GOVERNOR’S BUDGET ADDRESS
At Noon on Wednesday, Governor Bruce Rauner delivered his annual Budget Address to a joint session of the Illinois General Assembly. His proposal contains a $75 billion spending plan from all sources. The general funds portion accounts for $37.6 billion. General funds are monies derived from state imposed revenue sources (e.g. income tax, sales tax, excise taxes, etc.).
The Governor struck an overall theme of emphasizing essential public services over benefits. As such, his proposal included shifting nearly $700 million in pension costs the state currently covers for local schools and institutions of higher learning back to those institutions. This shift would be done over four years – 25% per year. Accountability was the key to the Governor’s argument here noting that it is easy for these entities to enact salary increases when they bear no responsibility for the pension costs. Such a move would significantly increase pressure on property taxes. However, the Governor argued the burden to schools would be softened because of (1) increased funding through the education formula, (2) the power to dissolve or consolidate units of local government which would provide more tax revenue for schools, and (3) greater flexibility in contracting, bidding, and sharing services. Additionally, he renewed his ‘best and final offer’ in negotiations with public section unions to remove group health insurance from collective bargaining thereby allowing the state to unilaterally impose cost controls. His office estimates savings from this change to be approximately $560 million. Additionally, the Governor proposed a pay-as-you-go capital program of $2.2 billion for infrastructure.
Cuts are also a part of the Governor’s proposal including another 4% cut to Medicaid providers although it is unclear at this time if this applies to all Medicaid providers or certain Medicaid providers. The Governor noted the need to end the historic process of spending more than state government takes in which has contributed to the State’s current fiscal crisis. In his words, “to reduce government expense but not customer service.”
Finally, the Governor claimed that if the Assembly adopted a consideration reform model for state pensions and the Thompson Center were finally sold, the state could afford to begin to roll-back the income tax increases enacted over his veto last year. According to the Governor’s proposal, the income tax could be reduced by ¼ of 1%.
Democratic response immediately focused on their belief that his proposal is out of balance by as much as $1.5 billion because he is relying upon passage of items they claim legislative Republicans will not support such as shifting the pension payments back to local schools and universities/colleges. Additionally, while the Governor’s proposal does set aside several hundred million to help pay off back-bills owed to those who have supplied goods and services to the State, those back bills currently total nearly $9 billion.
In response to the speech, IRMA issued the following statement: “Retail serves as an important economic engine for the state, and yet we continue to see razor thin margins as regulations, mandates and taxes continue to squeeze Main Street retailers. IRMA is concerned about the continued cuts and devaluing of Medicaid providers as well as its impact on the populations they serve. Pharmacies serve on the front lines when it comes to treating Medicaid patients, especially in areas with few medical options. IRMA stands ready, as it always has, to work with both Governor Rauner and legislative leaders on both sides of the aisle in passing a budget that will best serve Illinois’ constituents and restore its stability and competiveness,” said Rob Karr, president & CEO, IRMA.
This address begins the long budget process that may, or may not, conclude with a budget near the scheduled adjournment at the end of May.
BUSINESS DAY SPEAKER
Register now to attend Business Day 2018! Jim Vandehei, co-founder and CEO of Axios and co-founder and former CEO of POLITICO, will be keynote the opening luncheon of Business Day 2018 on Wednesday, May 9th in Springfield. In 2017, Vanity Fair listed Vandehei among the 100 most powerful ‘Information Age’ thinkers while Entrepreneur magazine named him one of 2017’s “50 Most Daring Entrepreneurs”. Exercising his entrepreneurial background and long history covering politics in Washington, D.C., Mr. Vandehei will pull back the curtain and address what audiences really need to know about the White House, Congress, politics, and the media. Mark your calendars now to attend Business Day 2018 on Wednesday, May 9th in Springfield!