Governor: Budget plan won't fund the full fiscal year

By Bethany Jaeger
Gov. Pat Quinn started using his unprecedented discretion to spread around about $3.4 billion largely to prevent drastic cuts to human services, followed by health care, education and public safety programs. At the same time, he continued to outline general areas of state operations that will get cut by $1 billion total. However, he said the reductions won’t free up enough money to satisfy such spending needs as financial aid for needy college students and health care liabilities for state employees and retirees.

During a Chicago news conference Friday afternoon, the governor’s office said the revised operating budget also does nothing to address the exceptionally high $3.9 billion backlog in unpaid bills. As a result, Quinn said he will continue to urge lawmakers to consider a temporary income tax increase to get through the rest of this fiscal year when they return to the Capitol in October.

Quinn said the roughly $26.1 billion spending plan would run out of money before the fiscal year ends next June. “We are aware of the fact that we are going to come up short this fiscal year.”

The General Assembly approved the spending plan July 15, giving the governor wide discretion in spending lump sums for each state agency. Legislators also approved a $3.4 billion short-term borrowing plan to make the state’s contribution into the public employee pension system, freeing up that same amount to put towards state operations. Of that, $2.2 billion is dedicated to community-based human services, while another $1.2 billion is up to the governor to divvy out. The plan also charged the governor with cutting an additional $1 billion.

Quinn said on Friday that he decided to spread the cuts out in a way that would maximize federal matching funds, as well as federal stimulus dollars. And he said he chose to fund health-related initiatives that focus on disease prevention and that could reduce demand for more expensive services later, including home health programs that allow senior citizens to remain in their homes rather than be sent to more expensive nursing homes.

The general areas of reductions have not changed since announced last month. The administration still plans to cut $185 million from state operations. The administration already sent out layoff notices earlier this month. Some employees will lose their jobs. Others will fill vacancies. Lawmakers and executive branch workers also will have to take one furlough day a month. The administration wants unionized employees to consider such concessions, but that would require the unions to open their active contracts that provide for annual pay raises.

“Do we really need the pay raise for union employees in the coming fiscal year, given all the things that have happened in this fiscal year?” Quinn said. “That’s $125 million. If the union said, ‘Well, we’ll take a pay freeze. We understand that we don’t want to, but we’re going to do that,’ then they can help save a lot of jobs.”

The idea is strongly opposed by the American Federation of State, County and Municipal Employees Council 31, the largest public employee union. Officials have met with the administration to bargain over the impact of layoffs, but they have not negotiated whether unionized employees will take furlough days, according to Anders Lindall, Council 31 spokesman.

“Should the administration make a proposal, we’re obligated to listen and prepared to do so,” he said in an e-mail. “But the height of this terrible recession is the worst possible time to reduce services to Illinois residents, whether by furlough or layoff of the frontline employees who make those services happen.”

Jerry Stermer, Quinn’s chief of staff, said frontline employees such as Department of Corrections officers will not be subject to furlough days because they would be replaced by fellow workers who would be paid for overtime. Stermer said the administration within the week would release more details about which employees would have to take unpaid days off.

Other general areas of spending reductions include grants to local agencies and governments, which would be reduced by $250 million.

Even after the cuts, the administration contends that Medicaid funding will fall $600 million short of the need, and financial aid for low-income college students will be reduced by $225 million.

“Some legislators screamed to the heavens, ‘Cut, cut, cut,’” Quinn said. “We have cut. We have cut from here to Kingdom Come. I don’t like college scholarships being cut $225 million. That’s our future.”

On the other hand, the administration does plan to put more money toward some education programs, human services and other public health and safety initiatives.

As part of the $3.4 billion borrowing scheme, Quinn must dedicate $2.2 billion to human services. Here’s how he said he would spend it:
- $1.4 billion for grants to programs that serve people with developmental disabilities, drug and alcohol addictions and mental health needs.
- $342 million for Department on Aging community care program, aimed at keeping seniors in their homes.
- $272 million for the Department of Children and Family Services for court-ordered services.
- $27 million for community adult education and GED services.
- $18 million for Chicago-area mass transit subsidies and free rides for seniors and people with disabilities.

The remaining $1.2 billion is slated to be split among programs related to health, education, disease prevention and public transportation. Some examples include:
- $300 million for Medicaid.
- $700 million for group health insurance for state employees and retirees.
- $85 million for early childhood education (brining it up to about 90 percent of last year’s funding levels). See our July 21 blog for background.
- $11 million for bilingual education (bringing it up to about 90 percent of what they were operating at before).
- $17 million for HIV/AIDS community-based programs (“pretty much full strength” funding levels compared with last year).
- $9 million for breast and cervical cancer screening programs.
- $13 million for Amtrak.

Stermer said while the new spending plan authorizes $26 billion in spending from the general revenue fund, it falls $1.4 billion short of funding services at last year’s levels and does nothing to address the $3.9 billion backlog of unpaid bills.

The cuts that are being implemented now may not be the last, he said. “We may have to make additional cuts as time goes on if we cannot make resolution with the General Assembly as to the unmet needs.”

He referred to the administration’s belief that an income tax increase will be necessary to get through the rest of the fiscal year.

UI admissions panel narrows in on recommendations

By Maureen Foertsch McKinney
The committee entrusted with evaluating the admissions process at the University of Illinois is expected to recommend that Gov. Pat Quinn at least seek the resignation of the chair of the board of trustees, Niranjan Shah, said committee member Ric Estrada today.

The admissions review committee established last month by Quinn (press release here) is expected to review a report outline tomorrow and submit its recommendations by August 7.

In early June, the Chicago Tribune reported that over a five-year period, about 800 students were admitted after scoring recommendations from such clout wielders as Shah, former Gov. Rod Blagojevich and university donors. The Tribune reported that students whose names were marked in red on so-called clout lists received preferential treatment, including special consideration for admission to the law school.

According to the Tribune, documents the newspaper obtained showed that Shah in 2007 directed Chancellor Richard Herman to hire his future son-in-law Maarten de Jeu at the Champaign-Urbana campus.

In testimony before the committee last week, as reported by the Tribune, Shah acknowledged that he intervened on a relative’s behalf when she forgot to apply to an honors program at the Champaign-Urbana campus.

Shah could not be reached for comment today.

Meanwhile, with his resignation Tuesday, University of Illinois trustee Lawrence Eppley joined mounting calls for the board step down.

Commission Chairman Abner Mikva, a former federal judge, told WGN radio in Chicago that he supports the mass resignation of the board. “I think the best thing that could happen, as far as the state and the governor, is if all of them would submit their resignations and he would decide which, if any, he would keep.”

Retired presidents James Stukel and Stanley Ikenberry earlier this week also told the panel they would support replacement of the current board, while current President B. Joseph White called the situation a “crisis” for his campus.

According to the Tribune, Eppley, a Chicago-based attorney, played a greater role in admissions requests than other trustees. Eppley also served as Blagojevich’s intermediary in cases that included “one in which a relative of political fundraiser Antoin ‘Tony’ Rezko’s had his rejection overturned following Eppley’s involvement,’’ the Tribune reported.

Then-Gov. George Ryan appointed Eppley to the board in 2001, and he was elevated to chair in 2003 by Blagojevich. His term would have expired in 2003.

“I thank him for his years of service and wish him well,’’ Quinn said in a statement announcing Eppley’s resignation.

Education cuts "rough" this year, worse next year

By Bethany Jaeger
Grant-funded education initiatives ranging from after-school programs to gifted education were “zeroed out” in a $7.2 billion budget adopted today by the Illinois State Board of Education.

The budget relies on about $362 million in cuts. It would have been worse without about $2 billion in federal stimulus funds, which won’t be available next fiscal year.

“This is a rough year. Next year could be a catastrophic year,” said Jesse Ruiz, chairman of the Illinois State Board of Education, which met in Springfield today for an emergency meeting to enact the fiscal year 2010 budget.

Next fiscal year, the board anticipates having to cut an additional $1 billion “just to tread water” and maintain this year’s funding levels, even with 25 percent to 100 percent reductions for education-related grants, said state superintendent Christopher Koch.

