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 Weekly Review
Provided through the Generous Support of the McCormick Tribune Foundation
CTBA Weekly Review June 24, 2008  
CTBA Quick Links
In This Issue
Gov Outlines $1.5 Billion in Cuts to FY 2009 Budget
Budget is Actually More Than $2 Billion "Out of Balance"
Senate's Revenue Legislation is Not "New Revenue"
Comptroller Hynes Urges Gov to Sign Ethics Bill
Fall Veto Session Calendar
Education Funding & Fiscal Reform
From the Capitol  
Capitol Dome
Will the State Have an FY 2009 Budget on July 1?

Governor Says the Budget is $2 Billion Out of Balance

Figure Does Not Include Backlog of Over $1.3 Billion in Unpaid Health Care Bills

Governor Urges House to Pass Senate's Revenue Mechanisms, Even Though it is a mixture of refinanced debt and fund transfers

 
Another week has gone by with no legislative action on the FY 2009 budget.  The first day of the new fiscal year is July 1, 2008.  

This afternoon, Governor Blagojevich held a press conference outlining $1.5 billion in budget cuts to education and social services, "...if the Senate's "revenue" package is not passed" he stated.   (see below for analysis on the Senate's revenue package).

Instead of calling the General Assembly back into a special session (like last year) the Governor called on the House to convene on its own to pass the Senate's revenue package. 

Read the entire press release here.

The press release outlines the following cuts to the General Assembly passed budget if no new revenue streams are passed:

 
  • Significant reductions in staffing throughout State government at agencies such as Department of Natural Resources, Department of Human Services, Department of Corrections, and others.
  • Increased workload for DCFS caseworkers.
  • A $110 million reduction in education spending.
  • Nearly $260 million in reductions to social services programs. Over 100,000 individuals would see a reduction in services or access to community health and prevention services; 21,000 individuals with developmental disabilities living in the community would face reductions in service; mental health services and programs for individuals with developmental disabilities would be reduced; rates for foster parents would not increase.
  • A $257 million reduction to economic development and transit. More than 100,000 workers will not receive job-skills training, and state support for RTA fare subsidies for students and people with disabilities would be eliminated.
  • More than $600 million in healthcare reductions. This includes the following:
  • $530 million Medicaid reduction resulting in healthcare providers such as hospital and pharmacies waiting an additional 20 days for payment from the State, on top of the 70 days they already wait.  (This $530 million would be in addition to the current $1.3 billion Medicaid backlog.  According to the Illinois Comptroller, as of April (the latest data available) the Department of Health Care and Family Services had an unpaid Medicaid bill backlog of $1.3 billion); 
  • 20,000 outpatients would not receive service at Oak Forest Hospital;
     
  • Up to 10,000 uninsured residents who are unaware of their HIV status would not be identified and linked to healthcare.
  • More than $106 million in reductions to services for seniors and Veterans. Expansion of the Elder Abuse Line would not be funded, despite a 25 percent increase in calls to the line since its inception. An additional 40 bed expansion at the LaSalle Veteran's Home would not open.
BACKGROUND:
The General Assembly passed a state budget for FY 2009 that is $2 billion more than predicted revenues for the fiscal year.  They left it up to the Governor to balance.  The governor has the following options:
 
  1. Veto the entire budget and send it back to the General Assembly.  The GA would needs a 3/5 majority (including Republican support) to override the Governor's veto.
  2. Line item veto specific budget appropriations (as stated in the press release and similar to what happened last year).   The General Assembly would only needs a majority to override the line item veto.  This would require Republican support in the House. 
     
  3. Do nothing and the bill will become law after 60 days.
Read Article IV Section 9 of the Illinois Constitution, which outlines the budget, veto and legislative process.


 
FY 2009 Budget
 		  

 
Why The Budget is Actually More Than $2 Billion Out of Balance
Figure Does Not Include $1.3 Billion in Unpaid Health Care Bills

 
The constitution requires that the state budget be balanced for any fiscal year.  This means, that because the General Assembly sent a budget to the Governor that is $2 billion over what the projected revenues will be for FY 2009, $2 billion must be either cut from it or raised in new revenues. 

It is important to remember this $2 billion figure does not include $1.3 billion in current unpaid Medicaid bills likely to be deferred from the current fiscal year to FY 2009 as reported by the Comptroller.  Under 30 ILCS 105/25, the state is legally able to defer Medicaid payments to health care providers from one fiscal year to the next. 

