State will pay off FY2010 bills by end of December - updated

By Jamey Dunn
UPDATE: Gov Pat Quinn confirmed Thursday that the state will pay off its fiscal year 2010 bills by the end of the month, largely through the sale of bonds against the state's tobacco settlement money.

Quinn said the backlog for FY2010 is about $1.4 billion and that service providers and vendors should expect payments soon. “They’ll get their money by the end of this year. Probably in the next week or so," he told reporters in Chicago.

Quinn also emphasized the importance of working on budget solutions when the legislature returns in January. “We also have to pay [FY2011] and beyond — [FY2012], [FY2013] and you name it. So we have to have a plan in Illinois that gets us back on sure footing when it comes to our finances, and that’s what I’m working on now with legislators of both parties.”

Illinois will make the deadline for paying off its bills by the end of this month. A new survey indicates, however, that the slow payment schedule, coupled with budget cuts, has hurt social service providers.

According to Alan Henry, director of communications for Comptroller Dan Hynes, the state will pay off all of its overdue bills from fiscal year 2010 — which ended June 30 — by the end of this month. Legislators moved the cutoff date for payments from August 31 to December as part of the budget plan passed in May.

The state prioritized paying off last year’s bills before paying for costs incurred in FY 2011. Illinois also sold $1.5 billion in bonds against the state’s money from a court settlement with tobacco companies and brought in $546 million from the tax amnesty period. Hynes warned in his quarterly report released in October that the state would have to get at least $1.2 billion from the tobacco money and $200 million from deadbeat taxpayers to make the end-of-the-year deadline.

But the results of a survey from the Illinois Partners for Human Services, a lobbying coalition that represents social service providers throughout Illinois, show that the state’s financial crisis has already taken a toll.

The group surveyed more than 200 Illinois social service providers. More than 70 percent of respondents said their efforts were affected by the late payments, with more than half cutting hours of operation or levels of services. More than 40 percent saw increased waiting lists, and more than one quarter turned clients away and/or closed programs. More than a quarter saw no changes to their services.

More than half of the organizations upped their fundraising efforts. Nearly half sought credit, and nearly half cut staff.

The report describes the compounded problem of staff cuts and an increased need for remaining staff to try to find money where they can:

Sixty percent of responding organizations sought additional funding sources, often requiring program staff to refocus efforts away from service provision. Combined with the 49% that laid off employees, these organizations are severely hampered by both direct cuts and service reductions, as well as reallocating staff to non-service specific functions.

Budget deficit could reach $15 billion

By Jamey Dunn

Illinois could be facing an even larger stack of unpaid bills next fiscal year, as well as a $15 billion deficit, according to the quarterly report on the state’s finances by Comptroller Dan Hynes.

The state rolled an unprecedented $6.4 billion in unpaid bills over from fiscal year 2010 to the new fiscal year, which started in July. Legislators extended the cut off for paying those bills from August to December, and Gov. Pat Quinn has vowed to have the backlog paid down by the new deadline.

According to Hynes, 23 percent of FY 2011 revenues will be needed to pay off obligations from last year. A short-term loan the state took out in July for $1.3 billion, which will come due next spring, already went toward payments to vendors and service providers.

Hynes said in order for Illinois to pay down the backlog by December, the estimated $1.2 billion would have to come in from the plan to sell bonds against money the state received in a tobacco settlement. The state would have to shift $1 billion from other funds into the general revenue fund, and the tax amnesty plan would have to successfully bring in revenues. While the report does not specify how much the state has to bring in during the tax amnesty period — which started on October 1 and ends November 8 — Hynes says the plan is not likely to bring in the original estimate of $200 million.

However, Kelly Kraft, a spokesperson for Quinn’s Office of Management and Budget, said an analysis by the legislature estimated the amnesty would bring in $250 million. She said in a written statement that it is too soon to predict the exact number, but added: “The hundreds of millions of dollars in expected revenue will be significant to help the state pay its bills and keep people employed.”

Hynes estimates that $8 billion in overdue payments could carry over from the current fiscal year to FY 2012 because so much of this year’s money will be needed to pay down last year’s bills. A total of $3.5 billion in unpaid bills from this fiscal year have already piled up. From the report: “Absent any other changes, payment delays will be extended from the historic levels seen recently. This will lead to more providers facing financial hardship and further threaten both the level and quality of services provided to Illinois citizens.”