The cuts are the result of a $26 billion state operating budget enacted last week. The General Assembly relied on $3.5 billion in short-term borrowing. While much of that money is earmarked to helping prevent more severe reductions in grants to community-based services, none of it so far has been dedicated to education-related grants.

For instance, agricultural education was cut in half. Early childhood education programs were reduced by a third. Bilingual education lost funding by a quarter. And $3 million for homeless education programs was eliminated, but the board said federal stimulus dollars will cover some costs this fiscal year. As we wrote about in Illinois Issues magazine this spring, the number of homeless youth is increasing while funding has failed to keep pace for years.

When deciding how to spread the pain, the board chose to fully fund general state aid and so-called mandated categoricals, which cover special education and transportation costs. The minimum amount of state aid provided for each student increased by $160, bringing the so-called foundation level up to $6,119.

Board member Joyce Karon said fully funding general state aid and mandated categoricals accomplishes two goals: It spreads the money around to reach as many students as possible and grants the most flexibility to local school districts.

The board also avoided cutting programs or line items that would leverage significant amounts of federal matching funds. If the board decreased funding for certain programs, it would fail to satisfy federal requirements to maintain past funding levels, added Linda Mitchell, the board’s chief financial officer.

“The budget passed by the General Assembly gave the board a lot of discretion, and that means gave the board a lot of difficult choices — a lot of ‘Sophie’s Choices’ of which children and which programs,” Mitchell said.

Ruiz added that the General Assembly again is mandating that districts provide such services as bilingual education but it is not approving the necessary funding. “We are just in essence putting the burden on local districts to somehow find the means and putting more stress on them,” he said. “And we can’t, as regulators in that regard, let them off the hook. Yet, we’re kind of passing the buck.”

On multiple occasions he reminded more than two-dozen advocates in attendance that the new budget has a political context: Incumbents and candidates will be campaigning throughout the state as they prepare for the 2010 elections. He said this year’s budget process, while disheartening, should energize advocates to pressure politicians to explain why they rejected revenue increases.

“Before you give them a check and a dime, challenge them and ask them how they’d invest in education in the future,” he said. “And I don’t want platitudes. I want specific plans. And make sure how they’re going to balance it all.”

He continued: “We need to become very, very, very discriminating consumers of our public officials. And I for one would raise the benchmark in my level of scrutiny in that regard. Keep your dollars in your pocket. Give to a school before you give it to a candidate.”

One advocate was Linda Drust, Williamson County Early Childhood Cooperative executive director. She said the 33 percent reduction to early childhood block grants would mean that her organization, which serves five school districts in southern Illinois, would go from serving 600 at-risk children to 400. She said she did not have alternative funding sources.

One wild card is whether Gov. Pat Quinn will use some of his discretion in a limited amount of money left over to fund such grants as early childhood education. The short-term borrowing scheme approved as part of the fiscal year 2010 budget deal allotted $2.3 billion to community-based human services and left $1.3 billion for him to spend as he chooses.

FutureGen on track to a 2010 decision

By Bethany Jaeger and Jamey Dunn
The east-central Illinois’ site for the first-of-its-kind, cleaner-burning power plant meets all environmental standards needed for FutureGen to continue, according to a recent decision by the federal government.

The U.S. Department on Energy issued a formal opinion called a record of decision, one regulatory step needed for the public-private partnership to move forward. Any small step forward is a big relief for a group of investors, as well as state and local officials, who have worked since at least 2004 to secure support of the technology called fully integrated carbon capture and sequestration. Simply, it would capture carbon dioxide pollutants and trap them underground. The goal is to capture 90 percent of the carbon emissions by the third year of a five-year test period, according to the record of decision.

The entire project and design of the Mattoon plant stalled in January 2008, when former President George Bush’s administration pulled support because of concerns about growing costs and increasing risks to taxpayers. A federal report by the Government Accountability Office, however, later indicated accounting errors overestimated the cost by $500 million.

The Mattoon site and the project were revived last month when U.S. Energy Secretary Steven Chu of President Barack Obama’s administration committed to working toward constructing FutureGen in Mattoon and contributing $1.073 billion, $1 billion of which is expected to come from the federal stimulus package. Including the cost of materials, recent estimates have said the total price tag could exceed $2 billion.

A group of investors and energy industry stakeholders called FutureGen Alliance would have to foot at least $400 million to $600 million of the remaining costs. The goal was for at least 20 partners to contribute a total of $20 million throughout the next four to six years.

But two partners recently dropped out of the alliance, reducing membership to nine. American Electric Power Co. and Southern Co. cited concerns about costs. Steve Higginbottom, spokesman for Southern Co., added that the company pulled out to focus on other technology research being conducted by the government and industry partners. The uncertainty of FutureGen also contributed, he said, but added: “We’re supportive of the FutureGen project. We think it has the potential to lead to some developments.”

The state’s involvement has included the Illinois Department of Commerce and Economic Opportunity, which now will contribute to more behind-the-scenes work, said Marcelyn Love, agency spokeswoman. That will include helping to prepare the final design and the site layout. “But we will continue to do whatever is needed to ensure that FutureGen can become a reality,” she said.

Illinois' recent enactment of a capital construction program includes $17 million, which Love said is intended to help pay for site development or construction.

The next stages in the project will start at the end of this month and continue through early 2010. The U.S. Energy Department listed the following steps:

• Restart preliminary design activities.
• Complete a site-specific preliminary design and update the cost estimate.
• Expand the alliance sponsorship program.
• Develop a complete funding plan.
• Consider adding “subsurface characterization.”

A decision about whether to discontinue the project is expected by early 2010.

Budget deal reached but only builds a bridge

By Bethany Jaeger, with Jamey Dunn and Hilary Russell contributing
The state now has an operating budget in place, although the legislature likely will have to address a remaining $4 billion to $5 billion deficit later this year or early next year. Gov. Pat Quinn enacted the 12-month spending plan soon after it won approval by the General Assembly Wednesday night.

Numerous legislators described the package as less than ideal, the least bad option or a bridge to buy time until lawmakers agree on alternative revenue sources and long-term reforms. Instead of generating new revenue through a state income tax, the spending plan relies on various forms of borrowing and debt instruments.

Several lawmakers echoed the sentiments of House Majority Leader Barbara Flynn Currie: “We have run out of options,” just as state workers and agencies have “run out of time.”

The governor signed the spending portion of the bill (Senate Bill 1216) late Wednesday night, which will allow the comptroller’s office to issue hard copies of paychecks to 5,000 to 6,000 state employees Thursday, said Carol Knowles, spokeswoman for the comptroller.

Human service agencies are in a less certain position. While community-based providers received some assurance of state support, the governor will have wide discretion when deciding how to divvy out limited remaining funds and where to further reduce spending.

The budget deal primarily relies on borrowing to pay public employee pensions, borrowing from state agencies and essentially borrowing from Medicaid providers that don’t receive federal stimulus funds because the payment cycle is likely to lengthen.

Sen. Donne Trotter, a Chicago Democrat and budget negotiator for his caucus, said, “It’s not the best deal, but it will keep us going until we can really sit down and get a grasp on how we’re going to change doing business here in the state of Illinois.”

Even Rep. Bill Black, a Danville Republican, who berated the recent budget-making process as primarily behind closed doors and inadequate for essential state services, ended up voting for the bill that he disliked. “Because there is no alternative,” he said afterward.

Spending = SB 1216
Grant-funded services will receive an average of 86 percent of the funding level originally sought by the governor, while much of state government operations will receive about the same level as last fiscal year.

The Illinois Department of Transportation will get some extra money to hire engineers who will handle the increased workload generated by the federal stimulus package and state’s $31 billion capital construction program recently enacted.

Cost-cutting measures (included in the BIMP) = SB 1912
There will be significant cuts, but the legislature left it up to the governor to decide when and where. Quinn also will have authority to take “administrative charge backs,” which basically are loans from state agencies that the state has to repay.

