Monday, May 19, 2008

Beginning of the end?

By Bethany Jaeger
State legislators and the governor have 12 calendar days before the state Constitution requires them to approve a state budget for day-to-day operations. There’s a strange feeling in the Capitol, almost a calm before the storm, that casts a shadow over the possibility that they’ll adjourn on time. There’s always an end-of-session rush to try to meet the deadline or face the need to acquire more votes — read, Republican input. But there’s no telling whether the brooding storm will produce a workable budget plan or whether lawmakers will fail to compromise and take the state into another overtime session. Either way, the next two weeks will be chalked up with wish lists with controversial funding sources (or lack thereof). Budget hearings in the House start tomorrow, when the Senate also returns to the Capitol.

Race to the Capitol
The state’s operating budget is one challenge. The other is a capital program for infrastructure projects across the state, which has been held up for years. Legislators could soon receive a proposal for such a plan. Leaders are expected to meet with Gov. Rod Blagojevich’s appointed negotiators Tuesday, and they could unveil an actual proposal soon, says Rep. Jay Hoffman, a Collinsville Democrat and floor leader for the governor.

Local governments, school districts and transportation departments anxiously wait for billions of dollars of state capital funds. Representatives of the horse racing industry and the 40,000 employees it includes say they have a way to fund that capital plan.

The horse racing industry leaders are back at the state Capitol to plead for state assistance. This time they’re trying to convince lawmakers that if the state helps them, they can turn more profits and help fund a $20 billion infrastructure program for the entire state.

The argument is that horse racing in Illinois is losing horses, trainers, agribusiness, and lots of money tied to the industry to other states. Many of those states subsidize the industry and offer larger prizes for winning a race. Blagojevich signed a measure into law nearly two years ago that would have shaved 3 percent of the profits from the state’s casinos to support the ailing horse racing industry, but the measure immediately landed in court.

In addition to the challenge of deciding how to revive the horse racing industry, lawmakers have to weigh the complicated option of using gaming to fund a statewide capital plan. Numerous industry insiders and a few pro-gaming legislators held a news conference in the Statehouse Monday afternoon to pinpoint HB 4194 as the solution.

Democrats Reps. Lou Lang of Skokie, Bob Molaro of Chicago, Hoffman of Collinsville and Republican Rep. Roger Eddy of Hutsonville joined the packed news conference. The controversial measure, sponsored by Lang, would create a Chicago casino, expand slot machine positions at the state's nine existing riverboats and allow slot machines at horse racetracks. It’s estimated to generate $2 billion that could be used for capital. But not only would it take a while for the state to actually collect the money, no one really knows whether the plan could raise that much money given the slowing economy. While Lang said the measure would have enough votes to advance to the Senate, lawmakers hesitate to support any revenue-generating idea without a specific and trusted process for distributing that money. Trust wears thin in the Statehouse, to put it nicely.

Leaders plan to meet Tuesday with former U.S. House Speaker Dennis Hastert, a Republican, and Southern Illinois University President Glenn Poshard, a Democrat, who have toured the state to urge lawmakers to compromise on the governor’s $25 billion capital plan.

Hotel fraud?
By Patrick O’Brien
A chronically troubled hotel with deep Illinois connections is headed for more trouble.

State Treasurer Alexi Giannoulias said in a Statehouse news conference Monday that an internal audit showed former owners of a Springfield hotel cheated the state out of millions of dollars. He turned the case over to state and federal investigators to find out if any laws were broken.

“I have a feeling this is just the tip of the iceberg,” he said.

Giannoulias paid auditors to review financial records of the President Abraham Lincoln Hotel and Conference Center in Springfield after the state took over the hotel from local businessman Bill Cellini last spring. Cellini has been named but not accused of wrongdoing in the ongoing corruption trial of Tony Rezko, political fundraiser and advisor for Gov. Rod Blagojevich.

The state gave investors a multimillion loan to renovate the hotel in the 1980s, but they rarely reported a profit and, therefore, didn’t have to make loan payments most years.

Giannoulias said investors diverted about $2 million in hotel profits for personal use, including paying more than $700,000 for legal representation against the state. Under the terms of loan, the hotel conducted its own financial audits that were then turned over to the state for review, according to Giannoulias. This allowed the pocketing of hotel profits to go unnoticed, he said.

Giannoulias said investors owe $30 million on the loan, but since the state took over the hotel, it generated a $1.2 million profit in one year. He turned the case over to the Illinois attorney general and to the FBI.

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