While income tax revenues saw a small increase, sales taxes where down. According to the report, Illinois cannot count on an economic rebound to bail out the budget in the near future.

Hynes’ report says all this bleak budget news — along with the loss of federal stimulus money and the state’s low credit rating leading to larger interest payments on borrowing — could culminate in deficit of at least $15 billion by the time lawmakers are hammering out a new budget early next year. If that happens, the state’s debt would represent more than half of the money currently in the general revenue fund.

Considering cuts - Part 2

By Jamey Dunn and Rachel Wells


A Senate committee held its second round of hearings today on the impact of possible 10 percent cuts to the budget in the last four months of the current fiscal year.

Senate Democrats have been accused of using the hearings as a political stage to criticize budgets suggestions made by Sen. Bill Brady, a Republican candidate for governor from Bloomington, during the primary election campaign.

Sen. Matt Murphy, a Palatine Republican, said he does get the sense that the hearings are motivated by politics. However, he said he is willing to work with Democrats on cutting the current budget. He echoed a statement that Democrat budget point man Sen. Donne Trotter made yesterday that 10 percent cuts are just a starting point and may not be necessary.

“We’re starting at 10 percent trying to solve this problem. We’ll see where we end up. If there’s a constructive effort at trying to minimize this [fiscal] year’s deficit to make next [fiscal] year’s budget process that much easier, we’re on board,” Murphy said.

State Superintendent Christopher Koch said in his testimony before the committee that he expects more than 13,000 layoffs in K-12 in the next fiscal year even without budget cuts. Those layoffs, he said, would include:

• Tenured teachers 457
• Non-tenured teachers 5,826
• Administrators 505
• Service employees, such as counselors and social workers 402
• Non-certified employees 5,194

Koch said those numbers represent the about 75 percent of schools that the numbers could go higher.

He added that cuts at the state level during the current fiscal year will just “pass the burden” off onto local governments that will have to try to increase taxes or borrow to meet their obligations.

Schools have already entered into contracts with employees, so they cannot make any layoffs during this fiscal year. One way or another, they have to make payroll.

The same goes for the Department of Corrections, which employs about 11,000 people to watch over about 46,300 prisoners and 33,000 parolees. “Any time our department attempts to go through a layoff process, it is a long drawn out process that sometimes takes six months to accomplish,” Corrections Director Michael Randle said. “We would have to approach the legislature and tell them the reality of our situation as an agency and seek additional appropriations to cover payroll.”

Trotter, a Chicago Democrat, suggested borrowing as the only solution.

Randle said cuts to food, utilities and education programs would be needed to make payroll.

“What we would be looking at is strictly a lock-and-key operation,” Randle said.

Randle under fire

Brady called for Randle to step down today.

He made the demand at a news conference held to announce a measure he introduced that would create an Internet database with information on any prisoners that are released early. The Web page would include photos and descriptions of the prisoners. Brady’s bill passed through a Senate committee with unanimous support. Brady said he also plans to create a “strike” force to investigate Gov. Pat Quinn's controversial “Meritorious Good Time Push" early-release program.

Brady sputtered when questioned about what sort of early release scenarios he would support and had difficulty giving a concrete example of which prisoners the state would be required to include on the Web site. In the end, he said he does not support the early release of any prisoners.

When asked about the security of his job, Randle said, "I think we all serve at the pleasure of the governor. … We’ll continue to do our job."

Senate considers cuts to this year's budget

By Jamey Dunn

The Illinois Senate is weighing 10 percent budget cuts for the last quarter of the fiscal year.

A Senate committee is taking testimony from agencies about the possible impact of such cuts to their budgets during the remainder of this fiscal year.

“We know that we’re going into [fiscal year] 2011 with [a] $13 [billion] to some people’s estimate up to $14 billion [deficit], so we need to cut that down now, if we can. And this is what these committee meetings are for,” Sen. Donne Trotter

While Democrats say they are serious about the cuts, Republicans say they are playing political games.

Sen. Bill Brady, a Republican candidate for governor from Bloomington, put forth the idea of 10 percent across-the-board budget cuts during his primary campaign, and many say that Democrats are holding these hearings to take shots at his proposal. But Trotter insists the hearings are not just for political show.

