By Caitlin Rydinsky
Another potential revenue source hit a wall at the Statehouse today as a House committee rejected a proposed tax on sugary drinks.
House Bill 0397 calls for a one-cent-per-ounce tax on sugary beverages. Sponsor Rep. Gabel, an Evanston Democrat, said the bill could potentially raise more than $600 million to ease the state’s loss in revenue from expiration of the temporary income tax. Supporters hoped that increased tax could also help to reverse obesity and health- related issues by prompting residents to drink fewer sugary beverages. The legislation called for the tax revenue to be used for physical and health education in schools and childcare centers, as well as walking paths and other community initiatives.
The bill failed by a wide margin in the committee, with only two of seven members voting in favor. Opponents argued that the tax would be hard on low- and mid-income families and would jeopardize jobs in the soft drink industry. Mark Denzler, chief executive officer of the Illinois Manufacturing Association, said, “You can’t raise the revenue without losing jobs.” The manufacturers and beverage industry raised concerns that a tax would impact stores and cause Illinoisans to go nearby states to avoid the cost. Denzler said, “If you raise the tax, and this is a tax increase by $2.88 on a case of soda, you will see consumers not necessarily changing their pattern of what they buy, but where they buy.”
Supporters said although the bill failed, they will continue efforts to pass such legislation. “Though we wish the outcome of the hearing had been different, we are glad this bill has started a public debate on the health impacts caused by sugary drinks. The fight will continue for a healthier Illinois,” said Elissa Bassler, executive director of the Illinois Alliance to Prevent Obesity, in a written statement. “The issues regarding obesity-related health impacts such as diabetes, heart disease and stroke are not going away, and we are committed to reversing the obesity epidemic in Illinois.”
Backers of the tax said that it would not limit consumers' ability to have a beverage they want, but it could encourage them to make healthier choices. They argued that while jobs might be lost in the soft drink industry, the legislation would promote growth in other sectors, such as health care and wellness.
“I understand the concerns of the tax applied, but I also really want to emphasize the cost and the pain that obesity and diabetes have caused in so many working families,” said Gabel. “Particularly low-income families who don’t have proper medical care and insurance. They end up losing their legs, and so, I think we have to weigh in on these things as well as the creation of jobs in other industries.”
Showing posts with label Revenue. Show all posts
Showing posts with label Revenue. Show all posts
Tuesday, May 27, 2014
Thursday, March 27, 2014
Madigan's millionaires tax has its political advantages
By Jamey Dunn
The House revenue and finance committee dove right into the topic of taxes this morning following Gov. Pat Quinn’s budget speech yesterday.
The committee today approved Speaker Michael Madigan’s proposal to tax millionaires at a higher rate to fund education and rejected a measure that would have allowed for a graduated income tax in the state. As protesters flowed into the capitol chanting, “We want a fair tax,” the House revenue and finance committee voted down a proposed constitutional amendment that would allow Illinois to have a graduated income tax. Currently, the state’s Constitution requires a flat income tax.
Committee members cited concerns that the proposed amendment does not include the progressive tax rates structure, but simply would change the Constitution to allow the legislature to approve a graduated tax. “I don’t believe its wise to put simple a strike through amendment on the ballot. I think the better approach is to enumerate what would be asked of the voters,” Riverside Democratic Rep. Michael Zalewski said before he voted against the amendment today.
Supporters of the plan say that it is best not to enshrine tax rates into the Constitution, because the threshold for changing the document is so high. “Actually embodying rates in the Constitution from just a good government and policy standpoint is very problematic because if you’ve got that rate wrong or you’d like a change, now you need a new constitutional amendment. It’s far better the have the rate structure be a creature of legislation so that you can adjust your tax policy over time,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability. Oak Park Democratic Sen. Don Harmon, sponsor of a Senate version of the graduated tax amendment, unveiled proposed rates earlier this week.
Martire said that the concept of taxing the wealthy at a higher rate, which is also at the core of Madigan’s proposal, is a good policy choice because most income growth is occurring amongst higher earners. However, he said that putting the specifics, such as the rate and the $1 million cut off, in the constitution does not allow for the flexibility that would be needed as the economy changes and inflation marches forward. For example, if in the future lawmaker decide that the rate is too high, or that $1 million is not what it used to be in terms of earnings, or that they want some of the money to go to health care instead of education, they will have to gain the support of three-fifths of both chambers and then wait for an election. They then would need to get the support of either three fifths of voters who vote on the question or the majority of voters participating in the election. If some of those details were determined by legislation instead, they could be changed by a simple vote in each chamber and the governor's signature.
Policy debates aside, Madigan’s proposal, which would impose a 3 percent surcharge on income offer $1 million, likely won out for a number of reasons. It would be a much easier vote than voting for the graduated income tax for lawmakers who have few millionaires in their area. Marion Democratic Rep. John Bradley, who is chairman of the committee, said as much before he voted in favor of the proposal. “This is an opportunity for a lot of areas of the state to actually do a lot better with minimal impact on my region.” There seems to be a perception among lawmakers that Madigan’s amendment is ready for primetime, while the graduated tax is not. “The speaker’s amendment is more show ready than this,” Zalewski during committee today. The graduated income tax proposal does not have the needed support to pass in the House. Still, Harmon said he has not given up hope on the graduated tax idea. He told supporters today “do not despair,” and said that the fight has just begun.
Conservative groups and business organizations are opposed to both. However, it does seem that the opposition has been hitting the graduated tax proposal much harder. National groups such as American’s for Prosperity and The Tax Foundation have joined the fray over the graduated tax plan. Of course, it has been around a lot longer so opposition has had more time to build and organize. Todd Maisch, the vice president of government affairs for the Illinois Chamber of Commerce, said at today’s hearing that the flat tax is a “key incentive” for businesses considering Illinois. And that the graduated tax comes from a “soak the rich mentality” that send a negative message to businesses and successful individuals. He also said Madigan’s plan would hit small businesses that file their taxes as individuals.” We think it’s just the wrong public policy to punish them with this surcharge.” If either of these plans is going to pass in the House, it would likely need the support of all Democratic members, something the graduated tax lacks. (For a comprehensive look at the graduated tax proposal and the arguments for and against it, see Illinois Issues January 2014. )
Madigan’s plan would probably be easier for voters to understand if it makes it to the general election ballot. It would also likely be very popular with anyone who is not bringing in $1 million (or close to it) annually because they would not be affected. It could also be useful as campaign ammunition that Quinn could against his opponent, multimillionaire Republican Bruce Rauner, who opposes the plan. The proposal would not conflict with Quinn proposal to make the temporary income tax increase permanent and give homeowners a $500 refund to defer property tax costs. Quinn is also asking to double the Earned Income Tax Credit for low-income workers from 10 to 20 percent. If this proposal and Madigan’s end up working in concert, it would be a rudimentary version of a graduated plan because lower earners would have more of their tax burden deferred and higher earners would pay more. It might have less nuance and flexibility than a graduated tax plan, but it would also be free of the political baggage of claims that it would hurt the middle class (depending on where you think the cut off is for the middle class).