Utilized by state government to varying degrees for decades, these budgetary loopholes have culminated in the accumulated health care, pension and GAAP deficit that exist today.  They also allow the state to maintain public service levels that it does not have the fiscal capacity to afford.

Medicaid Deferment
Illinois Auditor General Holland reports that during the last three fiscal years, on average $1.5 billion in medical claims went unpaid in the same year the services were provided.  This results in health care providers being paid months after services are rendered and the state incurring interest costs that could have otherwise gone to funding public services.

 
  • Due to the late payments, the agency accrued potentially $81 million in interest costs since FY2000.
     
  • Illinois Comptroller Hynes reports that in the current fiscal year alone the state has paid out more than $20 million in late-payment interest for healthcare-related bills.
Read Auditor General Holland's repot here

Read Comptroller Hynes' statement here

Read the May 13th Weekly Review summarizing the Auditor General's report here

Pensions & Fund Sweeps
The state can also use other stratagems to mask an otherwise unbalanced budget including: (i) underfunding the employer contribution the state owes its five public employee pension systems (as it did in 2006); and (ii) transferring or sweeping revenue from special use state funds to the General Fund.


RESOURCES:

 PENSIONS
Read the report:  The Illinois Pension Funding Crisis, Why it Matters, which outlines how the unpaid pension liability affects public services

SPECIAL STATE FUND SWEEPS
Special State Funds are various, smaller funds identified and held in the State Treasury as "special funds" under in Section 5 of the Illinois Finance Act restricted in use to the specific purpose for which they were created.

There are over 300 of these special state funds that support activities as diverse as medical assistance and environmental cleanup. They are, for the most part, designed as segregated accounts, restricted in use and funded from specifically earmarked revenue or fee sources. Examples include the Illinois Affordable Housing Trust Fund, the Youth Drug Abuse Prevention Fund and the Brownfields Redevelopment Fund. 

Since FY 2003, the state has transferred almost $1 billion from these Special State Funds to the General Revenue Fund.

Read more about how the state transfers revenue from special use state funds to the General Fund on page 25 of the CTBA report, Citizens Guide to the Illinois State Budget and Tax System. The report contains a wealth of information on all of these budget issues.
 
FY 2009 Revenues
 		  

 
Senate's Revenue Legislation
is Not New Revenue
 

The Governor stated he wants the House to vote on three bills passed in the Senate that he believes provide revenues to balance the FY 2009 budget.  He states without these revenue measures, he will have to make $1.5 billion in cuts to social services. 

However, the three pieces of legislation are not actually new revenues, they are a mixture of refinanced debt, one-time revenues and fund swaps. 

SB 709 - Fund Swap - The Senate's legislation will allow the state to transfer $530 million from other state funds into the general fund. 
 
  • This is not new revenue, it simply transfers revenue from Special State Funds into the General Fund.  This revenue swap would not be available next year without legislative approval.

 
SB 788 - Pension Restructuring - The authorization of $16 billion in pension obligation bonds to restructure the 1995 pension funding plan.  The administration says, "This would result in more than $400 million savings for FY09."
 
  • This is also not new revenue.  It actually issues debt to make the FY 2009 pension payment.  The debt will have to be repaid over the term of the bond. 
     
Illinois Works - State Capital Plan - In the press release the Governor stated passing a state capital plan will generate, "an estimated $280 million in new tax and fee revenues, and will eliminate operating appropriations that are used to support projects in the capital bill, freeing up $320 million from the operating budget."
 
  • This is again, not all new revenue.  The bill would swap $320 million from the operating budget to the capital budget.
     
(HB1496 - Lottery
HB 2651 - Gaming
HB4723 - Bond Authorization
HB6339 - Capital Appropriations
HB5618 - Hospital Capital/Urban Economic Development)



CTBA will release an analysis of the Fiscal Year 2009 final budget as soon as it is implemented.



 
Ethics  
Comptroller Hynes Urges Governor to Sign Ethics Bill
 

Comptroller Hynes is the latest public official urging the Governor to sign HB 824, the bill that would help end "pay to play politics." The legislation unanimously passed the General Assembly May 31st.
HB824 prohibits businesses with more than $50,000 in state contracts from making political donations to constitutional officers who award the contracts and candidates for those offices. The ban also applies to a company's owners, top officials and close family members.
 