“[The cuts] are real, but we may not be cutting it 10 percent - maybe it’s 5 percent … heaven forbid it’s 15 percent. But we don’t know until we have at least this dialogue with these agencies that will be impacted,” he said.

Committee chairman Sen. John Sullivan, a Democrat, said that no one Republican is being targeted, but the hearings are meant to display the impact of some Republican proposals, for better or worse.

“We’re not trying to put anybody on the hot seat,” Sullivan said. “Some individuals here in the General Assembly have said we need cuts — no new revenues — we need cuts. What we’re trying to do is let the public know and let members of the General Assembly know what the consequences of those cuts are.”

Sullivan said after the hearing that Brady would be welcome to testify before the committee. Brady said he might consider the offer but added that he had already laid out his budget plan.

“I am a candidate for governor. I am going to be the next governor of the state of Illinois. I welcome their test and their challenge. I am going to rise above it and provide the people of Illinois with a budget they can count on - provide the tax cuts they need to create business investment in our state,” he said.

University of Illinois President Stanley Ikenberry and Southern Illinois University President Glenn Poshard testified before the committee today on the possible impact of such cuts on higher education.

“There are many agencies that you will hear from that will be talking about the impact in terms of broken lives. … I think for higher education, it's better to think about it in terms of broken futures,” Ikenberry said.

Both said the proposed $76 million in cuts to Illinois public universities would mean mass layoffs in their university systems. “Such a drastic and immediate reduction in the current fiscal year would require the immediate layoff of 15 percent of our workforce for the remaining four months of the fiscal year. It is not practical prudent or possible to take such and action,” Poshard said.

Sen. Matt Murphy asked the two men if they would consider a deal that would guarantee their schools the money they are owed, with a 10 percent reduction.

“It is not acceptable for me to take a 10 percent deal right now and run with it,” Poshard said to Murphy. “You folks passed legislation that guaranteed us a certain amount of appropriation, upon which we built our budget. We depended upon that. We gave a promise to thousands of students based upon that promise to us from the state legislature and the governor.”

The committee is scheduled to take more testimony from agency representatives tomorrow at 9:30 a.m. Check back for details.

Senate moves to postpone budget address

By Jamey Dunn

A proposal to give Gov. Pat Quinn some extra time to work on his budget address has become the first partisan budget showdown of the session.

The Senate approved HB 2240 this afternoon. If approved by the House, the legislation would move the budget address from February 17, which is currently required by law, to March 10.

The bill would require Quinn to make some budget information available to the legislature and the public via a website by February 24. That information includes:

• Total revenue for fiscal year 2010, including estimates for the remaining months.
• Total spending for fiscal year 2010, including estimates for the remaining months.
• Estimated revenue for fiscal year 2011.
• The state’s obligations, such as interest on debts and pension payments, for fiscal year 2011.

Legislators, and anyone else in the state, could then use the website to make suggestions regarding the budget until March 10.

Senate Democrats said that they approached the governor’s office to request more transparency and input in the process. They tout the bill as an unprecedented cooperative approach to budgeting.

“We’re going to have, for the first time, the two major points. We’re going to have the information about how much money we’ve brought into this state so far this year and where we spent it. That’s never been officially reported,” said Senate President John Cullerton, the sponsor of the bill. “Secondly, we are going to have the official starting point for next year. We’re going to know how much money the governor says we have available to us and how much our obligations are for next year before he comes up with his budget.”

However, Republicans said the transparency measures were only included in the bill as an excuse to buy Quinn more time. “There’s a lot of good ideas in here, but when you boil it all down … this really is nothing more than window dressing to justify putting off the budget address. The fact of the matter is, there’s really nothing new that couldn’t have come out this week or last week,” Senate Minority Leader Christine Radogno said. She added that moving the address back would unnecessarily "compress" budget negotiations into a shorter time period.

Cullerton responded by saying the budget will be completed on time, and the process will actually begin once Quinn starts receiving input on the website.

“I think this is going to be a dramatic change. We still have to pass a budget by the same day. …We’re going to meet that deadline. We’re actually going to try to get out of Springfield three weeks earlier than we have in the past. And we’ll still have enough time to have [appropriations] hearings,” he said.