Members of the executive branch and of the General Assembly will have to take 12 unpaid days off, which amounts to about 4.5 percent of legislators’ annual salaries and stipends, according to Rep. Frank Mautino, assistant majority leader from Spring Valley. The governor also said he hopes to negotiate furlough days with unionized employees to avert the need for layoffs as large as 2,600 workers.

The governor now has authority to ask agencies to reserve a percentage of their funding in an attempt to save an additional $1.1 billion (on top of the $1 billion he’s already supposed to cut). He would have a rare range of flexibility in deciding how to cut that $1.1 billion.

“There is a check on it, but it’s a much greater latitude than anyone’s ever had, the first year of [former Gov. Rod] Blagojevich included,” Mautino said. If Quinn if were to lower a service provider’s payment rate or raise co-payment amounts for people enrolled in state-sponsored programs, then he would have to go first get approval from the legislative panel called the Joint Committee on Administrative Rules.

The governor won’t need that committee’s approval to tell state agencies to reserve a percentage of their funds to, say, hold the line on travel costs. To close a prison or other state facility, he would still have to go through a public review process of another legislative panel, the Commission on Government Forecasting and Accountability.

Elementary and secondary schools will receive about $161 more in general state aid per student than they received last year, but that’s less than the governor originally planned. Mautino said the hope among some lawmakers is that he’ll put more of his discretionary spending money into grants for early childhood education and other education-related programs.

Borrowing = SB 1292
One of the main revenue sources that prevented the need for deeper cuts is a short-term borrowing scheme that increased to about $3.5 billion. Of that, $2.2 billion will go to community-based human services. The governor will have wide discretion in spending the remaining $1.2 billion.

Rep. Patricia Bellock, a Hinsdale Republican, said such groups as substance abuse providers fear that their funding will remain cut because their services are not matched by federal Medicaid reimbursements. Currie said during floor debate that the governor would have discretion to shift money to those services.

The borrowing scheme received mixed reactions. “This is one of the only cards we have left on the table,” said Rep. Kevin McCarthy, an Orland Park Democrat.

“We are not acting prudently,” said Rep. Jack Franks, a Marengo Democrat. “This will not balance the budget. Let’s not kid ourselves. This is only smoke and mirrors.”

Rep. Dave Winters, a Shirland Republican, added that borrowing this year would automatically create a budget hole next year because it’s a one-time revenue source that will have to be repaid by about $750 million a year. Sen. Bill Brady, a Republican from Bloomington, said that the budget sets the state up to fall off of a “financial cliff” next year because it relies on short-term borrowing and stimulus funds that will not be available in the future.

What’s not in the budget?
What the budget deal will not do is address the state’s multibillion-dollar backlog of unpaid bills. In fact, the spending plan might even create longer payment delays for providers that don’t receive extra federal stimulus funds for Medicaid reimbursements.

The state will maintain payment cycles for providers such as hospitals that capture extra federal stimulus funds. That does not include pharmacists or some grant-funded human services, however.

Sen. Jeff Schoenberg, an Evanston Democrat, said the longer-term structural deficit will continue to plague state-funded services. “One thing that we’ll know with absolute certainty is that all of the hospitals, nursing homes and community-based health and human service providers will continue to experience severe cash flow problems,” particularly as the economic downturn makes it harder for them to access lines of credit, said Schoenberg, who said he’s working on two backup proposals if the borrowing schemes don’t pan out as hoped.

What’s next?
The legislature adjourned without a date certain to return, although the annual fall “veto session” is scheduled to start October 14.

When the legislature comes back, it’ll have an opportunity to reassess whether the revenue outlook improved from the economic stimulus and state construction programs. And when crafting next year’s budget, they won’t have to tackle as large of a pension payment ($4 billion topped a ramped-up payment schedule this year).

But Senate President John Cullerton said the state won’t be able to borrow its way through another year and that a tax increase is “inevitable.” “Now you see why we need the tax increase, if for no other reason than to pay [bills] instead of borrowing.”

Chicago Democrat Sen. James Meeks, longtime advocate for an income tax increase similar to House Bill 174 that the Senate approved in May, was absent from the floor during the vote. Meeks has campaigned for the income tax increase because he said it would provide property tax relief and create more equitable funding for education. Earlier in the day, Meeks said: “You either borrow or you vote for revenue. So since I voted for revenue, I’m not voting for borrowing.”

Budget bills

FYI: These are the five bills the governor signed Wednesday night:

• SB 1216 = spending bill
• SB 1292 = bonding bill ($3.5 billion)
• SB 1912 = budget implementation bill (with cost-cutting measures)
• SB 1433 = fund sweeps
• HB 2206 = designates state and federal funds

Expect ILGA action on Burr Oak this week

By Jamey Dunn
Public outcry and personal tragedy spurred quick reaction to a Chicago-area cemetery scandal.

Investigators revealed last week that bodies buried in Burr Oak, a historic African-American cemetery in Alsip, were moved and dumped into a mass grave in an apparent scheme to resell individual gravesites. Four cemetery employees have been charged in connection with the scam.

Rep. Monique Davis, a Chicago Democrat whose district includes Burr Oak, said that as early as tomorrow, the General Assembly could consider legislation intended to address regulatory gaps exposed by the crimes. “I think emergency legislation is surely needed,” she said.

The measure is part of a joint effort from area legislators, Comptroller Dan Hynes, Gov. Pat Quinn, Cook County Sheriff Tom Dart and Cook County State’s Attorney Anita Alvarez. It is expected to include:

1. Licensing requirements for cemetery owners and staff that would be overseen by the Illinois Department of Financial and Professional Regulation.
2. Cemetery maintenance and record-keeping standards.
3. Increased criminal penalties for disturbing a grave site, which already is a felony.
4. Recourse for families to seek financial compensation if their relatives’ graves were affected by the Burr Oak scandal.

Legislators voiced concern that other cemeteries in Illinois might have severe maintenance problems and called on citizens to report any suspicious activities or neglect to local authorities.

Citizens will soon have a forum to air their concerns. A task force originally created to address collapse of the state’s pre-need funeral trust also will look into potential reforms of cemetery regulation and licensing. Rep. Dan Brady, a Bloomington Republican and licensed funeral director, said hearings could start by the end of the month and would allow victims of the Burr Oak scheme, law enforcement officials and industry insiders to testify and to offer input on possible reforms.

Sen. Donne Trotter, a Chicago Democrat who said he has 27 family members buried at Burr Oak, said it could be difficult for lawmakers to address such an emotionally raw issue that has personally affected many among their ranks. “There are no easy answers,” he said. “There can’t be — ’cause who would have thought?”

As for the four charged with disturbing graves at Burr Oak, Trotter added: “There’s not a jail cell or holding that’s cruel enough. There’s not a hell hot enough for these individuals to go to.”

12-month budget deal within reach

By Bethany Jaeger, with Jamey Dunn contributing
The top four legislative leaders and the governor have a general agreement to work toward a full 12-month budget, as opposed to a partial-year budget that would last only five months, without raising income taxes.

But even with a general agreement, the state still is likely to face a deficit that the legislature would have to address this fall or winter, possibly during its annual fall “veto” session. The size of that deficit, however, is still unknown or, at least, debatable. The governor’s most recent estimate is a $9.2 billion gap in revenues versus spending.

The leaders met twice with the governor Tuesday. Senate Minority Leader Christine Radogno said after the second meeting that while the state would still have a massive backlog of unpaid bills, the revenue outlook could improve with activity from the federal stimulus package, the statewide construction program enacted Monday and other longer-term reforms to Medicaid and pension liabilities sought by Republicans.

“So we have to wait and see how the reforms and how the stimulus elements come together, and that may improve our revenue position,” she said. “I don’t know that. But I do know, as of tonight, we should avoid having a meltdown in state government.”

Not all were so sure. “They’re close," said Rep. Art Turner, a Chicago Democrat, "but … close counts in horseshoes. This is politics. We still haven’t gotten there, yet.”