Martire says that, while he thinks the graduated tax amendment if better policy, the politics of the situation cannot be put aside. “Any legislation or constitutional amendment that moves through a very political process has to take political concerns into account or it wouldn’t be a very sophisticated approach to changing policy,” he said after the hearing. “Illinois is at least moving towards a fairer tax structure and moving toward amending its Constitution to permit a fairer tax structure. Now the questions is whether or not that amendment is going to be the best one that we could have.”
The House revenue and finance committee dove right into the topic of taxes this morning following Gov. Pat Quinn’s budget speech yesterday.
The committee today approved Speaker Michael Madigan’s proposal to tax millionaires at a higher rate to fund education and rejected a measure that would have allowed for a graduated income tax in the state. As protesters flowed into the capitol chanting, “We want a fair tax,” the House revenue and finance committee voted down a proposed constitutional amendment that would allow Illinois to have a graduated income tax. Currently, the state’s Constitution requires a flat income tax.
Committee members cited concerns that the proposed amendment does not include the progressive tax rates structure, but simply would change the Constitution to allow the legislature to approve a graduated tax. “I don’t believe its wise to put simple a strike through amendment on the ballot. I think the better approach is to enumerate what would be asked of the voters,” Riverside Democratic Rep. Michael Zalewski said before he voted against the amendment today.
Supporters of the plan say that it is best not to enshrine tax rates into the Constitution, because the threshold for changing the document is so high. “Actually embodying rates in the Constitution from just a good government and policy standpoint is very problematic because if you’ve got that rate wrong or you’d like a change, now you need a new constitutional amendment. It’s far better the have the rate structure be a creature of legislation so that you can adjust your tax policy over time,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability. Oak Park Democratic Sen. Don Harmon, sponsor of a Senate version of the graduated tax amendment, unveiled proposed rates earlier this week.
Martire said that the concept of taxing the wealthy at a higher rate, which is also at the core of Madigan’s proposal, is a good policy choice because most income growth is occurring amongst higher earners. However, he said that putting the specifics, such as the rate and the $1 million cut off, in the constitution does not allow for the flexibility that would be needed as the economy changes and inflation marches forward. For example, if in the future lawmaker decide that the rate is too high, or that $1 million is not what it used to be in terms of earnings, or that they want some of the money to go to health care instead of education, they will have to gain the support of three-fifths of both chambers and then wait for an election. They then would need to get the support of either three fifths of voters who vote on the question or the majority of voters participating in the election. If some of those details were determined by legislation instead, they could be changed by a simple vote in each chamber and the governor's signature.
Policy debates aside, Madigan’s proposal, which would impose a 3 percent surcharge on income offer $1 million, likely won out for a number of reasons. It would be a much easier vote than voting for the graduated income tax for lawmakers who have few millionaires in their area. Marion Democratic Rep. John Bradley, who is chairman of the committee, said as much before he voted in favor of the proposal. “This is an opportunity for a lot of areas of the state to actually do a lot better with minimal impact on my region.” There seems to be a perception among lawmakers that Madigan’s amendment is ready for primetime, while the graduated tax is not. “The speaker’s amendment is more show ready than this,” Zalewski during committee today. The graduated income tax proposal does not have the needed support to pass in the House. Still, Harmon said he has not given up hope on the graduated tax idea. He told supporters today “do not despair,” and said that the fight has just begun.
Conservative groups and business organizations are opposed to both. However, it does seem that the opposition has been hitting the graduated tax proposal much harder. National groups such as American’s for Prosperity and The Tax Foundation have joined the fray over the graduated tax plan. Of course, it has been around a lot longer so opposition has had more time to build and organize. Todd Maisch, the vice president of government affairs for the Illinois Chamber of Commerce, said at today’s hearing that the flat tax is a “key incentive” for businesses considering Illinois. And that the graduated tax comes from a “soak the rich mentality” that send a negative message to businesses and successful individuals. He also said Madigan’s plan would hit small businesses that file their taxes as individuals.” We think it’s just the wrong public policy to punish them with this surcharge.” If either of these plans is going to pass in the House, it would likely need the support of all Democratic members, something the graduated tax lacks. (For a comprehensive look at the graduated tax proposal and the arguments for and against it, see Illinois Issues January 2014. )
Madigan’s plan would probably be easier for voters to understand if it makes it to the general election ballot. It would also likely be very popular with anyone who is not bringing in $1 million (or close to it) annually because they would not be affected. It could also be useful as campaign ammunition that Quinn could against his opponent, multimillionaire Republican Bruce Rauner, who opposes the plan. The proposal would not conflict with Quinn proposal to make the temporary income tax increase permanent and give homeowners a $500 refund to defer property tax costs. Quinn is also asking to double the Earned Income Tax Credit for low-income workers from 10 to 20 percent. If this proposal and Madigan’s end up working in concert, it would be a rudimentary version of a graduated plan because lower earners would have more of their tax burden deferred and higher earners would pay more. It might have less nuance and flexibility than a graduated tax plan, but it would also be free of the political baggage of claims that it would hurt the middle class (depending on where you think the cut off is for the middle class).
Martire says that, while he thinks the graduated tax amendment if better policy, the politics of the situation cannot be put aside. “Any legislation or constitutional amendment that moves through a very political process has to take political concerns into account or it wouldn’t be a very sophisticated approach to changing policy,” he said after the hearing. “Illinois is at least moving towards a fairer tax structure and moving toward amending its Constitution to permit a fairer tax structure. Now the questions is whether or not that amendment is going to be the best one that we could have.”
Friday, March 21, 2014
Democrats make the case for more revenue
By Jamey Dunn
Democrats on key budgeting committees are beginning to build the case for finding more revenue for the next fiscal year’s budget.
A Senate budgeting committee today called upon agency heads to present the potential impacts of a 20 percent cut. The results were dire. The State Board of Education said that if the cut, which would be $967 million, fell on general state aid it would result in the per-pupil foundation level being funded at 65 percent. Currently, Illinois is meeting 89 percent of its statutorily required per-pupil funding. State Superintendent Christopher Koch said that the number of schools on “financial watch” status would more than double. The number of districts that would be deficit spending would jump from 532 to 724 of the state's 860 districts. He estimated that up to 13,400 teachers could face layoff and many schools would have to eliminate all extracurricular activities. Koch said that the cut in funding could also result in a loss of almost $80 million in federal funds, including Title I and Title II funding, which is meant to assist at-risk students.
“We could eliminate our Early Childhood Block Grant and that would only get us about a third of the way to a $967 million reduction in state spending. It would also mean more than 90,00 children would no longer receive early childhood education,” said Koch.
