IN THIS ISSUE:
GOVERNOR’S BUDGET ADDRESS
Illinois has gone nearly two years without a state budget. The result has been several downgrades of the state’s bond rating, spending, as a result of court orders, that exceeds revenues, unpaid bills that grow at the rate of $11 million per day, some state vendors not getting paid, etc. Against this backdrop, on Wednesday Governor Bruce Rauner delivered his third annual Budget Address.
As he did a few weeks ago during his State of the State speech, the Governor struck an optimistic tone about the future possibilities of Illinois noting the state’s many strengths if we make the reforms necessary to be competitive – a focal point of his speech. According to the Governor, if Illinois had been more competitive over the last six years, 540,000 fewer residents would have left the state. If our economy had grown at the national average since 2000, we would have had 650,000 more jobs and an $8.5 billion surplus.
Among the reforms the Governor wants to see in any budget deal, he called out workers’ compensation reform and a permanent property tax freeze as essential reforms as well as term limits and redistricting. The Governor also called for a hard cap on spending to try and force government to live within its means.
Recognizing that relying only upon cuts is not realistic, he generally supported the idea of expanding the sales tax base to include services similar to Wisconsin but objected to the idea of expanding the base to include food and over-the-counter medicines, currently taxed at 1%.
During the address, he praised the attempt in the Senate, led by Senate President John Cullerton (D- Chicago) and Senate Republican Leader Christine Radogno (R- Lemont) to develop a bipartisan budgetary framework. The framework includes some of the items noted above as well as several others. That framework has not been finalized and has not advanced out of the Senate. Nevertheless, the Governor signaled his appreciation for, and receptivity to, their efforts.
The Governor has proposed two alternative budget approaches to the Assembly. The first, what he termed the “Working Together” option, is a budget predicated on general revenue fund estimates of $37.279 billion. This would require new spending reductions and additional revenues of $4.5 billion to bring the state’s budget into balance. The reductions totaling approximately $3 billion would be the areas of pensions, group health insurance for state employees, procurement reform particularly in the area of cooperative purchasing, selling the James R. Thompson Center in Chicago, and changes to compensation for state employees primarily continuation of a wage freeze. The remaining $1.5 billion would be realized through tax increases.
The second option is called the “Executive Management” option. Just like last year, this proposal envisions passage of legislation which would give the Governor sweeping authority to balance current spending and revenues. According to the Governor, general revenue funds for FY 18 are estimated at $32.744 billion while current spending is estimated at $37.279 billion. The Governor’s management proposal would foresee $4.535 billion in spending cuts to bring the budget into balance. This approach was not considered by the Assembly in the past.
In addition to changes to state employee health insurance, increased spending in public safety, human services, and public health, and a new veterans home in Chicago, some of the other ideas the Governor is proposing are:
K-12 education: $200 million overall increase in funding compared to FY 17. This would include increases in General State Aid, early childhood, bilingual education, vocational education, transportation, and technology.
Higher education: funding would be based on FY 15 minus 15% for universities and minus 10% for community colleges. MAP funding would be based on FY 15 plus 10% resulting in an increase of $36 million over FY 15.
Pensions: A total of $1.2 billion in savings. $750 million in savings would come from reduction of salary spiking, state would only pay the pension contribution on the first $180,000 of salary for school districts, community colleges, and universities, and a 5-year asset smoothing. Another $500 million in savings would come from
Public safety: two new life skill centers for non-violent offenders with 1-4 years left on their sentence; 3 mental health facilities; and two new State Police cadet classes.
James R. Thompson Center: would be sold and is estimated to bring in $240 million on a $300 million sales price.
Capital spending: $2.2 billion Pay-As-You-Go program; $50 million for maintenance of state buildings; $400 million for information technology; and $150 million for in-patient mental health facility.
During the speech, Democrats reacted with laughter at several statements and, post-speech, they unveiled a coordinated message stating the Governor had failed to propose an actual balanced budget as required by the Illinois Constitution. The battle over those who want substantial reforms in exchange for any revenue increases continues unabated. IRMA continues to be willing to work with all who desire a balanced approach to returning stability to Illinois.
Some groups are attempting to insert a tax on sugar-sweetened beverages into any budget agreement. In response, this week HR 148 (Rep. David McSweeney, R- Cary) was introduced in the House. The resolution calls into question the motives behind the tax proposal and notes the impact it would have on consumers, farmers, retailers, distributors, wholesalers, and the people they employ. HR 148 was introduced Wednesday afternoon. By the time the House adjourned Thursday, HR 148 had nearly 60 co-sponsors signifying substantial opposition in the House. IRMA would like to thank Rep. McSweeney and all those who have added their names to HR 148 expressing their opposition.