wants to eliminate 2,000 or more state jobs by closing some mental health facilities and deteriorating prisons.

Members of the House Republican caucus had some different cuts in mind when they met recently. They started by identifying things that could not be cut.

"We figured out all the nondiscretionary money -- the pension payments and bond debt service and health insurance," which accounts for about half the projected state revenues, Tracy said.

Cuts suggested in discretionary programs would decrease spending by about $1.25 billion. Republicans discussed cutting educational spending for K-12 schools by $500 million, general services funding by $89 million, higher education by $152 million, human services by $391 million and public safety by $121 million.

But those are just proposals. Tracy does not know what the House will eventually approve and whether the budget will put the state on the road toward better financail health.

Teri McEwen, president and manager of Members First Credit Union, is used to dealing with household budgets in either private settings or classrooms, such as the sessions provided for Upward Bound in Quincy last month. Although McEwen has never dealt with billions of dollars, the state's finances can be illuminated by reducing it to the size of a household budget.

If the state's $33.7 billion is treated like $33,700 in income, and the $8.5 billion in debt becomes $8,500, McEwen knows financial health is unlikely within a year or two.

"It's going to take awhile. It's going to be long-term," McEwen said.

Members of the General Assembly believe the first step is to squeeze all the excess out of the $33.7 billion budget figure.

"The actual budget needs to spend dramatically less than this amount if we are to begin paying our overdue debts," said state Rep. Norine Hammond, R-Macomb.

"We must reduce spending levels year after year."

Charlie Wheeler, director of the public affairs reporting program at the University of Illinois at Springfield, is a budget expert who has seen some hopeful signs in the Legislature.

"The estimated revenues are $300 million more than the proposed spending," Wheeler said.

A law approved last year also bans the Legislature from approving a budget that is not balanced.

"If they don't pass a balanced budget, the auditor general notifies the governor and the legislative leaders ... and the income tax increase dies immediately. That's a pretty powerful incentive," Wheeler said.

The threat to state revenues is meant to avoid situations where the Legislature ignores its own rules.

"Just a few years ago the House Republicans and Democrats agreed to a revenue figure that was $1 billion less than the Senate wanted," Wheeler said.

It looked like the state would save $1 billion, but then a grant program for college students was in danger of collapse and the Legislature simply added hundreds of millions of dollars to the budget without transferring those funds from other line items. Wheeler said such budgetary shortcuts damage the state's finances.

Illinois Treasurer Dan Rutherford said no discussion about the budget would be complete without mention of the huge pension obligation owed. Rutherford was in the Legislature in the mid-1990s when a law was passed that ramps up pension payments each year, with a goal of having pensions fully funded by 2045. In the coming year the budget payment is expected to exceed $5.5 billion.

Former Gov. Rod Blagojevich is blamed by many Republicans for putting forward irresponsible state budgets that put off pension payments and made the funding gap greater. They also blame him for expanding Medicaid eligibility, nearly doubling the number of people in the health care program from 1.5 million in 2003 to 2.9 million now.

Regardless of who is to blame, the state's finances will represent a major challenge this year and for years to come.

McEwen said if state lawmakers approached her like a family facing financial problems, she would suggest immediate changes in managing the household budget.

"There would have to be huge changes in behavior. Everyone would have to commit to it. You allow for no extras, or very, very few extras," McEwen said.