As things stand now, the Illinois Department of Corrections officials said that without a funding increase, three facilities would need to be closed. If those closures happen, the department would have to find room for about 4,000 inmates in its overcrowded prisons or release them. An estimated 900 staff members would be laid off.
IDOC Director Tony Gondinez said that a 20 percent cut would mean that 11 corrections facilities would have to be closed, and 15,500 inmates would be released. He said that the current parole system, which has more than 27,000 parolees monitored by about 350 agents, would be hard-pressed to monitor those newly released offenders. Corrections officials said that those newly released offenders would be “virtually be unsupervised.” More than 3,000 DOC employees would be laid off without offers of transfer to new positions.
Under a 20 percent cut, the Department of Juvenile Justice would have to close two facilities and release 215 youth out of the 800 it has in custody. The department is currently hammering out the details of a court order to improve its education system, mental health care and the safety standards at its facilities. Experts that were called upon to report on these areas found that the department was in violation of state and federal laws. “One of the issues now is whether or not we can provide minimum services with the funding we had,” said acting Director Candice Jones. She said that the department would lose federal funding if it is unable to comply with required staffing ratios.
Illinois State Police Director Hiram Grau said that his agency would have to lay off 450 state troopers, which is 30 percent of the department’s officers. More than 100 cadets would be dismissed from the current class. ISP would have to close all of its forensic labs and layoff all 400 employees. More than 5,000 rape kits would not be processed. Local law enforcement would lose access to forensic analysis. Grau said that the cuts would require the department to respond to “only the most critical calls.” He said that the department is already having issues with response time. In 2013, the Chicago district had 6,399 calls for which it did not have a car immediately available for response.
Representatives from the Department of Human Services and the Department of Aging said they would have to cut back on services. In home care for the elderly and childcare for low-income families would be on the chopping block. Nursing home inspectors would be laid off. Welfare benefits would be reduced, and the state would have problems implementing the food stamps program. Illinois could lose up to $585 million in fund for the Temporary Assistance for Needy Families program. The state could also potentially loose hundreds of millions in federal matching funds.
The Department of Child and Family Services would eliminate services for 18 to 21 year olds. Acting Director Bobbie Gregg said that those youth would be less likely to finish high school and would no longer receive support from the department to attend college. She said of those in this age group who are cut off from services: “Many of them end up homeless. ... That’s the outcome that we would anticipate.”
Republican committee members derided the hearing, calling it a “dog and pony show” of “Chicken Little scenarios” that blow the state’s budget woes out of proportion. “This doom and gloom scenario that you have paraded everybody in here to provide is actually as far from the reality that we face in putting this budget together as could be,” Sen. Matt Murphy, a Republican from Palatine, said during the hearing. “And frankly, it’s a pretty cynical ploy because it is not reflective of the revenues that we’re going to have and doesn’t have to happen. And yet, you put all these people through this dog and pony show to make it look like this all has to happen to justify the tax increase.”
The Republicans likely are not wrong, at least in part. It does seem that the Democrats are building the case for some form of new revenue, which could potentially be the extension of the tax increase. The House is contemplating giving appropriation committees 14 percent less revenue to dole out in its budgeting process. Chicago Democratic Rep. Greg Harris, chairman of the House human services budgeting committee, said that the state faces “massive budget challenges” for Fiscal Year 2015 because the temporary income tax will begin to step down. In a post to his Facebook page, Harris made the case for more revenue. “We have undertaken major reforms of Medicaid, our state’s pension plans (no savings can be assumed from those changes until court challenges conclude), a plan to pay down our mountain of old bills and reducing expenses. Now is the time to maintain our revenues to protect core education, public safety and human services spending. I will support plans to maintain our revenues, close tax loopholes and shift the burden of taxes from those with the least means to those with the most ability to pay.”
The way a news release from Senate Democrats’ communications staff described the tax step down is telling. While Republicans say an extension of the current rates would be a tax increase, Democrats are beginning to call the automatic step down a tax cut. “Automatic tax break[s] that take effect next year will have a dramatically negative impact on State functions, according to testimony given to a Senate budget panel today,” said the news release.
But with about $1.5 billion in revenue disappearing along with the step down and growing costs associated with statutory obligations, such as Medicaid, which could be more than $1.5 billion, the Senate Republicans’ claims that things aren’t as bad as they seem, ring hollow.
Nonpartisan group The Civic Federation called for a one-year extension of the tax rates and then a gradual step down to avoid unmanaged cuts to the state budget and enable the state to pay off its old bills. This is the same organization that has for years been hammering home the need for changes to the state’s pensions systems.
Murphy and others have taken issue with the projected revenue number approved by the House and Senate because it allows for $400 million in transfers out to education and medical funds. While that money, and other statutory transfers out could, and maybe should, be reassessed, $400 million in revenue is not going to keep the FY 15 budget afloat without some deep cuts and changes to current law. Gov. Pat Quinn is scheduled to present his budget next week. He is required to present a budget based on current revenue and law. While the sky may not be falling in Illinois, the situation is looking precarious at this point.
Democrats on key budgeting committees are beginning to build the case for finding more revenue for the next fiscal year’s budget.
A Senate budgeting committee today called upon agency heads to present the potential impacts of a 20 percent cut. The results were dire. The State Board of Education said that if the cut, which would be $967 million, fell on general state aid it would result in the per-pupil foundation level being funded at 65 percent. Currently, Illinois is meeting 89 percent of its statutorily required per-pupil funding. State Superintendent Christopher Koch said that the number of schools on “financial watch” status would more than double. The number of districts that would be deficit spending would jump from 532 to 724 of the state's 860 districts. He estimated that up to 13,400 teachers could face layoff and many schools would have to eliminate all extracurricular activities. Koch said that the cut in funding could also result in a loss of almost $80 million in federal funds, including Title I and Title II funding, which is meant to assist at-risk students.
“We could eliminate our Early Childhood Block Grant and that would only get us about a third of the way to a $967 million reduction in state spending. It would also mean more than 90,00 children would no longer receive early childhood education,” said Koch.
As things stand now, the Illinois Department of Corrections officials said that without a funding increase, three facilities would need to be closed. If those closures happen, the department would have to find room for about 4,000 inmates in its overcrowded prisons or release them. An estimated 900 staff members would be laid off.
IDOC Director Tony Gondinez said that a 20 percent cut would mean that 11 corrections facilities would have to be closed, and 15,500 inmates would be released. He said that the current parole system, which has more than 27,000 parolees monitored by about 350 agents, would be hard-pressed to monitor those newly released offenders. Corrections officials said that those newly released offenders would be “virtually be unsupervised.” More than 3,000 DOC employees would be laid off without offers of transfer to new positions.