The new fiscal year started July 1. Layoff notices to state employees went out July 7. Numerous human services providers that get state funding have reduced programs and laid off their own employees because their shoestring budgets can’t survive without knowing when they would receive their next state payments.

The general agreement among legislative leaders includes enacting a 12-month budget that relies on revenue from refinancing state debt (Senate Bill 1609, which already was enacted), sweeping dedicated funds (SB 1433) and borrowing more money. The short-term borrowing scheme has changed from its original version. Instead of floating $2.2 billion in bonds, the state would float $3.6 billion. The governor also would still have to cut an additional $1 billion in spending. The legislature would give him wide discretion to cut as he saw fit.

The short-term borrowing would help the state make its $4 billion payment into the public employee pension system this fiscal year. The borrowing would free up money that would be used to prevent severe cuts to community-based services. While numbers vary, one estimate by a House Democrat is that the new budget deal could result in service providers receiving about a 13 percent cut, as opposed to a 50 percent cut, as previously approved. The governor vetoed that measure (SB 1197).

Human services
So instead of the so-called 50 percent budget for human services, providers would get about 87 percent of what they received in state support last fiscal year.

“We’re getting very close to what [the governor] was looking for,” said House Minority Leader Tom Cross.

But, he added, the situation has been painted as more severe than it needed to be. “I think the approach a month ago was to attempt to scare legislators into a tax increase. I didn’t think that was a good approach,” Cross said. “I think at the end of the day, [cuts to human services] will not be nearly as severely as the governor portrayed six weeks ago.”

Both minority leaders and Senate President John Cullerton added that state employees and service providers now need reassurance that they’ll still get paid. “Unfortunately, some people come to believe that they’re going to be shut down, that their not-for-profit agencies are not going to be able to operate,” Cullerton said. “And that’s been unfortunate because that was never the case, never had to be the case.”

Under the new version of a budget deal, about $2.2 billion of the short-term borrowing scheme would benefit human services. Quinn would be able to decide how to spend the additional $1.3 billion that the legislature is expected to add to the borrowing scheme Wednesday.

Income tax update
An income tax increase temporarily is off the table. Quinn recently said he would delay his campaign for a tax increase until the fall or winter. Fewer votes would be needed in January. And some legislators have requested the governor “tone down the rhetoric” for the next few months, which would allow them to find out whether they face serious opponents in the 2010 elections before being called to vote on a tax increase.

But the idea of a tax hike still has support, particularly among Senate Democrats.

“It’s not dead,” said Sen. Terry Link, a Waukegan Democrat. “It may be on pause, but it’s definitely not dead.”

Sooner or later, he added, state government will have to have a “revenue infusion” to keep operating. Cullerton gave a sneak peak into his campaign for a tax increase when he seeks support from Republicans. He said if the legislature had approved an income tax increase this year, the state could have used the revenue to pay its backlogged bills rather than borrowing money to do so. “That would be a conservative, responsible response to a fiscal crisis,” he said. “That’s what our income tax increase could be characterized as.”

After spending most of the day in closed-door meetings, some legislators headed to the Major League Baseball All Star baseball game in St. Louis, where President Barack Obama was scheduled to toss the ceremonial opening pitch. The legislative leaders are scheduled to meet again at 11 a.m. Wednesday. And they expect to take action on parts of the budget deal as early as Wednesday afternoon.

AFSCME lawsuit
If things fall into place tomorrow, then some groups of state workers would be paid up to a few days late.

In an attempt to ensure that state workers continue to get paid if things fall apart and a budget is not in place, the American Federation of State, County and Municipal Employees Council 31 filed a lawsuit today in St. Clair County. The union made a similar move in 2007 when the legislature failed to produce a budget by the end of the fiscal year. AFSCME spokesman Anders Lindall said, “Unfortunately, we’re in the same boat.”

The lawsuit would apply to all state employees. “The fundamental legal principles are the same for any state employee,” Lindall said. “If you work, you are entitled to be paid in full and on time for that work.” He added that if lawmakers can agree on a budget in the next few days, the suit would not be necessary.

Ready, set, shovel

By Bethany Jaeger
Shovels could break ground within a few weeks as the state signs contracts for new road construction jobs. Gov. Pat Quinn signed into law a capital spending plan that his office said would create or retain as many as 439,000 jobs throughout the next six years.

“By advancing this now, we can still have an impact during this construction season. We should not let a minute go to waste,” Senate Minority Leader Christine Radogno said in a statement. At a bill-signing ceremony in Chicago Monday afternoon, she added: “These last several years, successes in Illinois government have been few and far between. But what we have here today is a major success. It’s a beautiful thing.”

Trade group members are on the edge of their seats waiting for projects to start, according to Beth Tatro, director of external programs the Illinois Road and Transportation Builders Association based in Itasca. “We’re at the point right now where our companies are starving,” she said. “This has been an early Christmas present.”

But time is tight for projects to begin this month. Engineers have to design the work, the department has to seek bids for contracts to do the work and then they’ll start building. “If the project is already on the shelf, as soon as we get the money, we can build them,” Tatro said. If some of the projects were designed three years ago, engineers might have to review the plans and adjust the costs.

According to the Illinois Department of Transportation, about $448 million in highway projects already have been let. And an additional $310 million would be obligated for highway projects this fiscal year. The distribution of money for downstate mass transit projects, however, has not yet been decided, according to the department.

In addition to improving transportation-related infrastructure such as roads, bridges and mass transit, the $31 billion capital plan will finance projects that build new schools, make schools and homes more energy efficient and support vocational and early childhood facilities. Environmental and economic development projects also are slated to help clean up contaminated sites, deploy broadband Internet technologies, support jobs in economically depressed areas and help build affordable housing units for veterans and people with disabilities. Another goal is to expand high-speed rail between Chicago and St. Louis.

The capital plan, however, does not mean that Illinois has an operating budget. The lack of a state operating budget for the fiscal year that started July 1 has led to ongoing layoffs and service reductions for community service agencies. Without a spending plan in place this week, some state employees could not receive their full paychecks on time.

The governor indicated last Friday that he would postpone his campaign to enact a temporary income tax hike until this fall, which would allow incumbent legislators to know whether they have serious primary election challengers in 2010. Quinn also indicated last week that he would, despite early opposition, consider a five-month budget to at least keep the state operating until the legislature returns for its annual fall session in November.

The legislature will return to the Capitol Tuesday afternoon. Legislative leaders are scheduled to meet with the governor Tuesday morning.

“The General Assembly must pass a balanced budget that makes essential cuts and cost efficiencies, while also providing for our most vulnerable and needy residents,” Quinn said in a statement Monday.

The governor previously said he would not sign the capital plan into law without an operating budget on his desk because without it, bond rating agencies were likely to downgrade the state’s bond status, which would make it more expensive for the state to borrow.

Financing the statewide construction program
The flow of revenue to pay for projects outlined in the program, Illinois Jobs Now!, comes from a variety of fee increases and gaming expansions. Driving-related fees for vehicle titles, license plates and drivers’ licenses combine with expanded sales taxes on candy, some tea and coffee drinks, hygiene products and wine and beer.

The revenue bill is House Bill 255.

The spending bill is HB 312.

The bonding bill is HB 2400.

The state would garner 80 percent of the revenue generated by new sales taxes on candy and grooming products, which will include soaps, shampoo, toothpaste, mouthwash, deodorants, and suntan lotions and sunscreens that don’t require prescriptions.

A more controversial and, potentially, legally challenging revenue source would be the legalization of video poker in places that serve alcohol. Numerous bars, clubs and riverboats throughout the state already have video poker machines, but hundreds illegally pay winners under-the-table. The new state law would legalize the payouts and then tax the profits, generating up to $300 million a year once fully implemented, according to the governor’s office.

Supporters, including coin machine operators and beverage and hospitality associations, said it’s a voluntary tax that averts the need to raise other general state taxes to pay for critical construction projects. Opponents have said video poker increases the likelihood of gambling addictions and social problems that go along with them. A portion of the revenue will go to gambling addiction services.

