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Government, Politics & Issues

Illinois state budget's still in crisis; outlook for solution is still cloudy

This article first appeared in the St. Louis Beacon, Dec. 20, 2009 - Nine months ago, Illinois Gov. Pat Quinn called on lawmakers, especially his fellow Democrats, to hike the state income tax rate to ease severe budget problems. But he couldn't get enough of them to go along with the plan, and today the state's finances remain in turmoil, with no easy solution in sight.

"The state is in a fiscal mess. There's no question about that," said Illinois Senate Republican Leader Christine Radogno, R-Lemont.

Summing up the dilemma is simple: The roughly $25 billion spending plan that was approved earlier this year fails to cover the cost of all the services and programs for which state government is on the hook.

But fixing the problem and identifying who or what bears the blame are far more complicated matters.

Lately, the state's grim financial picture has begun attracting more attention -- and not the favorable kind.

The Pew Center on the States issued a report in November that labels Illinois one of the 10 most financially troubled states in the nation. The "Beyond California: States in Fiscal Peril" report found that Illinois long has lacked the fiscal discipline to balance its budget, opting instead for patchwork solutions, such as putting off bill payments and shortchanging contributions to state pension funds.

This month, Illinois' general obligation bond ratings were downgraded by both Standard & Poor's and Moody's Investors Service. The downgrades will make it more expensive for state government to borrow money in the future.

Standard & Poor's added that the outlook for Illinois is negative because "its willingness to implement difficult and politically unpopular measures to restore budget balance is questionable in our view."

PROPOSED TAX HIKE

Quinn unveiled his budget proposal in March, about six weeks after he was elevated to governor upon the ouster of his impeached predecessor, Rod Blagojevich.

Quinn's plan would have raised the individual state income tax rate from 3 percent to 4.5 percent, while increasing the personal exemption from $2,000 to $6,000. He touted the plan as a restructuring of the tax system that would leave 5 million Illinois residents paying the same or less than before in state income taxes, with wealthier Illinoisans carrying a heavier load.

Illinois Senate Democrats, who wield the majority in that legislative chamber, later approved a different income tax hike that also would have expanded the Illinois sales tax. But the Illinois House of Representatives spurned the idea.

"Raising taxes should be the absolute last resort," veteran state Rep. Jay Hoffman, D-Collinsville, said this week. "This is a very difficult economic time. I think there's a legitimate case to be made that we ought to do all we can before asking people to pay more."

"This is my 20th year (in the Legislature), and the challenges have never been greater," he added.

WHOSE FAULT?

Pinpointing the exact size of Illinois' budget deficit is difficult, though the consensus is it's in the double digits. The Pew report pegged the budget gap at $13.2 billion for the current fiscal year.

"If we were not a state, we'd have to declare bankruptcy," said state Sen. David Luechtefeld, R-Okawville.

Luechtefeld acknowledged that the nationwide economic downturn has hurt Illinois, but he believes the state would be contending with budget problems anyway. That's because during the past six or seven years, during Blagojevich's administration, the state government launched programs it couldn't afford, he said.

He cited FamilyCare, an expansion of state-subsidized health care, as an example. Such initiatives "sound good," but if the state cannot pay for them, then elderly care and other programs will suffer, Luechtefeld said.

Radogno also places much of the blame for the budget crisis on the Blagojevich administration's free-spending habits. State government routinely borrowed money, tried to sell assets and dipped into special-purpose funds "to make it look like we had money to spend," she said.

But Rep. Frank Mautino, D-Spring Valley, said it is "silly" to make the former governor the bad guy when it comes to the state's current financial difficulties. Nearly every state in the country is having problems because of the economic downturn, he said.

Before the recession took hold, Illinois' pension and Medicaid costs had been escalating, but state government also had investments that "were doing rather well," Mautino said. Now, Illinois and nearly every other state are struggling with declines in revenue, he added.

"You can't really pin it on one person or one administration," said Mautino, an assistant House majority leader and chairman of a House appropriations committee.

MORE BORROWING, UNPAID BILLS

Since the middle of this calendar year, the state has borrowed more than $2 billion as a short-term remedy for its cash-flow problems. The sum must be repaid by the time the fiscal year ends on June 30, 2010.

Quinn repeatedly has said in recent weeks that he wants to take out another short-term loan of $500 million so the state can pay some of its backlogged bills. But Comptroller Dan Hynes, saying the state already has borrowed plenty, hasn't signed onto the idea.

Such borrowing requires the approval of the governor, comptroller and Treasurer Alexi Giannoulias. Quinn and Hynes are opponents in next year's Democratic primary for governor.

Despite the deep fiscal woes, state government manages to keep functioning -- largely by delaying billions of dollars worth of payments owed to social service providers, public universities and others.

The state budget for the fiscal year that began July 1 appropriated $235 million to the Southern Illinois University system, said spokesman David Gross. SIU had received only $15.5 million of that amount as of mid-December, enough to meet its early-December payroll. Another infusion of cash from the state is anticipated so SIU can cover its late-December payroll, too.

Tight finances have forced the university to impose a freeze on most hires and slow its cycle of paying vendors, Gross said.

"We understand the hardship it places on our vendors, but our commitment to our employees will have to come first," he said.

Additional belt-tightening measures, including mid-year budget cuts and unpaid furlough days for certain employees, soon might be necessary, he added. Making cuts to the university's academic offerings "would be the last place we would go."

In a Dec. 14 e-mail sent to university employees, SIU President Glenn Poshard warned of more hardship.

"To be sure, in the foreseeable future, additional sacrifices will be asked of every individual associated with SIU, but we will meet our challenges and be a stronger and more excellent university because of it," Poshard wrote.

What lawmakers might do to brighten the budget picture remains uncertain.

They will return to the state capitol on Jan. 12, but they're scheduled to stick around only through Jan. 14. After that, they resume in earnest on Feb. 8, with adjournment of the spring legislative session slated for May.

Quinn will deliver his State of the State speech on Jan. 13, less than three weeks before Illinois' Feb. 2 partisan primary election.

Adriana Colindres, a freelance writer in Springfield, Il., has covered the Illinois state legislature for several years.

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