Under a 20 percent cut, the Department of Juvenile Justice would have to close two facilities and release 215 youth out of the 800 it has in custody. The department is currently hammering out the details of a court order to improve its education system, mental health care and the safety standards at its facilities. Experts that were called upon to report on these areas found that the department was in violation of state and federal laws. “One of the issues now is whether or not we can provide minimum services with the funding we had,” said acting Director Candice Jones. She said that the department would lose federal funding if it is unable to comply with required staffing ratios.
Illinois State Police Director Hiram Grau said that his agency would have to lay off 450 state troopers, which is 30 percent of the department’s officers. More than 100 cadets would be dismissed from the current class. ISP would have to close all of its forensic labs and layoff all 400 employees. More than 5,000 rape kits would not be processed. Local law enforcement would lose access to forensic analysis. Grau said that the cuts would require the department to respond to “only the most critical calls.” He said that the department is already having issues with response time. In 2013, the Chicago district had 6,399 calls for which it did not have a car immediately available for response.
Representatives from the Department of Human Services and the Department of Aging said they would have to cut back on services. In home care for the elderly and childcare for low-income families would be on the chopping block. Nursing home inspectors would be laid off. Welfare benefits would be reduced, and the state would have problems implementing the food stamps program. Illinois could lose up to $585 million in fund for the Temporary Assistance for Needy Families program. The state could also potentially loose hundreds of millions in federal matching funds.
The Department of Child and Family Services would eliminate services for 18 to 21 year olds. Acting Director Bobbie Gregg said that those youth would be less likely to finish high school and would no longer receive support from the department to attend college. She said of those in this age group who are cut off from services: “Many of them end up homeless. ... That’s the outcome that we would anticipate.”
Republican committee members derided the hearing, calling it a “dog and pony show” of “Chicken Little scenarios” that blow the state’s budget woes out of proportion. “This doom and gloom scenario that you have paraded everybody in here to provide is actually as far from the reality that we face in putting this budget together as could be,” Sen. Matt Murphy, a Republican from Palatine, said during the hearing. “And frankly, it’s a pretty cynical ploy because it is not reflective of the revenues that we’re going to have and doesn’t have to happen. And yet, you put all these people through this dog and pony show to make it look like this all has to happen to justify the tax increase.”
The Republicans likely are not wrong, at least in part. It does seem that the Democrats are building the case for some form of new revenue, which could potentially be the extension of the tax increase. The House is contemplating giving appropriation committees 14 percent less revenue to dole out in its budgeting process. Chicago Democratic Rep. Greg Harris, chairman of the House human services budgeting committee, said that the state faces “massive budget challenges” for Fiscal Year 2015 because the temporary income tax will begin to step down. In a post to his Facebook page, Harris made the case for more revenue. “We have undertaken major reforms of Medicaid, our state’s pension plans (no savings can be assumed from those changes until court challenges conclude), a plan to pay down our mountain of old bills and reducing expenses. Now is the time to maintain our revenues to protect core education, public safety and human services spending. I will support plans to maintain our revenues, close tax loopholes and shift the burden of taxes from those with the least means to those with the most ability to pay.”
The way a news release from Senate Democrats’ communications staff described the tax step down is telling. While Republicans say an extension of the current rates would be a tax increase, Democrats are beginning to call the automatic step down a tax cut. “Automatic tax break[s] that take effect next year will have a dramatically negative impact on State functions, according to testimony given to a Senate budget panel today,” said the news release.
But with about $1.5 billion in revenue disappearing along with the step down and growing costs associated with statutory obligations, such as Medicaid, which could be more than $1.5 billion, the Senate Republicans’ claims that things aren’t as bad as they seem, ring hollow.
Nonpartisan group The Civic Federation called for a one-year extension of the tax rates and then a gradual step down to avoid unmanaged cuts to the state budget and enable the state to pay off its old bills. This is the same organization that has for years been hammering home the need for changes to the state’s pensions systems.
Murphy and others have taken issue with the projected revenue number approved by the House and Senate because it allows for $400 million in transfers out to education and medical funds. While that money, and other statutory transfers out could, and maybe should, be reassessed, $400 million in revenue is not going to keep the FY 15 budget afloat without some deep cuts and changes to current law. Gov. Pat Quinn is scheduled to present his budget next week. He is required to present a budget based on current revenue and law. While the sky may not be falling in Illinois, the situation is looking precarious at this point.
Thursday, March 06, 2014
Senate approves revenue estimate
By Jamey Dunn
The Senate today approved a revenue estimate already passed by the House. According to the projection, the state will have about $1 billion less to spend in the next fiscal year.
The revenue projection of $34.495 billion is based on estimates from the bipartisan Commission on Government Forecasting and Accountability's (COGFA). Revenue will drop substantially from the current fiscal year because the state’s temporary income tax increase will begin to step down during the second half of Fiscal Year 2015.
Sen. Dan Kotowski, a Democrat from Park Ridge, said that the approval of a revenue estimate at the beginning of the spring session, something lawmakers have done the past few years, is an improvement on the budgeting process. “We’re identifying available revenue first,” and then deciding how to spend it, he said. “We used to do it based on what we were going to spend first.”
While the revenue estimate passed with strong bipartisan support in the House, Republicans in the Senate took issue with the numbers. They argued that the estimate sweeps about $400 million of general revenue into special funds, and therefore makes the loss of revenue for next fiscal year look even worse. Palatine Republican Sen. Mat Murphy said he suspects that Democrats may by trying to make the situation look worse “to try to justify continuing the tax increase.” He cautioned that whatever the revenue estimate is, lawmakers should not consider it all money that they can spend next fiscal year because the state still has billions of unpaid bills. Republican Sen. Kyle McCarter said, “This is creative accounting, and typically creative accountants would go the jail.”
Senate President John Cullerton noted that the use of special funds for budgeting is standard practice in Illinois and about half of the money in the budget is in such funds. “We’re not hiding it. It’s just not considered to be part of the General Revenue Fund,” he said. “It’s not a conspiracy.”
The estimate is not legally binding, but lawmakers have generally stuck to them since the process began the process in 2011. If that continues this year, expect cuts to spending in core areas of the state budget, such as education.
The Senate today approved a revenue estimate already passed by the House. According to the projection, the state will have about $1 billion less to spend in the next fiscal year.
The revenue projection of $34.495 billion is based on estimates from the bipartisan Commission on Government Forecasting and Accountability's (COGFA). Revenue will drop substantially from the current fiscal year because the state’s temporary income tax increase will begin to step down during the second half of Fiscal Year 2015.
Sen. Dan Kotowski, a Democrat from Park Ridge, said that the approval of a revenue estimate at the beginning of the spring session, something lawmakers have done the past few years, is an improvement on the budgeting process. “We’re identifying available revenue first,” and then deciding how to spend it, he said. “We used to do it based on what we were going to spend first.”