Republicans said that because the state is in a fiscal crisis, Quinn should be prepared to give his address on time. “This is now anarchy. This is fiscal anarchy,” said Aurora Republican Sen. Chris Lauzen. “If the governor does not know what he is going to say, on schedule, then we are truly lost.”

Back to borrowing

By Bethany Jaeger
Gov. Pat Quinn could propose borrowing roughly $1 billion for the third time since May to keep the state operating through the winter. Tax revenues have slowed, while spending pressures have not. Those pressures include unpaid bills, employee health insurance and financial aid grants for low-income college students.

While short-term borrowing is relatively normal to help the state get through the slow revenue season, the state already borrowed $1 billion in May and an additional $1.25 billion in August. That money, as well as any new short-term borrowing, needs to be repaid by the end of the fiscal year, June 30, 2010.

That’s on top of a $3.7 billion backlog of unpaid bills, according to the state comptroller’s office.

The legislative Commission on Government Forecasting and Accountability recently projected that state tax revenues could come in $900 million less than anticipated.

Although Quinn has had to cut more than $2 billion in spending this fiscal year, he and the legislature recently restored $200 million to fund second semester grants of the Monetary Award Program for low-income college students. But they did not identify a way to pay for the additional spending.

After meeting with legislative leaders behind closed doors in the Capitol Tuesday afternoon, Quinn said he could propose borrowing $900 million to ease the cash-flow problem. “We have to have that just to have liquidity for the months of November and December, January and February,” he said. “That’s historically been a time when state government’s finances — the cash that’s in the till — is the lowest.”

Of the $900 million, some $250 million would potentially be dedicated to pay Medicaid bills and to ensure Illinois continues to qualify for an enhanced federal Medicaid reimbursement rate offered through the federal stimulus program.

The state treasurer and comptroller have to sign off on short-term borrowing plans. It does not need legislative approval. According to Carol Knowles, Comptroller Dan Hynes’ spokeswoman, the comptroller’s office has not received a borrowing proposal from the governor's office.

Hynes, who is running against Quinn in the Democratic primary for governor next February, said in his latest quarterly report that the state carried over a record $3.8 billion in overdue bills from the previous fiscal year at the same time tax revenues took a nosedive. He described the fiscal situation as “grim, and getting worse.”

Democrats have proposed various versions of an income tax increase in the past few months, but they have failed to win approval without Republican support. Fewer votes, a simple majority, would be needed once the legislature convenes its spring session in January.

After meeting with other legislative leaders and the governor, Senate President John Cullerton said: “Nobody wants to vote for tax increases. All you can do is borrow.”

House Speaker Michael Madigan also said there’s close to “no other choice” and that it would push the underlying problem down the road. “This has been done year after year after year,” he said of the short-term borrowing, but he added, “This is a higher amount of money.”

House Minority Leader Tom Cross said the problem has evolved for a number of years. "There’s a real strain on our budget that I’m not sure is going to be able to be met next year,” he said. His spokeswoman, Sara Wojcicki, said Cross also sought clarification about the governor’s priorities. “All this borrowing is something that needs to be carefully scrutinized,” she said. “We want to know how exactly it’s going to be spent, what bills are going to be paid down, why, in that order.”

Senate Minority Leader Christine Radogno added, “I do think there’s a good faith effort to manage, but the overall message here is we still need to look at the spending side of things. And it seems to be more focused on the borrowing.”

The leaders’ meeting kicks off the last week of the legislature’s annual fall veto session. While they and the governor previously vowed to work together to propose new campaign finance reforms during this veto session, they said they did not discuss campaign finance during the closed-door meeting. Democratic leaders met separately with reform advocates, again, behind closed doors.

Wojcicki said Republicans have been kept out of the loop since the end of September. “It seems sort of like an oxymoron: Landmark reform and closed-door meetings without us.”

We’ll keep you posted on new versions of campaign finance legislation throughout the week.

MAP grant funding up in the air

By Bethany Jaeger

Antonio Boyzo is one semester away from graduating from the University of Illinois Chicago. Having worked his way up from earning a general equivalency diploma and transferring from a community college to UIC, as well as earning U.S. citizenship in August, he feared Thursday morning that it would all disappear. He feared he would be one of about 137,000 low-income college students in Illinois who wouldn’t be able to afford tuition for the rest of the school year because state funding for the Monetary Award Program had been cut in half.