Currently, Illinois has no campaign contribution limits.

Hynes, one of the original architects of the legislation in February 2005, said, "This proposal was overwhelmingly approved by the Senate and the House and represents the hard work and dedication of many lawmakers - Democrats and Republicans alike...I urge the Governor to recognize the need to end pay-to-play politics in Illinois and to sign this bill, as is, as soon as it reaches his desk....To do otherwise would further erode the public's confidence in their government."

The Comptroller added, "For far too long some politicians, with a wink and a nod, have been awarding contracts to campaign contributors," "They can say the two actions are not related, but the public isn't fooled. Taxpayers deserve to know that state contracts are awarded based on merit not on greed and political connections."

Hynes instituted a similar ban in his own office more than three years ago and at his urging, all of the other constitutional officers, except for the Governor, instituted the ban as well.
Read the entire Comptroller's statement here

HB 824 sits on the Governor's desk.  Blagojevich can sign it into law, veto the entire bill, or amendatory veto portions of the bill.  The Governor has stated he may add new provisions to the bill. If so, lawmakers would then need to rally support a second time to enact the legislation.

Contact the Governor and tell him to sign the bill into law:

Web Site: www.illinois.gov/gov

207 Statehouse
Springfield, IL 62706
Phone: (217) 782-0244
Fax: (217) 524-4049

Main District Office:
100 W. Randolph St., Ste. 16-100
Chicago, IL 60601-3220
Phone: (312) 814-2121
Fax: (312) 814-6183


Track HB 824 Here.
 
Veto Session
 		  

The fall veto session calendar can be accessed at the following links:

House
Senate


 
Education Funding & Fiscal Reform  

Schools and Kids Need Your Help!
 
Is Your Senator a Co-Sponsor of SB 2288?
 
 
SB 2288 now has 22 co-sponsors! 
Click here to see if your Senator is a sponsor.  If not, please contact him or her and tell them to co-sponsor SB 2288!
 
The lead sponsors of SB 2288, Senator James Meeks and Senator John Cullerton, are committed to bringing the bill to a vote in November.  This gives us the spring and summer to work for the passage of the bill. 
 
Senate Bill 2288 provides a new, permanent revenue source for schools, property tax relief for homeowners and
$1 billion for debt service for a state infrastructure program.  It is the only piece of legislation that will truly reform the way education is funded in Illinois by making the state the primary funder of K-12 education.  The bill also provides $300 million for community colleges and universities.
 
Read the bill here
 
 
Please continue to call or write your Senator and tell them to co-sponsor SB 2288.  Use the A+ Illinois' website tools to find your Senator and their contact information here.   
 
SB 2288 makes significant changes to tax and school funding laws.
  • It reduces our reliance on property taxes to fund schools by mandating an annual property tax abatement of $2.9 billion (indexed to inflation for each subsequent year) with every property owner seeing a minimum of 20% property tax relief on the portion of the bill designated to education.
  • The Invest in Illinois Fund is created and funded with $1 billion each year to provide funding for debt service and fees on bonds for capital projects, such as roads and schools, throughout the State.
  • The bill also mandates a $300 million annual appropriation (indexed for inflation) for grants to institutions of Higher Education.
  • Increases for Early Childhood education are phased in, from $45 million in 2009-2010 to $180 million in 2012-2013.
  • Increases to the Foundation Level are phased in, raising it from $6,253 for the 2009-2010 school year (from $5,734) up to $7,809 for the 2012-2013 school year.  The Foundation Level and Supplemental General State Aid (Poverty Grants) are automatically tied to increases to the Employment Cost Index to control for inflation.
  • Creates a School Improvement Partnership Fund to target resources to proven programs such as smaller class sizes, literacy coaching, longer school days and teacher mentoring;
  • Maintains and expands grants for high-poverty schools
  • The personal income tax is increased to 5% (from 3%), and the corporate income tax is increased to 8% (from 4.8%).
  • Family Tax Credits are provided to single taxpayers earning less than $26,695 and married couples earning less than $53,694.

 

    Click here to listen to a presentation on SB 2288 by the Center for Tax and Budget Accountability.

CTBA has numerous reports outlining the education funding problem in Illinois and how to fix it.  Visit the education page of the CTBA website for more information. 
 
 
 
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Please email Chrissy Mancini