While the revenue estimate passed with strong bipartisan support in the House, Republicans in the Senate took issue with the numbers. They argued that the estimate sweeps about $400 million of general revenue into special funds, and therefore makes the loss of revenue for next fiscal year look even worse. Palatine Republican Sen. Mat Murphy said he suspects that Democrats may by trying to make the situation look worse “to try to justify continuing the tax increase.” He cautioned that whatever the revenue estimate is, lawmakers should not consider it all money that they can spend next fiscal year because the state still has billions of unpaid bills. Republican Sen. Kyle McCarter said, “This is creative accounting, and typically creative accountants would go the jail.”
Senate President John Cullerton noted that the use of special funds for budgeting is standard practice in Illinois and about half of the money in the budget is in such funds. “We’re not hiding it. It’s just not considered to be part of the General Revenue Fund,” he said. “It’s not a conspiracy.”
The estimate is not legally binding, but lawmakers have generally stuck to them since the process began the process in 2011. If that continues this year, expect cuts to spending in core areas of the state budget, such as education.
Tuesday, February 25, 2014
House approves revenue estimate
By Caitlin Rydinsky
A revenue projection passed unanimously today by the Illinois House anticipates a $1.5 billion revenue loss for state government next fiscal year.
The number approved by the House, $34.495 billion, is based on the Commission on Government Forecasting and Accountability's (COGFA) estimated state income for the coming year. Lawmakers will have less money to work with as they put together the Fiscal Year 2015 budget because the temporary income tax will begin to sunset during the second half of the fiscal year.
In recent years, lawmakers have generally stuck to the spending number approved by the House when creating the budget.
The Governor’s Budget Office projects a revenue amount that is larger than the House’s number by $705 million. However, legislators said they are encouraged that Gov. Pat Quinn’s number is close to theirs. “And I want to compliment the governor’s office because their numbers were very similar to the COGFA numbers this time, and I find that very heartening because a lot of other times, they have been very far apart,” said Democratic Rep. Jack Franks of Marengo.
Rep. Robert Prichard, a Republican from Hinckley, said, “Indeed they were very close, but I think what’s most important in this is that we are living within the laws that this body has set and that we are moving forward with a revenue number that is a realistic number.” Although the Republicans supported the projected revenue with the Democrats, they reminded Democrats that differences in opinions would arise once legislators begin debating spending decisions. “I just want to make this perfectly clear: We are supporting the revenue; it doesn’t mean that we are supporting the budget,” said House Minority Leader Jim Durkin of Western Springs. “We are ready to work with you for a responsible budget for the taxpayers of Illinois, with emphasis that we need to do a greater job at reducing the state debt than what we are doing.”
Rep. William Davis, a Democrat from Lewistown, hesitated in his decision to agree with the budget because of the possibility of more revenue coming to the state. Davis said money could come in as a result of recent talks about changing the way businesses are taxed. “I am concerned about this not being the complete revenue picture. It may be where we are right now,” Davis said. But he wants lawmakers to leave the door open to considering the potential for more revenue. Davis chairs the House K-12 budgeting committee and wants additional money to be spent on education — including general state aid to schools — which has been cut in previous years. Although the House passed its resolution and passed a joint resolution in the hopes that the Senate would also adopt its revenue projection, lawmakers are not legally bound to stick to the agreed amount.
A revenue projection passed unanimously today by the Illinois House anticipates a $1.5 billion revenue loss for state government next fiscal year.
The number approved by the House, $34.495 billion, is based on the Commission on Government Forecasting and Accountability's (COGFA) estimated state income for the coming year. Lawmakers will have less money to work with as they put together the Fiscal Year 2015 budget because the temporary income tax will begin to sunset during the second half of the fiscal year.
In recent years, lawmakers have generally stuck to the spending number approved by the House when creating the budget.
The Governor’s Budget Office projects a revenue amount that is larger than the House’s number by $705 million. However, legislators said they are encouraged that Gov. Pat Quinn’s number is close to theirs. “And I want to compliment the governor’s office because their numbers were very similar to the COGFA numbers this time, and I find that very heartening because a lot of other times, they have been very far apart,” said Democratic Rep. Jack Franks of Marengo.
Rep. Robert Prichard, a Republican from Hinckley, said, “Indeed they were very close, but I think what’s most important in this is that we are living within the laws that this body has set and that we are moving forward with a revenue number that is a realistic number.” Although the Republicans supported the projected revenue with the Democrats, they reminded Democrats that differences in opinions would arise once legislators begin debating spending decisions. “I just want to make this perfectly clear: We are supporting the revenue; it doesn’t mean that we are supporting the budget,” said House Minority Leader Jim Durkin of Western Springs. “We are ready to work with you for a responsible budget for the taxpayers of Illinois, with emphasis that we need to do a greater job at reducing the state debt than what we are doing.”
Rep. William Davis, a Democrat from Lewistown, hesitated in his decision to agree with the budget because of the possibility of more revenue coming to the state. Davis said money could come in as a result of recent talks about changing the way businesses are taxed. “I am concerned about this not being the complete revenue picture. It may be where we are right now,” Davis said. But he wants lawmakers to leave the door open to considering the potential for more revenue. Davis chairs the House K-12 budgeting committee and wants additional money to be spent on education — including general state aid to schools — which has been cut in previous years. Although the House passed its resolution and passed a joint resolution in the hopes that the Senate would also adopt its revenue projection, lawmakers are not legally bound to stick to the agreed amount.
Tuesday, February 18, 2014
Proposed education budget increase is unlikely at this point
By Jamey Dunn
The Illinois State Board of Education is asking for more than a $1 billion increase in its budget, but lawmakers indicated today that a large infusion of funding is unlikely.
In Fiscal Year 2015, ISBE is asking for $1.08 billion more than what was budgeted this fiscal year for K-12 education. The bulk of the increase, $879 million, would go to general state aid for schools. The amount would be needed to meet the foundation level, $6,119 per student. The foundation level is set in statute, but for the last three years, the state budget has failed to fully fund it. According to ISBE, education currently makes up about 27 of the state’s general spending. The board is asking lawmakers to dedicate 33 percent of Illinois’ budget to K-12 education.
So far, the budget outlook for the next fiscal year is not good. The temporary income tax is set to decrease, creating a hit of an estimated $1.6 billion in revenue. The employee pension payment, personnel costs and the state’s Medicaid liability are all expected to increase. Rep. William Davis, a Lewistown Democrat and chairman of the House committee hearing the budget proposals today, cautioned those presenting their budget plans, including ISBE, to be realistic. “Please, just keep in mind that this is going to be a difficult year for us. I think we all, if nothing else, can agree on that much,” he said. “Please, when you are making your presentations, please try to make them in the context of what we’re facing this particular year.”
But ISBE Chairman Gery Chico warned that if the Illinois does not invest in education now, it will hurt the state’s economy later. “if we don’t invest in our students today and produce an intelligent college- and career-ready class of graduates each year, Illinois' economic future is bleak. We know that if we don’t invest in our students' education, Massachusetts will, India will, or China will [invest in theirs]. Guess what follows investments in education — jobs.”