Each restaurant, bar, veterans’ hall, truck stop would be stripped of existing machines and would have to install up to five standardized machines that would be connected to and regulated by state gaming authorities. But before they could install the machines, the county or municipality would first have to submit the question of whether to allow legalized video poker to voters. A majority of voters would have to say OK.

The new law also allows the state to partner with a private management firm to run the Illinois Lottery, although the state would still own and maintain control of the asset. And Illinois could start a pilot project for up to four years to allow people 18 and older to buy Lotto and Mega Million lottery tickets online, mainly in an effort to target people who don’t often play the lottery. But the pilot program would first need federal approval from the U.S. Department of Justice. The University of Illinois will conduct a study about the effect of families buying lottery tickets in a report due to the state in January 2011.

Burris: No longer in the running

By Bethany Jaeger
No Lisa Madigan. No Roland Burris. The race to be the next U.S. senator from Illinois just narrowed to a more classic competition. The seat has gained national attention for its previous occupant, President Barack Obama.

Madigan, the Illinois attorney general, announced yesterday and Burris announced today that they opted not run in 2010.

“It’s an open seat, and the focus is more going to be more on national issues than would have been the case if Burris were running or if Lisa Madigan essentially would have cleared the field,” said Kent Redfield, political scientist at the University of Illinois at Springfield.

If Madigan would have run, Redfield said she would have been the Democrats’ strongest candidate. “Her not running is a minus for the Democrats, but Burris not running is certainly a plus. There’s no question about that.”

Burris never shed the cloud that hovered over his appointment by former Gov. Rod Blagojevich. The then-governor had just been arrested on federal corruption charges, accused of trying to personally profit from his powers to appoint the state’s next senator. Early polling of 644 likely voters showed that just 5.3 percent of respondents supported Burris as a candidate for a full term. Numerous Illinois officials, including U.S. Sen. Dick Durbin and then-Lt. Gov. Pat Quinn, urged Burris step down. Burris wouldn’t budge. His ambitious style came through in, "Always in the running," our profile of him in Illinois Issues magazine.

Burris said today during a Chicago news conference that fundraising had a lot to do with his decision not to run in 2010. Here’s an excerpt of his announcement:

Life is about choices. Make no mistake, I love serving in the United States Senate. I love serving the people of Illinois, make no mistake.

I’m the only African-American serving in the Senate, and I believe that diversity and representation of all segments of our society is essential to who we are as a nation.

The reality of being a U.S. senator today [is that it] requires not only a significant time commitment to performing the job, but an almost equal commitment to raising funds to run competitively for the office.

Political races have become far too expensive in this country.

I was called to choose between spending my time raising funds or spending my time raising issues for my state. The people … should always come first.

The chronicles of Burris’ statements about whether he spoke to Blagojevich, Blagojevich’s brother or Blagojevich’s inner circle was the never-ending story. First he testified to an Illinois House committee that was investigating cause for the governor's impeachment. He said he only spoke with Lon Monk, Blagojevich’s former chief of staff. Then Burris revealed in a follow-up affidavit that he also spoke with the governor’s brother, as well as three insiders: Doug Scofield, John Wyma and former Deputy Gov. John Harris, who just pleaded guilty to wire fraud in the ongoing Blagojevich corruption case.

Burris most recently avoided perjury charges in Sangamon County, where State’s Attorney John Schmidt said Burris’s statements might have been vague, but there’s no proof that he intentionally mislead the Illinois House committee. Burris still faces a probe by the U.S. Senate.

His bow out of the 2010 election eliminated an easy target for the GOP, Redfield said. “It kind of takes Burris and Blagojevich out of the Senate race.”

Now, likely candidates are taking shape. On the Democratic side, they include state Treasurer Alexi Giannoulias. Redfield says he has the advantage of being the only candidate so far who has run a statewide race before. He also has a significant campaign kitty, with reportedly more than $1 million raised for his potential Senate bid. Two candidates with less name recognition include Cheryle Jackson, chief executive officer of the Chicago Urban League, and Chris Kennedy, head of Chicago’s Merchandise Mart and son of the late U.S. Sen. Robert F. Kennedy. Redfield said Jackson also could have a slight disadvantage by being tied to Blagojevich. She was his communications director during his first term.

On the Republican side, U.S. Rep. Mark Kirk of Hinsdale has been reported as set to run for the Senate seat. Redfield said he brings his national experience to the table, but as a moderate Republican, he would have to work to gain the moderate and independent vote. Andy McKenna, chairman of the Illinois Republican Party and businessman, also has reportedly discussed the idea. He lost his 2006 bid.

Looks good for capital, not so much for budget

By Bethany Jaeger
It’s taken a decade, but Gov. Pat Quinn said that come Monday, the state would have a major infrastructure program in place to help spur the economy and send people back to work.

Downstate legislators who met with the governor Thursday afternoon in the Executive Mansion expressed bittersweet sentiments: The governor would sign the long-awaited public works program to send laborers and others back to work, but thousands of other public employees and the people they serve are on the brink of losing their jobs and their access to critical aid. That's because the governor and the legislature still haven’t enacted a balanced operating budget, despite a new fiscal year that started July 1.

Rep. Brandon Phelps, a Harrisburg Democrat, for instance, is in a downstate area in need of economic development. However, he also has a prison in his district that could lose employees under Quinn's plan to cut spending by an additional $1 billion. Enacting the capital bill wouldn’t prevent layoffs of 1,000 Department of Correction employees, he said, adding that such significant layoffs might not save as much money as needed to cover the increased overtime costs.

The General Assembly is scheduled to return to the capital city Tuesday, about the same time the comptroller’s office needs to process checks so the first round of state employees would get paid on time. The governor, facing doubt about whether he can persuade more legislators to support an income tax increase to fill what he says is a $9.2 billion budget deficit, said he would consider Plan B, even if that includes a temporary spending plan.

“I’m open to anything that gets us moving in a positive direction, whatever it takes,” Quinn said. That could include a five-month budget so he could continue to lobby for an income tax increase.

But, asked Rep. Bill Black, a Danville Republican, at what level would the five-month budget be based? Would it be based on the $26 billion plan already approved by the legislature but partially vetoed by the governor? Or would it be the $28 billion originally proposed by Quinn?

In May, the legislature approved along partisan lines a budget that reduced funding for human services by half of what the governor proposed. Quinn then vetoed much of that spending plan and said that regardless of whether an income tax increase passes, he would still have to make about $1 billion in cuts. He recently announced a general plan that lacked specifics, although legislators said today they hope by Tuesday to receive more details.

Rep. Roger Eddy, a Hutsonville Republican, said a five-month budget is risky because it would assume that the legislature would approve an income tax increase before the end of the year. “Then you’ve spent for five months based on revenue you may or may not get. I think it’s very risky.”

He added, however, that it might be the most politically palatable option for many legislators because by this fall, incumbents would know whether they faced a serious challenger in the next election.

Either way, Eddy said, Quinn faces a “triple negative” in trying to persuade lawmakers to vote for a tax hike because the new revenue would not prevent further budget cuts. “It would be nice to vote for a tax increase — if you have to — and go home and talk about all the new wonderful programs you’re going to start. This combination is: Vote for revenue, borrow $2.2 billion, make $1 billion in cuts above the cuts that have already been made. That’s a pretty tough sell.”

Rep. Mike Bost, a Murphysboro Republican, said he appreciates that Quinn is showing some direction in where he might cut, but he’s concerned that the governor is making broad statements to stir up local residents so they pressure their legislators to approve an income tax increase. The GOP has remained mostly united on opposing a tax hike without action on other cuts and what they see as reforms because they fear giving billions of new dollars to a group of leaders which he said “can’t control themselves.”

Legislators said they could be in session Tuesday through Thursday, although several expressed doubt about how they would solve the budget impasse by then. “I think it’s going to be a challenge for all the pieces to come together,” said Rep. Bob Flider, a Mount Zion Democrat.

CAPITAL
After the legislature in May overwhelmingly approved the first major infrastructure program in a decade, Quinn said he wouldn’t sign the package into law until he received a balanced operating budget on his desk. With little consensus on how to balance a severely out-of-whack budget, the capital program remained in limbo and jeopardized federal matching funds.

