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From the Capitol |
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Fiscal Year 2009 Begins
Without a Budget
Comptroller Hynes Says the State
Needs a Budget in Place by July 10th
Today is the first day of the new
fiscal year and for the second year
in a row, it began without an
enacted budget.
The Governor finally received the
budget on Monday and can now make
whatever changes he deems fit.
You'll recall last week the Governor
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 has
stated the General Assembly passed
budget is at least $2 billion in the
red.
The Governor outlined several cuts
to the General Assembly passed
budget including a $110 million
reduction in education funding, a
$260 million cut to social service
programs (such as mental health and
disability programs), staff
reductions throughout the state,
$530 million in Medicaid reductions,
(resulting in longer wait times for
paying health care providers and on
top of the current bill backlog of
$1.3 billion) and $106 in reductions
to senior and veteran's programs.
(See last week's summary of the
press conference here).
BACKGROUND:
The General Assembly passed a state
budget for FY 2009 that is $2
billion more than predicted revenues
for the fiscal year (on top of $1.3
billion the state owes in Medicaid
bills). They left it up to the
Governor to balance.
The
governor has the following options:
- 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.
- 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.
- 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.
No Budget - What Happens Now?
According to Comptroller Dan Hynes,
the State can operate without a
budget until July 10th. The State
Journal Register reports that in a
letter to the Governor, lawmakers
and other officials last week, the
Comptroller stated his office needs
a budget in place by July 10 to
ensure that about 4,900 employees
are paid on time July 15. The
following week, paychecks for
another 8,200 employees could be in
jeopardy. Hynes said some
payments, such as checks to state
government retirees and payments to
the needy will be paid regardless of
a budget.
Schools will not be at risk until
August. In June, the state made two
General State Aid payments to
schools, so there is no July
payment.
Those in the most trouble are
organizations that provide state
services, such as senior and
disability care. Hynes said a delay
in enacting a budget "affects the
issuance of tens of millions (of
dollars) each and every day to state
vendors and payees," which will have
a "grave impact" on entities that
provide health care, social services
and transportation.
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FY 2009 Budget
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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.
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FY 2009 Revenues
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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."
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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."
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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.
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Early Childhood Education
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Governor Signs
Pre-School for All Legislation
The Pre-School
for All program was extended for two more years,
as HB 4705 (Currie, Lightford) was signed into
law yesterday.
The bill extends
the nationally recognized Preschool for All
program from June 30, 2008 to June 30, 2010. In
2006, Gov. Blagojevich signed the Preschool for
All program into law, making Illinois the first
state to make preschool available for all three
and fouryear- olds.
According to the
Illinois State Board of Education (ISBE), in
Fiscal Year 2007 alone, Preschool for All served
85,186 children ages 3 to 5 years - 55,860 in
downstate Illinois and 29,326 in the city of
Chicago. During Fiscal Year 2008, more than
90,000 children will have been served statewide.
Over the past five years, Early Childhood
Education funding has increase $164 million.
The General Assembly passed FY 2009 budget
includes an increase of $32 million.
The goal of ISBE is to continue to increase
funding until all children whose families want
them in preschool have access to it.
Earlier this year, Illinois was singled out as a
national leader for being the first state
committed to serving all three-year olds with
quality preschool, according to a report
published by the National Institute for Early
Education Research (NIEER) of Rutgers
University.
Preschool For All, Illinois' high-quality,
state-funded pre-kindergarten program, was
ranked first nationally for enrolling 19 percent
of the state's three-year-olds, according to The
State of Preschool 2007: State Preschool
Yearbook.
Nationwide, enrollment of three-year-olds was up
10 percent, mostly due to increases here in
Illinois, which became the first state to commit
to serving all threeyear-olds.
Illinois was also ranked 12th for percentage of
four-year-olds enrolled - 27 percent. The
state's pre-kindergarten initiatives also meet
nine of ten quality benchmarks cited by the
report.
For more
information on the Preschool for All program
visit the Illinois State Board of Education
website at
http://www.isbe.net/earlychi/default.htm
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Ethics |
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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.
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Veto Session
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The fall veto
session calendar can be accessed at the
following links:
House
Senate
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Education Funding & Fiscal Reform |
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Schools and Kids Need Your Help!
Is Your Senator a Co-Sponsor of 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
SB 2288 makes significant changes to tax
and school funding laws.
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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.
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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.
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The
bill also mandates a $300 million annual
appropriation (indexed for inflation)
for grants to institutions of Higher
Education.
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Increases for Early Childhood education
are phased in, from $45 million in
2009-2010 to $180 million in 2012-2013.
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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.
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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;
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Maintains and
expands grants for high-poverty schools
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The
personal income tax is increased to 5%
(from 3%), and the corporate income tax
is increased to 8% (from 4.8%).
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Family Tax Credits
are provided to single taxpayers earning
less than $26,695 and married couples
earning less than $53,694.
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Do you have something to share in the
Weekly Review?
Please email Chrissy Mancini
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