The board is also asking for increases in other areas, including $450 million in capital funding for technology upgrades for schools, $25 million for early childhood education and $12.3 million for bilingual education.
Hinckley Republican Rep. Robert Pritchard said ISBE officials should possibly take the fact that the foundation level has not been met the last three years as an indication that “looking at the funding level and how we’re seemingly never able to fund at the necessary level to do the objectives that we have, isn’t it time maybe to look at a new model for education?”
State Superintendent Christopher Koch said ISBE is willing to consider rolling back some mandates on schools, but he also said that some of those requirements are necessary. “While we know this is a big increase, allow me to put this a little bit into perspective,” he told the committee. “When adjusting the FY 09 K-12 budget for inflation, our request amounts to a 1.5 percent decrease from the adjusted FY 09 levels.”
The Illinois State Board of Education is asking for more than a $1 billion increase in its budget, but lawmakers indicated today that a large infusion of funding is unlikely.
In Fiscal Year 2015, ISBE is asking for $1.08 billion more than what was budgeted this fiscal year for K-12 education. The bulk of the increase, $879 million, would go to general state aid for schools. The amount would be needed to meet the foundation level, $6,119 per student. The foundation level is set in statute, but for the last three years, the state budget has failed to fully fund it. According to ISBE, education currently makes up about 27 of the state’s general spending. The board is asking lawmakers to dedicate 33 percent of Illinois’ budget to K-12 education.
So far, the budget outlook for the next fiscal year is not good. The temporary income tax is set to decrease, creating a hit of an estimated $1.6 billion in revenue. The employee pension payment, personnel costs and the state’s Medicaid liability are all expected to increase. Rep. William Davis, a Lewistown Democrat and chairman of the House committee hearing the budget proposals today, cautioned those presenting their budget plans, including ISBE, to be realistic. “Please, just keep in mind that this is going to be a difficult year for us. I think we all, if nothing else, can agree on that much,” he said. “Please, when you are making your presentations, please try to make them in the context of what we’re facing this particular year.”
But ISBE Chairman Gery Chico warned that if the Illinois does not invest in education now, it will hurt the state’s economy later. “if we don’t invest in our students today and produce an intelligent college- and career-ready class of graduates each year, Illinois' economic future is bleak. We know that if we don’t invest in our students' education, Massachusetts will, India will, or China will [invest in theirs]. Guess what follows investments in education — jobs.”
The board is also asking for increases in other areas, including $450 million in capital funding for technology upgrades for schools, $25 million for early childhood education and $12.3 million for bilingual education.
Hinckley Republican Rep. Robert Pritchard said ISBE officials should possibly take the fact that the foundation level has not been met the last three years as an indication that “looking at the funding level and how we’re seemingly never able to fund at the necessary level to do the objectives that we have, isn’t it time maybe to look at a new model for education?”
State Superintendent Christopher Koch said ISBE is willing to consider rolling back some mandates on schools, but he also said that some of those requirements are necessary. “While we know this is a big increase, allow me to put this a little bit into perspective,” he told the committee. “When adjusting the FY 09 K-12 budget for inflation, our request amounts to a 1.5 percent decrease from the adjusted FY 09 levels.”
Tuesday, March 05, 2013
House preempts Quinn and approves a spending cap the day before his budget speech
By Jamey Dunn
The Illinois House kicked off its budgeting process a day before Gov. Pat Quinn is scheduled to present his budget plan.
The House approved a spending cap of $35.08 billion today, preempting the estimate that will presumably be a part of Quinn’s plan. “It ... means that if the governor walks into this chamber tomorrow, walks up to that podium and proposed to spend more than $35.081 billion, then he puts himself at odds immediately with this chamber,” said Arlington Heights Rep. David Harris, the ranking Republican on the House Revenue and Finance Committee, which produced the estimate. Rep. John Bradley, who chairs the committee, said it moved ahead because Quinn’s budget office was “all over the place” with its revenue estimates. “If the House adopts this number today, the House will have already spoken,” he said before the floor vote.
The revenue estimates approved in the last two years have been the basis for the budgets that lawmakers ultimately sent to Quinn. Those estimates were approved, however, after Quinn presented his plan. “It’s the same process we’ve used for the last two years ... and it’s the first and most crucial step in beginning the budget process,” said Bradley, a Marion Democrat. The projection means lawmakers will have more to work with than last year, when the estimate was $33.7 billion. “The revenues are expected to be stronger this year than last year, and we have significant spending pressures that we’re going to have to deal with,” Bradley said. “I think we’re going to have close to $2 billion of additional pressures this year, and that’s not including whatever may or may not have happened with regards to the contract announcement.” He said that the committee was still working to estimate the cost of the new contract for state workers. The American Federation of State, County and Municipal Employees is in the process of ratifying the proposed three-year contract, which includes pay raises and requires employees to contribute more to their health care costs in retirement. He said the estimate also takes into account federal across-the-board budget cuts, known as the sequester, that went into effect on Friday.
The revenue committee’s estimate was created by the bipartisan legislative Commission on Government Forecasting and Accountability. “We drove down into the numbers of the COGFA report, and we determined that the COGFA numbers, unlike in previous years, we believed were accurate,” Bradley said. He said he thinks the estimate will be lower than Quinn’s projection. “I anticipate and I predict we’ll be below the governor’s number tomorrow.” Quinn’s office did not respond to questions about the House’s projection.
Harris said that several issues before the legislature could bring in more revenue next fiscal year. “There certainly are unknowns out there, and maybe those unknowns will be favorable. Depending on what we do with hydraulic fracturing and gaming and telecommunications, maybe the revenue will be higher.” But he cautioned his colleagues not to expect new spending. “While the number is big, I believe that it’s reasonable, but let’s not plan to go out and spend it right away. Because my friends, we can’t spend it on education, or health care, or assistance to the developmentally disabled, or roads or any other needed service because our pensions payment alone goes up by $1 billion. So unless we make reforms to the pension system, this $1 billion increase in revenue goes to one place, and that’s for pensions.”
The next step in the House budgeting process will be to take fixed costs, such as debt service and the pension payments, off of the top of the estimate and then dole out spending numbers to the various appropriations committees. Members of those committees then make spending decisions in their specific areas of state government, such as education. “This was the first step of a long journey we have ahead of us this year,” Bradley said.
The Illinois House kicked off its budgeting process a day before Gov. Pat Quinn is scheduled to present his budget plan.
The House approved a spending cap of $35.08 billion today, preempting the estimate that will presumably be a part of Quinn’s plan. “It ... means that if the governor walks into this chamber tomorrow, walks up to that podium and proposed to spend more than $35.081 billion, then he puts himself at odds immediately with this chamber,” said Arlington Heights Rep. David Harris, the ranking Republican on the House Revenue and Finance Committee, which produced the estimate. Rep. John Bradley, who chairs the committee, said it moved ahead because Quinn’s budget office was “all over the place” with its revenue estimates. “If the House adopts this number today, the House will have already spoken,” he said before the floor vote.