By midday, the legislature approved Senate Bill 1180 to restore $205 million to fund the second semester of the grant program; however, it did not approve a way to pay for it. The move comes on the heels of an updated — but ominous — projection that the state’s revenues will fall nearly $900 million less than anticipated.

To help pay for the second semester of MAP grants, Gov. Pat Quinn said he proposed to legislative leaders the idea of borrowing from dedicated state funds and repaying the money when revenue flowed back into the state, something called inter-fund borrowing. “It allows [states] to do more fiscal management during an extremely tough time, and that’s what we want to do,” he said outside his Statehouse office Thursday.

The push for major sources of new revenue, he said, will restart after January, when revenue proposals would need only a simple majority of votes rather than the three-fifths supermajority needed now.

The legislature returns Friday for the third day of the six-day fall veto session.

October issue: Jerry Stermer, "Voice for the man"

Get a glimpse of who helps shape Gov. Pat Quinn's agenda and style in the October edition of Illinois Issues magazine. Maureen McKinney profiles Jerry Stermer in the "Voice for the man."

Read the third and final installment of a three-part series on the plight of nonprofits in Illinois. Crystal Yednak writes, "Joining forces: To prepare for an uncertain future, nonprofits collaborate rather than compete."

And if you want to read about the anticipated effects of this year's state budget banking on delaying payments to certain Medicaid providers, read my feature, "Pay delay."

As always, our columnist Charlie Wheeler gives valuable context and analysis about what legislators and the governor have done by booting the tough choices into next year.

I also provide analysis about how "small budget cuts hit home in a big way." Case in point: grant-funded programs for people with disabilities and college students are in limbo.

And executive editor Dana Heupel gives the national context to Illinois' budget woes in his monthly column.

Our print readers also can read two guest essays: the first by Brent Never, who adds to the picture of how nonprofits are at the mercy of the state; the second by Jack Van Der Slik, who analyzes why politicians shrink from raising taxes as long as they can. Also available in print-only are more articles about campaign finance, the University of Illinois Board of Trustees, a lawsuit over Chicago's parking meters, the closure of Howe Developmental Center, the attack of the waterhemp weed and other Illinois issues.

September issue: Out with the Old — NCLB

Check out the September edition of Illinois Issues magazine.

Find a profile of Senate Minority Leader Christine Radogno, who has taken her party away from the legacy of James 'Pate' Philip, according to writer Kevin McDermott, in "Her own style."

In our cover story, educators and policy groups weigh in as Congress prepares to reauthorize the 2001 No Child Left Behind law. See "Out with the old."

And get a preview of an Illinois Supreme Court case that has potential to clarify what nonprofit hospitals need to do to qualify for property tax exemptions. Read "Charity care" before the case's oral arguments, scheduled for September 23.

In the print edition, only, University of Illinois at Springfield professor Christopher Mooney analyzes Gov. Pat Quinn's "populist" style as he calls attention to direct democracy concepts of recall and citizen initiative in "Let the people speak."

Also in print-only, MarySue Barrett, president of the Metropolitan Planning Council, pens a guest essay about "Wise spending," or a method she says would get infrastructure investment right.

As always, the print edition also includes, among other monthly features, the award-winning column by Charlie Wheeler, director of the Public Affairs Reporting program at UIS. This month, he says, "Illinois' budget is the most out-of-whack in recent history."

Home services grant to be cut October 1

By Bethany Jaeger
A short-term borrowing plan approved by the General Assembly to prevent drastic cuts to human services might not be enough to prevent layoffs of workers who advocate for people with disabilities throughout the state.

A network of about two-dozen Centers for Independent Living were told earlier this month that starting October 1, a state grant that pays for recruiting and training personal assistants for individuals with severe disabilities would be cut. The so-called Home Services grant is funded through the Illinois Department of Human Services. It also pays for training of the people with the disabilities so they understand their civil rights when working with caseworkers and so they learn ways to manage their personal assistants.

The 23 Centers for Independent Living that operate throughout the state run on shoestring budgets, said Ann Ford, executive director of the Illinois Network of Centers for Independent Living based in Springfield. They already anticipated a 10 percent reduction in funding as part of the fiscal year 2010 budget agreement, which is expected to result in furlough days and potential layoffs. Cutting the Home Services grant on top of that would affect between 2,500 and 3,000 individuals who are served under the program each year, according to Ford.

