Wednesday, November 19, 2008

Keep your sights on 2011

The state’s bipartisan legislative Commission on Government Forecasting and Accountability projected the state’s budget shortfall between $2 billion and $3 billion for the current fiscal year, FY09. And that striking deficit includes a one-time windfall when the state collects on a lease of the 10th casino license.

Yesterday, Gov. Rod Blagojevich pitched a four-point plan. Tonight, Rep. Gary Hannig, the chief budget negotiator for House Democrats, said he plans to discuss legislation Thursday that would advance one of the governor’s proposals. (Watch for the new language in an amendment of SB 2083.) It would allow the governor to withhold 8 percent of general revenue funds in “reserve.”

This and previous governors have applied that power to state agencies under the governor’s control in the past, but the new proposal would expand that authority and allow Blagojevich to impound some additional funding for K-12 education, higher education and state pension funds. It also potentially would allow Blagojevich to collect some tax revenues typically shared with city and county governments.

The same power to reserve up to 8 percent also would be extended to other statewide officers. The governor already applied a 3 percent reserve on state agencies and cut funding for constitutional officers earlier this year. The potential for further reserves begs the question of how state managers would be able to cut more programs or institute more furlough days than they already have.

Hannig said the current proposal also would allow Blagojevich to apply the reserves unevenly, potentially requiring 8 percent reserves, say, for higher education but not for K-12 education. The House will have to flesh out the details of this serious but controversial proposal, Hannig said. “Our view in the House is in light of the fact that we’re scheduled to go home tomorrow and not return until January 12 that we shouldn’t just ignore the governor’s proposal.”

Hannig pointed out: “The language says he may. So he may not.”

Hannig’s budget negotiating counterpart in the Senate, Sen. Donne Trotter, agreed. “He doesn’t have to do this against any agency. This is an alternative to us getting dollars from the feds or selling the license, so it’s a contingency plan.”

While the House could move the bill Thursday, Trotter said the Senate could still act on it by week’s end or in the first two days of session in January.

Either way, the FY09 budget is in bad shape, and the Commission on Government Forecasting and Accountability projected that FY10 will be worse. The first thing that sticks out, Hannig said, is a massive payment to the state’s five pension systems for public employees. He anticipates an additional $1.2 billion payment, and if revenue projections are accurate, the state might not even garner $1.2 billion in growth for FY10.

“If we don’t do something, we may not even be able to make the pension payment next year, let alone anything else,” Hannig said.

To avoid ending on a bad note, take the advice of Scott Pattison, executive director of the National Association of State Budget Officers. He spoke to Statehouse reporters during a national conference in North Carolina last week and said: Look forward to FY11, when things actually might start to look better. Hannig agreed with that projection and compared post-FY11 to a spring day after the long, dark days of winter.

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