The governor said today he would sign the capital program into law on Monday. He previously said on May 31 that the lack of an operating budget would hurt the state’s bond rating, making it more expensive to borrow money.

Thursday afternoon, he said the state still needed both. “I think we need to have a good budget that is a balanced budget that’s fair and decent. Together with a good jobs program, we can get Illinois focused on economic recovery and budget stabilization.”

Shovels might not move dirt for weeks, maybe months. We’ll have more on that and other reaction soon.

Word of the day: Neither

By Bethany Jaeger
Political hopefuls and Statehouse insiders waited for the day when Illinois Attorney General Lisa Madigan would decide whether she would run for governor or for the state’s second U.S. Senate seat in 2010. Today she surprised most of them by saying, “Neither.”

Citing her family and her feeling that there is still “plenty to do” in her current position, she said she decided to seek a third term as attorney general, setting off a chain reaction of political decisions leading up to the election season.

“I know that for now, the best way for me to continue serving the people of Illinois is to continue doing the job that I love,” Madigan said in her announcement. She cited her work targeting predatory lending practices, lifetime supervision of sex offenders, utility rates, hospital bills for uninsured patients and public access to information.

Her decision to seek another term ripples throughout state and national politics, particularly because it comes shortly after a trip to Washington, D.C. She met with President Barack Obama and reportedly discussed a potential bid for his former U.S. Senate seat. Madigan was seen as a strong candidate to ensure that it remained in Democratic hands, given that U.S. Sen. Roland Burris’ abbreviated term has been clouded by his controversial appointment by embattled former Gov. Rod Blagojevich.

Attorney general
As an incumbent candidate for statewide office, Madigan faces a repeat opponent, DuPage County State’s Attorney Joe Birkett. He lost to Madigan in 2002. He ran for governor in 2006 but soon became Judy Baar Topinka’s running mate as lieutenant governor on the GOP ticket. They lost to Blagojevich and then-Lt. Gov. Pat Quinn. On his campaign Web site, Birkett said, “I want to remain a prosecutor.” He said he would bring to the forefront ideas to partner with state’s attorneys in every county, work with the General Assembly to reform laws, root out public corruption and protect communities against gang violence.

His fundraising, as reported to the Illinois State Board of Elections, however, has been outpaced by Madigan. She most recently reported having nearly $3.5 million available at the end of 2008, compared with Birkett’s $44,676 for the same period.

State Rep. Julie Hamos, an Evanston Democrat, was considering a bid for attorney general. Her campaign released a statement today saying she would revisit with community leaders and supporters. “I look forward to hearing their ideas and input as I discuss my next steps with my family."

U.S. Senate
Now that Madigan is out of the race for the Hill, chips are starting to fall for likely Democratic and Republican candidates to challenge Burris, if he indeed runs. Republican U.S. Rep. Mark Kirk has not officially announced but has reportedly reached out to supporters today. Statehouse insiders also have mentioned Kirk as a possible GOP candidate for governor.

On the Democratic side, state Treasurer Alexi Giannoulias of Chicago has formed an exploratory committee for the Senate. CORRECTION: Raja Krishnamoorthi, former deputy treasurer, is exploring a run for state comptroller, not treasurer. If Giannoulias vacates his position as treasurer, his chief of staff, Robin Kelly, wants it. Another Democrat exploring the U.S. Senate race is Chris Kennedy, who heads Chicago’s Merchandise Mart and is the son of the late Sen. Robert F. Kennedy. Democratic U.S. Rep. Jan Schakowsky decided June 8 against a Senate bid and instead will run for reelection in her House seat.

Governor
Madigan’s decision to seek reelection also causes a ripple effect at the state level. Not seeking the governor’s office avoids the politically awkward situation of serving while her father, House Speaker Michael Madigan, controlled one of the legislative chambers. It also avoids a primary run against sitting Democratic Gov. Pat Quinn.

Considering she was also widely seen as one of the strongest candidates for the chief executive’s job, several potential opponents waited for her decision. Comptroller Dan Hynes is considering; however, he has not officially announced which office he might seek. His campaign issued a statement that said he would discuss his options with his family and “make a decision within the next few weeks.” Krishnamoorthi is considering a bid for comptroller if Hynes decides to move on. My apologies for an error published in the original post.

The GOP primary race for governor, meanwhile, is increasingly crowded, particularly with suburban Chicagoans. State Sen. Kirk Dillard of Hinsdale, who served in the administrations of former Govs. Jim Edgar and Jim Thompson, officially announced his bid with a statewide tour today. “I’ve always said I didn’t care whether Lisa Madigan was my opponent. I intended to run otherwise. But, obviously, she and her father would have been very difficult opponents.”

He was quoted this morning as saying he looks forward to Lisa Madigan being attorney general when he’s governor. Dillard said this afternoon, however, that he was not endorsing her. “Joe Birkett and [GOP Rep.] Jim Durkin are close friends and would be great attorney generals. And it would be worth the price of admission to see a rematch between Joe Birkett and Ms. Madigan, especially since State’s Attorney Birkett came so close last time to beating her.”

In the race for governor, Dillard joins GOP candidates Sen. Bill Brady of Bloomington, a repeat gubernatorial hopeful; Sen. Matt Murphy of Palatine, who announced last month and has become his chamber’s budget point person; DuPage County Board Chairman Bob Schillerstrom; Dan Proft, political commentator for WLS-AM 890 Chicago radio, a political consultant and a writer for conservative publications; and Adam Andrzejewski, a self-made businessman and self-funded candidate based in the Chicago suburb of Oak Brook.

We’ll have more about the suburban Chicago hotspot for political aspirations in the future.

Layoff notices go out

By Bethany Jaeger
Gov. Pat Quinn said about 2,600 layoffs are needed to help reduce state spending by $1 billion. At the same time he outlined the cuts in Chicago Tuesday, Quinn also vetoed another portion of the state budget. He said the General Assembly sent him a spending plan that “just spends too much money.”

“I think the best way to operate with the budget that I was given by the General Assembly a week ago is to veto it in its entirety because it doesn't cut spending as it should,” he said in a Chicago news conference. He later added: “We're not playing tennis here. We're playing with people's lives.”

Quinn vetoed House Bill 2145, which authorized $3.8 billion in spending on state operations, because it didn't follow the principle of shared sacrifice, he said. “There were too many instances of entities getting the same budget they did the year before or a very modest reduction, where others are taking very painful cuts. I don't believe that that's fair, and I don't think the people, the taxpayers of Illinois think that's fair.”

Of his $1 billion in cuts, he proposed 12 furlough days, or unpaid days off, for all state employees, including unionized workers and those in the executive and legislative branches. The 2,600 layoffs would spread across all state agencies. He said the furlough days would save about $108 million. Without them, he would seek an additional 2,500 layoffs.

The list of cuts proposed by the governor also would include:

• $150 million - Moving Medicaid patients to managed care health plans so they have medical "homes" and reducing IllinoisCares Rx, a prescription drug program started by former Gov. Rod Blagojevich.
• $250 million - Reducing grants to local agencies, local governments and programs by 10 percent across most state agencies, except the Department of Veterans' Affairs.
• $175 million - Maintaining last year's funding levels for education, while preserving the investment needed to secure all federal stimulus dollars.
• $125 million - Laying off about 1,000 Department of Corrections employees and possibly closing some prisons (he previously mentioned letting non-violent criminal offenders out of jail early).
• $100 million - Requiring all state agencies to reserve some spending for an even rainier day.
• $25 million - Reducing spending in other state offices and departments not under the governor's control.

“We're all in this together,” Quinn said. “So whether you're the governor of Illinois or a member of the legislature or somewhere in the state bureaucracy, we have to cut costs, cut costs, cut costs.”

But a large chunk of the governor's cuts would require negotiations with public employee unions, which would mean reopening active labor contracts to implement furlough days and to reconsider pay raises scheduled for this year. Quinn said those raises account for about $125 million.

Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees Council 31, said yesterday, “We have a duty to listen to anything that the administration proposes, and we've indicated a willingness to do that.” However, he added, furloughs have the same effect of service cuts, and layoffs could result in more expensive overtime pay.

Furloughs are the “least painful way of going,” Quinn said. “We want to limit layoffs wherever possible. That's why the use of the furlough can help preserve jobs on the state.” Despite furloughs, he added the state would still have to lay off about 2,600 workers and that Illinois only has as many employees today as it did in 1973. The roughly 58,000 workers is one of the nation's lowest ratios of state employees per state resident. “But having said that," Quinn said, "we still have to do these very difficult cuts because we simply don't have the money.”

The dramatic cuts are nothing new to many legislators. The governor has been making similar warnings since the spring legislative session. However, some Republican lawmakers said they're still waiting for the governor to act on other types of reforms before they'll consider a tax increase, which Quinn maintains is the other major way to avoid such deep budget cuts.

For instance, Rep. Franco Coladipietro, a Blooomingdale Republican, said the governor and the General Assembly need to address initiatives that affect not just this year's budget, but budgets several years down the road. He cited job growth, as well as more significant ethics and public employee pension reforms. “Passing a tax increase right now with making no changes to the structural budget process in Illinois only puts us in a position where we'll be in the same exact position three years from now,” he said. “And it doesn't change anything.”

Coladipietro was one suburban Chicago legislator at a closed-door meeting with the governor yesterday. Quinn also previously met with female legislators. He said he plans to meet with downstate legislators in Springfield later this week, and he's scheduled to meet Monday with legislative leaders in the Executive Mansion.

Gov. Quinn: Cuts are coming

By Bethany Jaeger
Gov. Pat Quinn is slated to announce layoffs and other government spending cuts in what he said is an effort to cut another $1 billion from the state’s operating budget. He’s scheduled to announce specific cuts in Chicago tomorrow afternoon, one week before the legislature is scheduled to return to Springfield to consider his recent veto of the part of the budget that would fund human services at reduced levels.

After meeting with suburban legislators today, Quinn said public employee unions would be notified this week of unpaid days off and layoffs. He did not specify where the layoffs would take place; however, Republican Rep. Jim Durkin of Western Springs attended the meeting and said the administration outlined 1,000 layoffs from the Illinois Department of Corrections and about 900 layoffs from the Department of Human Services, as well as cuts in grant programs.

One of the largest unions, the American Federation of State, County and Municipal Employees Council 31, had not received official notice, said Anders Lindall, union spokesman, adding that layoffs are expected without a new flow of revenue into state coffers. “As long as the budget is broken and legislators haven’t passed sufficient revenue, layoffs would be inevitable. Not just layoffs, but damaging cuts to essential human services and public safety.”

Lindall said furlough days or layoffs at state agencies would be tantamount to cutting services, wouldn’t save as much money as needed and could actually cost the state more money in added overtime pay. “Certainly, the thousands of layoffs he’s now talking about would have a profound harmful impact on basic services in DHS, safety in the prisons, DCFS functions and all of the basic services that Illinoisans [rely upon].”

According to Durkin, the governor indicated in the private meeting that he was willing to operate on a temporary state budget until a more permanent solution could be reached. That would counter Quinn’s previous statements that he would not accept a temporary budget.

The governor continues to frame a state income tax increase as the only solution to balancing the budget, which he estimates is $9.2 billion out of balance, but several legislators said they don’t expect a tax hike to win approval next week.

“I don’t think anybody’s mind was changed with today’s meeting,” Durkin said. “And I think that at this point in the year, I just don’t know how you get to 71.” He referred to the 71 votes needed in the House to approve any legislation now that the legislature has gone into overtime session. And cutting thousands of employees from prisons, for instance, won’t win political points with legislators, Durkin added. “I can see where a lot of these jobs are. These are in districts where you might have people who previously were supportive of an income tax increase. You lost ’em.”

Rep. Jack Franks, a Woodstock Democrat who attended today’s meeting, said the governor hasn’t proven to the public that a tax increase is a last resort. Instead of identifying specific spending cuts and negotiating with unions early in the spring, the governor has waited until the new fiscal year this summer to lay the groundwork for a tax hike. “This should have been the very last option on the table. And for him, it was the first and only,” he said.

Franks said his recommendations to the governor have been to cut member initiatives, otherwise known as pork projects, reduce or eliminate the pay of various board members and commissioners, close some state prisons and move to a two-year budget cycle.

Few legislators had high expectations for next week’s special session. “I think next will be a colossal waste of time,” said Rep. Dennis Reboletti, an Elmhurst Republican. “I don’t think any suburban legislators’ mind was changed by this meeting.”

In addition to considering the governor’s veto of the human services budget, the Senate also could reconsider a short-term borrowing scheme that the governor initially proposed but then lobbied against at the last minute — a bone of contention with many lawmakers.

Quinn, however, remains an eternal optimist. He has met with female and suburban legislators and said he plans to meet with groups of legislators from all regions of the state because he believes answering questions, offering suggestions and listening to criticisms has resulted in progress. “I would like to see all of this done by the 16th of this month,” he said.

People look for answers in funeral trust case

By Jamey Dunn
Millions of dollars entrusted by Illinois citizens to pay for their funerals is at stake in an investment scandal that has been marked by confusion and finger-pointing. A lawsuit now poses funeral directors against an association that was supposed to protect their interests.

A pre-need funeral trust fund allows people to make their final arrangements in advance for the cost at the time of purchase. The money is then invested into the trust, and the investment returns help cover inflation costs between the time customers buy their plans and the time they pass away.

Illinois’ pre-need fund, which held about $300 million at its highest point, began losing money in 2001 and is now mired in controversy, as the Illinois Funeral Directors Association faces investigations and a lawsuit filed by some of its members.

Funeral homes are still on the hook for guaranteed pre-need plans, regardless of whether the trust has enough money to foot the bill. Rep. Dan Brady, a Bloomington Republican and licensed funeral director, said that his fellow directors are “caught in the middle. They are left holding the bag … because of investment problems and questionable dealings.” Some directors say the association that is supposed to protect their interests has hung them out to dry by making bad investments and failing to give them accurate information about the pre-need trust.

The Illinois Funeral Directors Association began taking out life insurance policies on funeral directors as an investment, but the insurance policies did not pay out quickly enough to cover the funeral costs of the people with pre-need plans. When a funeral director dies, a portion of the insurance payout would go to his or her beneficiaries. But the majority of the money would go to the trust.

According to a complaint filed by the Illinois secretary of state’s office, the association sunk about $200 million from the trust into life insurance policies.

However, a statement on the Funeral Directors Association’s Web site pegs the economic downturn as the primary reason for the trust’s losses.

The association was licensed to control the trust in 1980 by then-Comptroller Roland Burris, now a U.S. senator. The license has come under scrutiny because Burris became a lobbyist for the association after he left office. Current Comptroller Dan Hynes has said the license shouldn’t have been issued in the first place. Burris has declined to comment about why he awarded the license, saying too much time has passed and he doesn’t remember.

Hynes’ office pulled the association’s license to manage the trust in September 2007 and ordered the organization to repay almost $10 million in fees it collected for managing the trust. Carol Knowles, spokeswoman for Hynes, said the comptroller’s office is prepared to take the association to court if the money is not returned.

Also as part of the fallout, a Merrill Lynch agent who sold the life insurance policies to the association has lost his investment adviser’s license from the secretary of state’s office and his insurance broker’s license from the Illinois Department of Insurance. The agent, Edward Schainker, is contesting both decisions.

Knowles said the comptroller’s first goal going forward is to protect individuals who purchased pre-paid funeral plans and then to help funeral directors who were unaware of their association’s investments. However, Knowles said she thinks some funeral directors knew what was going on. “They received personal insurance policies free of charge. Many of them sat on the [Illinois Funeral Directors] board at one time or another, and they participated in an investment that was, as they say, ‘too good to be true.’”

Many association members, in turn, claim that the comptroller’s office failed to protect them by waiting too long to alert them of the fund’s losses.