For Mark Karner, director of advocacy for Progress Center for Independent Living in Forest Park, that means he’s out of a job Thursday. Karner also has multiple disabilities and needs a machine to help him breathe and a home aide to help him get out of bed each morning, among other daily functions. He expects to be on a job hunt, or, if he couldn’t find a flexible employer, then he would have to file for unemployment or Social Security, which he has not had since before he started working at Progress Center 16 years ago.

Tom Green, spokesman for the Department of Human Services, said it all comes down to the budget. “It’s the toughest financial challenge that Illinois has ever had. Everyone has to make sacrifices. There’s a limited amount of revenue in the budget that was passed by the General Assembly, not enough to cover all the expenses. And DHS has made cuts in all budget areas.”

He added that cuts to community-based services would have been far deeper, as much as 50 percent, without a $3.4 billion borrowing plan approved by the General Assembly in July. About $2.2 billion of that was slated for community-based human services. But that same budget agreement also relies on Quinn reducing another $1 billion in spending. The General Assembly gave Quinn unprecedented discretion in where to cut.

Ford said she was “very disappointed” in that budget agreement.

“We continue to borrow. We don’t really act like adults and look at what do we need to do to have enough revenue in this state to support the programs that allow some people some dignity in their lives,” she said. “It’s a huge disappointment to me that that was the option that was chosen, and it’s a bigger disappointment to me that the General Assembly then went home and said to the governor, ‘Do whatever you want to do.’”

On July 31, Quinn said that he would spread the cuts out in a way that would maximize federal matching and stimulus funds. And he said he would fund health-related initiatives that focus on disease prevention and that reduce demand for more expensive services later.

Karner said zeroing out the Human Services grant would do the opposite. Mike Ervin, for instance, needs the personal assistants. But he’s lived in his own condominium in Chicago as a freelance writer, a playwright and a community activist, and he’s not enrolled in Medicaid. Losing the personal assistants grant program, Ervin said, would take the system back 30 years. “Not only does it keep me out of nursing homes, but I employ five people. And it keeps us paying whatever taxes we do. It’s just positive all the way around. It’s the wave of the future, it’s the way the future should be going. And cutting it just such a huge regression.”

Karner said a meeting for consumers affected by the Home Services grant is scheduled in Chicago Friday. “I guess there’s still some glimmer of hope that the governor will change his mind before October 1,” he said.

Rallies against the cuts also are scheduled next Monday in Springfield and Chicago. Ford said if the centers don’t know by mid-September whether the grant will be restored, more layoffs are expected.

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.

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.

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

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.

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.

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.

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.

The puzzle falls apart

By Bethany Jaeger, Jamey Dunn and Hilary Russell
Renewed hope and high spirits defined the transition from impeached Gov. Rod Blagojevich to Gov. Pat Quinn early this year, but frustration and gridlock have stained the end of the fiscal year.

Today marked the last day of fiscal year 2009. After a string of strange events, the legislature left town with no date certain to return. And Quinn would not specify how he would proceed, whether by calling special sessions or by holding more meetings with the top four legislative leaders behind closed doors. Nor would he address whether he would allow the state to shut down if a budget weren’t in place by the time the state ran out of money to pay its bills. According to the comptroller’s office, July 15 is a key date for the first wave of state payroll in the new fiscal year. But a spending plan would need to be in place by about July 9 or 10 to have enough time to process expenditures.

The legislature’s day started with a protest of sorts in an attempt to block House members from entering the chamber. Statehouse police removed eight individuals from the Service Employees International Union as they rallied outside the chamber and chanted, “Raise taxes now.”

Despite the governor’s wishes, the legislature didn’t even consider raising taxes today. Lawmakers, instead, sent him pieces of what Quinn dubs a “half-baked budget” that would mean drastic cuts to human services and, in some cases, has already resulted in layoffs and program cuts within community-based services. Quinn said he would veto the spending plan.

“We must not put off decisions for later in the summer or the fall or next winter," he said during a last-minute budget address before both chambers. "That’s not what adults do. They confront tough challenges. They meet those challenges with the best that they come up on behalf of the common good.”