The revenue estimates approved in the last two years have been the basis for the budgets that lawmakers ultimately sent to Quinn. Those estimates were approved, however, after Quinn presented his plan. “It’s the same process we’ve used for the last two years ... and it’s the first and most crucial step in beginning the budget process,” said Bradley, a Marion Democrat. The projection means lawmakers will have more to work with than last year, when the estimate was $33.7 billion. “The revenues are expected to be stronger this year than last year, and we have significant spending pressures that we’re going to have to deal with,” Bradley said. “I think we’re going to have close to $2 billion of additional pressures this year, and that’s not including whatever may or may not have happened with regards to the contract announcement.” He said that the committee was still working to estimate the cost of the new contract for state workers. The American Federation of State, County and Municipal Employees is in the process of ratifying the proposed three-year contract, which includes pay raises and requires employees to contribute more to their health care costs in retirement. He said the estimate also takes into account federal across-the-board budget cuts, known as the sequester, that went into effect on Friday.
The revenue committee’s estimate was created by the bipartisan legislative Commission on Government Forecasting and Accountability. “We drove down into the numbers of the COGFA report, and we determined that the COGFA numbers, unlike in previous years, we believed were accurate,” Bradley said. He said he thinks the estimate will be lower than Quinn’s projection. “I anticipate and I predict we’ll be below the governor’s number tomorrow.” Quinn’s office did not respond to questions about the House’s projection.
Harris said that several issues before the legislature could bring in more revenue next fiscal year. “There certainly are unknowns out there, and maybe those unknowns will be favorable. Depending on what we do with hydraulic fracturing and gaming and telecommunications, maybe the revenue will be higher.” But he cautioned his colleagues not to expect new spending. “While the number is big, I believe that it’s reasonable, but let’s not plan to go out and spend it right away. Because my friends, we can’t spend it on education, or health care, or assistance to the developmentally disabled, or roads or any other needed service because our pensions payment alone goes up by $1 billion. So unless we make reforms to the pension system, this $1 billion increase in revenue goes to one place, and that’s for pensions.”
The next step in the House budgeting process will be to take fixed costs, such as debt service and the pension payments, off of the top of the estimate and then dole out spending numbers to the various appropriations committees. Members of those committees then make spending decisions in their specific areas of state government, such as education. “This was the first step of a long journey we have ahead of us this year,” Bradley said.
Wednesday, October 24, 2012
New study drills down on state budget problems
By Jamey Dunn
A study released today takes a comprehensive look at Illinois’ fiscal situation and the events that led to the state’s current budget mess.
The study, which comes from the State Budget Crisis Task Force, is a follow-up to a report put out by the task force in July. The summer report focused on the budgets of California, Illinois, New Jersey, New York, Texas and Virginia. Richard Ravitch, the former lieutenant governor of New York, and Paul Volcker, the former chairman of the Federal Reserve, co-chair the task force, which seeks to parse state’s budget concerns in the wake of the national recession.
The report points to the usual suspects as cost drivers for the Illinois budget: growing pension and Medicaid costs. It also cites stagnant revenues, borrowing and shoddy accounting tactics as culprits in the state’s recent budget crisis. The report says that that tactic of selling bonds to cover pension costs — 2003, 2010 and 2011 — has been the primary contributor to Illinois having one of the highest debt rates per capita of any state.
The study says that the 2008 economic collapse was part of a perfect storm that sunk the state budget. Revenues tanked as demand for services spiked. “But unlike other states, Illinois was effectively insolvent. Illinois had no reserves and had used fiscal gimmicks and borrowing to balance the budget for the previous six or seven years.”
The authors attribute the problems leading up to 2008 to expansions of state programs and services without corresponding revenue increases under former Gov. Rod Blagojevich. The study said that the governor’s refusal to increase the state income tax and House Speaker Michael Madigan’s unwillingness to work with Blagojevich on alternative revenue sources left the state spending more than it could afford. “During Blagojevich’s two terms as governor, new programs were created and expanded, including health insurance coverage and preschool for Illinois children and free public transportation and prescription drugs for Illinois seniors. But with an existing structural deficit, and without new sources of revenue, the state did not have sufficient resources to meet all of its obligations,” the report said. “And while the recession took a toll on the state’s resources, Illinois’ government became essentially dysfunctional with the federal investigation of Governor Blagojevich and his removal from office.” The authors described the state’s budgeting tactics leading into the recession as such: “Illinois did all this without any sort of long-term financial plan to restore balance and without reserves. Illinois has been doing back flips on a high wire, without a net.”
Illinois economic growth has also stalled when compared with the rest of the country. “By FY 2010, Illinois’ total personal income fell 2 percent more and employment fell 1 percent more than in the U.S. as a whole. The impact of the recession on Illinois’ tax collections was much, much larger. In FY 2010, total state taxes in the U.S. were 93 percent of the amount in FY 2007, but Illinois’ tax revenues had fallen to 85 percent of the FY 2007 amount,” said the study. Illinois is recovering from the recession, but it is doing it more slowly than it recovered from the last three recessions.
The report notes that progress has been made to get the state back on secure footing. An income tax increase brought in new revenues, and lawmakers agreed on spending caps, cuts and sweeping Medicaid reforms. The authors note that such cuts are not painless and could have long-term effects on the state’s priorities, such as education and infrastructure. “There is, of course, nothing ‘encouraging’ about cuts in education, medical care and human services from the point of view of recipients or advocates. One of the most controversial budget appropriations was $6.5 billion for K-12 education, which was a cut of 3 percent from FY 2012,” said the study. Despite cuts and new revenues, the authors say the state cannot continue on its current budget trajectory. “Illinois’ budget is not fiscally sustainable. Despite recent progress and difficult choices, it is still in a deep hole. It cannot simultaneously continue current services, keep taxes at current levels, provide all promised [public employee] benefits, and make needed investments in education and infrastructure.”
Gov. Pat Quinn’s new budget spokesperson, Abdon Pallasch, echoed the idea that the current budget is unsustainable when he spoke to the Daily Herald’s editorial board yesterday. Quinn is pushing for concessions from the state’s largest public employee union and pension reform as at least a partial solution. “The alternative is we, you know, close a few prisons or universities, I guess,” Pallasch told the Daily Herald. “I’m not threatening to close prisons or universities,” he said. “I’m just saying, let your imagination run wild with what we’d have to do.” Officials with the American Federation for State County and Municipal Employees say Quinn and lawmakers should repeal tax breaks given to corporate interests, such as a recent tax deal given the Sears and the CME group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade.