In an attempt to prevent the situation from repeating itself, Hynes backed state legislation aimed at protecting the money that is still in the fund and creating more transparency for investors. Senate Bill 1682, which passed both chambers of the General Assembly this spring, would require the fund to be administered by a third-party trustee that would be legally bound to make decisions that were in the best interest of investors. The bill also would require the trustee to send reports directly to individuals with money invested. The bill’s sponsor, Democratic Rep. Lisa Dugan of Bradley, said that measure is just a starting point for reform and would make changes that are urgently needed. “We can’t take $40 million that’s been mismanaged and not have something in place to make sure that — any money from here on out — the same thing doesn’t happen. … That part of the issue needed to be put under regulatory control now.”

However, it’s difficult to pinpoint the amount the fund has lost because the Funeral Directors Association gave its members inaccurate statements on the trust, according to Michael McRaith, director of the Insurance Department and acting secretary of the Department of Financial and Professional Regulation. He said it may not even be a matter of the fund loosing a lot of money; it may be that the association told members that the fund was doing better than it actually was. That difference now appears to be a large loss.

The Department of Financial and Professional Regulation worked out an $18 million settlement with Merrill Lynch, which sold the insurance policies to the association. McRaith said the figure was based on premiums that Merrill Lynch received for insurance policies and an additional amount that was tacked on to “bring the matter to closure.”

Funeral directors criticized the settlement by saying Merrill Lynch would be returning pennies on the dollar of the original investments into the trust. Some association members are, instead, opting to sue the Funeral Directors Association and Merrill Lynch. If individual members refused Merrill Lynch’s offer to settle, then their portion of the money would go to their customers who bought the pre-need funeral arrangements, instead.

Brady said the settlement is a well-intentioned effort to restore some faith in the trust, but, in the end, it has just created more “frustration and confusion” for funeral directors. He said the directors do not know if they should settle because they are unsure about how much money they actually lost. Brady said he thought $40 million was a conservative estimate but added, “I don’t think anybody truly knows.”

Confusion and frustration seem to be recurring themes surrounding the future of the pre-need funeral trust, and, so far, solutions are nowhere in sight. The Illinois House voted to create a task force that will look into the issue. The panel will consist of legislators and representatives from the comptroller’s office, the Department of Insurance and the Department of Financial and Professional Regulation. Both McRaith and Knowles said their offices wanted to wait for the task force’s recommendations before proposing any other changes to the way the trust is regulated.

Brady, who sponsored the resolution that created the task force, said that the group’s goals include holding accountable whoever is responsible for the problems with the trust and creating a comprehensive reform package that addresses problems in all areas of pre-need funeral sales. The task force must submit the report to the governor by the end of the year.

With all the negative attention on the trust, Brady said that he hopes reforms could help get it back on solid ground. “When you have a multifaceted problem like that, you have a consumer that is becoming very suspicious and skeptical when all they have been told over the last several years is that the whole idea is piece of mind.”

Knowles said that people should not be afraid to invest in the fund just because some individuals made irresponsible investments and took “advantage of the system.” She added, “People rob banks every day, but that doesn’t and shouldn’t stop people from putting their money in banks.”

See The State-Journal Register for a timeline of events associated with the pre-need funeral trust.

New fiscal year, same stalemate

By Bethany Jaeger

The first day of fiscal year 2010 is marked by Gov. Pat Quinn vetoing the portion of a state budget approved by the legislature, meaning the state doesn’t have a spending plan in place. And after yesterday’s strange string of events, lawmakers and state service providers wonder how the governor will proceed.

House Speaker Michael Madigan had some advice for the governor: Stop doing 180s on his stances. “I plan to continue to work with the governor in full cooperation. I recognize the problems of state government, but it does not help in this very difficult situation to engage in all these flip flops.”

Most recently, Quinn sought the ability to float pension obligation notes as a short-term borrowing plan to free up about $2.2 billion, which legislative leaders of both political parties agreed would go to human services. The governor congratulated the House yesterday afternoon for approving the short-term borrowing plan in Senate Bill 415, but a few hours later, he called senators asking them not to vote for the plan because he said it would take pressure off of finding more significant revenue sources. Quinn said today outside of his Statehouse office that voting on the borrowing scheme was out of order.

“We didn’t know there was an order,” said Sara Wojcicki, spokeswoman for House Minority Leader Tom Cross. She added: “If there was anything that we were agreeing on in the leaders’ meeting [yesterday morning], it was that we were going to do that [short-term borrowing]. It seemed to be the program.” She also said it’s been hard for the caucuses to gather support or opposition to the governor’s proposals when he keeps changing his mind.

The legislature isn’t scheduled to return until July 14, about the same time the comptroller’s office is supposed to cut checks for the first wave of payroll of state employees. The timing, according to Madigan’s spokesman, reflects a survey of legislative members’ schedules. But Quinn said he hopes they all can find a solution well before then.

But the governor didn’t specify a plan for how that would happen. He just said the next few days are crucial and that he would work hard with legislators and others. “We will not relax in our battle to have a balanced budget in the Land of Lincoln. This is a fight worth fighting for.”

The bill he angrily vetoed, SB 1197, gave him authority to spend about 20 percent of the state budget that is distributed in grants. After funding federally required portions of education and Medicaid to acquire economic stimulus funds, the bill only gave the governor about $3.5 billion of the $10 billion he sought for grants of community-based human services, according to Madigan.

“We only appropriated for the amount of money that we thought would be available,” the speaker said, later adding, “There’s enough money to manage the government under the spending authority contained in the bills that we’ve sent to the governor.”

Madigan also said he would vote to override the governor’s veto, although he said he didn’t know whether his chamber would have enough votes to do so July 14.

Quinn has not addressed other portions of the budget, including various revenue sources. But, he said, “I’m philosophically opposed to trying to balance the budget on just one area of human services in Illinois.”

Even with his veto of the human services portion, however, some providers already have cut programs or laid off employees because the state Department of Human Services told them to prepare for cuts July 1 and more cuts later in the fall. The unpredictable nature of funding is enough to devastate social services that run on shoestring budgets. For instance, in the Southtown Star, columnist Phil Kadner describes the scene in the Chicago suburbs. The Herald & Review outlines cuts being made for Decatur-area services.

Comptroller Dan Hynes said the governor is sending the wrong message, which he said “bordered on irresponsible.” In a statement, Hynes wrote: “He needs to communicate to our social service providers that they need to continue providing services and they will be paid. Instead, he is adding to the hysteria by creating doubt and potentially causing disruption to these essential services.”

Quinn said human service providers should carry on. “I think it’s important that they do their jobs, and I’m hopeful, very hopeful, in a prompt manner, we will get this impasse resolved and get a balanced budget.”

Quinn’s office also issued a warning to state vendors that any bills incurred after today will have to wait for payment. “We have to hold that bill until we get a budget,” Quinn said.

July/August issue: The environment

Illinois Issues magazine's annual environment issue came out today.

In it, you'll find "Wind power," a story about Illinois being at a turning point in its energy-producing future. It's written by Michael Hawthorne, the Chicago Tribune reporter who broke the Crestwood water contamination story.

I picked up on the Crestwood case, which spawned multiple lawsuits, including one by Illinois Attorney General Lisa Madigan. I wrote about it in my July/August column, which explores current state law regarding how information about the public water supply trickles down — or not — to local residents.

Also check out a rather inspiring story about the "River man," a personal profile of Chad Pregracke, founder of Living Lands & Waters and dedicated leader of hundreds of volunteers who cruise the state's waterways and pick up unbelievable amounts of trash.

Energy policy gurus can catch up on the state's new process of procuring power on behalf of Illinois utilities by reading "Switched on." It discusses the Illinois Power Agency's role in an uncertain electricity market.

In addition to our regular columns, brief articles and legislative checklists, the print-only edition also includes a feature about the environmentally friendly but challenging technologies meant to fight pollution in urban areas. Our print readers also will learn more about Marc Miller, new Natural Resources director who is trying to revive that agency's morale while fighting an uncertain economic future.