And he gained one more reason to veto the so-called 50 percent budget late in the day. It would carry an even larger deficit than anticipated because the legislature failed to approve a short-term borrowing scheme to free up $2.2 billion. Senate Bill 415 actually failed twice tonight.

“Now you’re another $2.2 billion out of whack,” said Rep. Frank Mautino, assistant majority leader from Spring Valley. He added that the legislature has approved the governor’s authority to spend about $26 billion, but lawmakers didn’t approve enough revenue to pay for it. The result? In addition to giving Quinn more reason to use his veto pen, Mautino added that any momentum to override the governor’s veto deflated along with the Senate’s failure to approve the short-term borrowing (background here).

Sen. Jeff Schoenberg, sponsor of the borrowing plan, said not fully paying the state's $4 billion contribution into the public employee pension system will cost the state more than if the state borrowed money to make this year's payment.

And in a strange turn of events, Schoenberg confirmed that the governor’s office had called some senators to urge them not to vote for the bill, which the governor had proposed and supported earlier in the day. Schoenberg said members were told the borrowing plan would take pressure off of the legislature to act on more substantial revenue sources, such as an income tax increase.

Sen. Emil Jones III, son of the former Senate president of the same name, was one who changed his vote from a yes to a no. He said he ultimately voted against the borrowing plan to show support for a tax increase and to reject a piecemeal solution to the deficit.

Without the borrowing, Senate President John Cullerton said the spending plan sent to the governor’s desk would carry a $6.2 billion shortfall. Quinn maintains that the deficit is closer to $9.2 billion.

The disagreement is just one sign of the tension between the legislative and executive branches in the past month. They can’t even agree on the size of the deficit, let alone the methods to fill that gap.

House Speaker Michael Madigan said the governor and the legislature had “legitimate differences of opinion” but that they will continue to work through the differences. In the meantime, he said the governor has now received a package of bills that would allow him to spend the amount of money they expect to be available in fiscal year 2010. “The governor’s complaint is that he wants more money to spend,” Madigan said. “The legislature has said, ‘We’re not going to give you authority to spend money when we don’t think that money will be available.’”

Sounding similar to what he said last year when the General Assembly sent an unbalanced budget to then-Gov. Blagojevich, Madigan added, “As is contemplated by the Constitution, the governor has the ability to spend money at his total discretion.”

During his rare address to both chambers, Quinn said, “I’m prepared to stay here all summer to get the job done.” One person in the chamber clapped.

Quinn said the legislature’s spending plan is unbalanced and invites lawsuits. In fact, he cited a court order issued today. According to the Associated Press, U.S. District Judge John Grady’s order requires the Illinois Department of Children and Family Services to maintain support as promised for such services as psychiatric treatment, counseling and daycare.

The governor repeatedly said an income tax increase is the only way the state would be able to provide critical services to the most needy citizens. And even with a tax increase, he announced today he would need to scale back spending by another $1 billion, which would be in addition to the $1 billion in cuts he announced in March. Those cuts, he said, could come in the form of a dozen furlough days for state workers and 2,200 layoffs, as well as possible closure of state facilities. Closing prisons or other facilities, however, wouldn’t result in immediate savings because the process requires an intentionally long review by a legislative panel and the public.

Majority Leader Barbara Flynn Currie said she agrees with the governor, but his words could be falling on deaf ears. "He’s laying down the gauntlet, and he’s absolutely right," she said. "But I don’t think he changed a single mind or a single vote."

Some Republicans, including two gubernatorial candidates, Sens. Bill Brady of Bloomington and Matt Murphy of Palatine, said tax increases during an economic recession would cost more jobs and encourage more people to leave the state. Murphy suggested starting all over again. Senate Minority Leader Christine Radogno proposed a temporary budget that would fund services at the levels of two years ago, which she said was the “closest thing we’ve had to a balanced budget in recent years.”

Cullerton was in favor of buying some time, he said, to allow Republicans to come around to supporting an income tax increase and to continue to pursue long-term pension and Medicaid reforms. And the governor could sign the capital construction program for roads, bridges, schools and other infrastructure.

The construction program, however, is still in the lurch. Quinn said again this morning that he’s still tying the capital bill to an operating budget, meaning he’s unlikely to sign the bills into law without a balanced budget in place. The construction program was approved by the legislature last month, but it finally sent the bills to the governor's desk last night.