Center for Tax and Budget Accountability

Governor Makes $1.4 Billion in
Budget Cuts

Only House Back in Session this Week

Committee of the Whole Recap
Last week the House held a Committee of the Whole to deal with several revenue generating bills. Most of the revenue generating bills discussed were voted down including:

HB 2651: Legislation to expand gaming to three new casinos (including a Chicago casino, which the city testified against) and more slot machines. The bill would have helped fund a state capital program. It lost on a vote of 47 to 55.

HB 1496: Legislation to sell the Illinois lottery. The state would sell 80% of the Lottery to a private company for around $10 billion. This also would have helped fund a state capital program. (CTBA testified in committee against the sale).

SB 790: Legislation to sweep special state funds. Provides the Governor the authority to sweep up to $530 million from special state funds into the General Fund. As a good faith effort, in committee the bill was amended to strike all of the language and sent to the House floor. The House indicated they would like to work with the Governor to identify exactly how much should be swept from each fund as well as identify where the money should go.

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.
NOTE: 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 fiscal year without legislative approval.

SB 788: Legislation to authorize $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." (Note: Accounts in newspapers across the state and on Capitol Fax Blog agree that the Governor is no longer calling on the House to pass a pension obligation bond. His office says there is not enough support for it in the House. The Governor's office has not introduced an idea to replace this $400 million). SB 788 lost in committee by a vote of 01 -11.
NOTE: This is 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.

Governor Makes Vetoes - Chambers React
As the House was still considering the above pieces of revenue legislation, the Governor vetoed $1.4 billion out of the budget. He said (to the State Journal Register) the remainder of the budget hole will be filled through $700 million in "belt tightening," but has not outlined what that exactly means. The budget is now law.

The chambers now have 15 days to act on the vetoed line item appropriations. The House is convening three days this week to discuss the vetoes. However, any vetoes they override must also be overridden in the Senate. Senate President Jones has stated that he does not plan on coming back to the Capitol unless the House passes revenue generating legislation.

The Governor's vetoes hit almost every budget item including social services and higher education. Additionally, constitutional officers, such as the Attorney General and Treasurer saw their budgets significantly reduced.

Health Care
Health care was significantly cut, including a $530 million cut to hospitals that provide Medicaid services. The $530 million was intended to pay down the current Medicaid liability (right now the Medicaid liability stands at about $1.3 billion) the funding was not for an expansion of any program.

The Illinois Hospital Association (IHA) finds that because of the veto, the payment cycle for hospitals, on average, will go from about 100 days to six months or longer.

According to the IHA, many hospitals now have cash flows of only a few days, some are forced to borrow just to make payroll or meet other basic operating expenses, and some are postponing critically needed projects to update their facilities, equipment and technology. The IHA calls extending the Medicaid payment cycle, "onerous and unworkable."

Medicaid Deferment
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, this budgetary loophole has allowed the state to maintain public service levels that it does not have the fiscal capacity to afford.

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 $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.

What Else Was Cut

Social Services - $210 Million in cuts including:

$55 million for substance abuse programs
$5 million for developmentally disabled programs
$4.6 million for physically disabled programs
$36 million for mental health services
$4 million for HIV/AIDS programs
$3 million for domestic and youth shelters
$30 million decrease for DCFS resulting in an increased caseload of five children for each caseworker

Senior and Veterans Services - $100 million in cuts including:

$25 million cut to homecare workers that provide essential services to seniors

Economic Development and Transit - $240 million in cuts including:

$37 million in state support for transit fares for students and people with disabilities
$5 million cut to laptop for schools
$3 million cut to grants for parks and museums
$25 million in job training cuts

Education: $100 million in cuts including:

$18 million in higher ed financial assistance for low-income students
$22 million in grants for health care education services
$5.6 million in higher education tuition support
$10 million for community colleges

Public Safety - $9 million in cuts including:

$9 million for inmate transition programs

State Government Operations - $153 million in cuts including:

$153 million cut in state government operations

Read the full press release here

What is being said in the news:

Advocates say Blagojevich's budget cuts go too deep
House faces a hard job on restoring budget cuts
Quinn: Gov's budget cuts 'petty and vindictive'
Governor's rivals see cuts to budgets
SJ-R Exclusive: Blagojevich says Madigan forced budget cuts