The study also looked to potential future concerns for Illinois, including cuts to federal funding as deficit reduction efforts continue, the need to invest in infrastructure upgrades and the state’s aging residents. “Illinois’ demographics show an aging population with a trend toward fewer workers and more retirees, which will pose daunting fiscal challenges in the years ahead.”
A study released today takes a comprehensive look at Illinois’ fiscal situation and the events that led to the state’s current budget mess.
The study, which comes from the State Budget Crisis Task Force, is a follow-up to a report put out by the task force in July. The summer report focused on the budgets of California, Illinois, New Jersey, New York, Texas and Virginia. Richard Ravitch, the former lieutenant governor of New York, and Paul Volcker, the former chairman of the Federal Reserve, co-chair the task force, which seeks to parse state’s budget concerns in the wake of the national recession.
The report points to the usual suspects as cost drivers for the Illinois budget: growing pension and Medicaid costs. It also cites stagnant revenues, borrowing and shoddy accounting tactics as culprits in the state’s recent budget crisis. The report says that that tactic of selling bonds to cover pension costs — 2003, 2010 and 2011 — has been the primary contributor to Illinois having one of the highest debt rates per capita of any state.
The study says that the 2008 economic collapse was part of a perfect storm that sunk the state budget. Revenues tanked as demand for services spiked. “But unlike other states, Illinois was effectively insolvent. Illinois had no reserves and had used fiscal gimmicks and borrowing to balance the budget for the previous six or seven years.”
The authors attribute the problems leading up to 2008 to expansions of state programs and services without corresponding revenue increases under former Gov. Rod Blagojevich. The study said that the governor’s refusal to increase the state income tax and House Speaker Michael Madigan’s unwillingness to work with Blagojevich on alternative revenue sources left the state spending more than it could afford. “During Blagojevich’s two terms as governor, new programs were created and expanded, including health insurance coverage and preschool for Illinois children and free public transportation and prescription drugs for Illinois seniors. But with an existing structural deficit, and without new sources of revenue, the state did not have sufficient resources to meet all of its obligations,” the report said. “And while the recession took a toll on the state’s resources, Illinois’ government became essentially dysfunctional with the federal investigation of Governor Blagojevich and his removal from office.” The authors described the state’s budgeting tactics leading into the recession as such: “Illinois did all this without any sort of long-term financial plan to restore balance and without reserves. Illinois has been doing back flips on a high wire, without a net.”
Illinois economic growth has also stalled when compared with the rest of the country. “By FY 2010, Illinois’ total personal income fell 2 percent more and employment fell 1 percent more than in the U.S. as a whole. The impact of the recession on Illinois’ tax collections was much, much larger. In FY 2010, total state taxes in the U.S. were 93 percent of the amount in FY 2007, but Illinois’ tax revenues had fallen to 85 percent of the FY 2007 amount,” said the study. Illinois is recovering from the recession, but it is doing it more slowly than it recovered from the last three recessions.
The report notes that progress has been made to get the state back on secure footing. An income tax increase brought in new revenues, and lawmakers agreed on spending caps, cuts and sweeping Medicaid reforms. The authors note that such cuts are not painless and could have long-term effects on the state’s priorities, such as education and infrastructure. “There is, of course, nothing ‘encouraging’ about cuts in education, medical care and human services from the point of view of recipients or advocates. One of the most controversial budget appropriations was $6.5 billion for K-12 education, which was a cut of 3 percent from FY 2012,” said the study. Despite cuts and new revenues, the authors say the state cannot continue on its current budget trajectory. “Illinois’ budget is not fiscally sustainable. Despite recent progress and difficult choices, it is still in a deep hole. It cannot simultaneously continue current services, keep taxes at current levels, provide all promised [public employee] benefits, and make needed investments in education and infrastructure.”
Gov. Pat Quinn’s new budget spokesperson, Abdon Pallasch, echoed the idea that the current budget is unsustainable when he spoke to the Daily Herald’s editorial board yesterday. Quinn is pushing for concessions from the state’s largest public employee union and pension reform as at least a partial solution. “The alternative is we, you know, close a few prisons or universities, I guess,” Pallasch told the Daily Herald. “I’m not threatening to close prisons or universities,” he said. “I’m just saying, let your imagination run wild with what we’d have to do.” Officials with the American Federation for State County and Municipal Employees say Quinn and lawmakers should repeal tax breaks given to corporate interests, such as a recent tax deal given the Sears and the CME group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade.
The study also looked to potential future concerns for Illinois, including cuts to federal funding as deficit reduction efforts continue, the need to invest in infrastructure upgrades and the state’s aging residents. “Illinois’ demographics show an aging population with a trend toward fewer workers and more retirees, which will pose daunting fiscal challenges in the years ahead.”
Wednesday, March 07, 2012
Senate approves same revenue projection as House
The Illinois Senate today approved a revenue estimate that mirrors one the House approved last week.
Today’s action puts the General Assembly on course to cut from the governor’s proposed spending plan. Both chambers agreed to spend no more than $33.7 billion in Fiscal Year 2013, but Quinn’s budget is based on a $33.9 billion revenue projection.
Last year, the chambers did not agree on an estimate. Senate Democrats favored a revenue projection from the Commission on Government Forecasting and Accountability that was almost $1 billion more than the House’s number. But the House got a jump on the Senate and approved its budget first. In the end, it was the House’s budget that went to Quinn’s desk, although some new spending was tacked on in the legislature's fall veto session.
“Starting with the same number this year should definitely make it easier to reconcile our budget proposals in the end,” said Park Ridge Democratic Sen. Dan Kotowski, a chairman of one of the chamber's two budgeting committees.
The estimate was approved with overwhelming support. However, Senate Minority Leader Christine Radogno emphasized that Republicans agree with the $33.7 million figure as an estimate for how much money there will be next fiscal year but do not necessarily agree that all of it should be spent. She said cuts would be needed to allow the income tax increase implemented last year to begin to phase out on schedule in Fiscal Year 2015. “It’s hurting Illinois families, and the jobs climate,” Radogno said.
Quinn takes issue with the lower revenue estimate. “The governor's FY 2013 revenue projections utilized economic forecasts from nationally recognized forecasting firms, with final revenue estimates developed by state agencies using detailed historical tax collection data and employment records,” Kelly Kraft, a spokeswoman for Quinn’s budget office, said in a written statement. “A difference of more than $200 million will lead to even further reductions during a time when many legislators call for cuts, but when cuts are proposed they say, ‘Don't cut here.’”
Today’s action puts the General Assembly on course to cut from the governor’s proposed spending plan. Both chambers agreed to spend no more than $33.7 billion in Fiscal Year 2013, but Quinn’s budget is based on a $33.9 billion revenue projection.
Last year, the chambers did not agree on an estimate. Senate Democrats favored a revenue projection from the Commission on Government Forecasting and Accountability that was almost $1 billion more than the House’s number. But the House got a jump on the Senate and approved its budget first. In the end, it was the House’s budget that went to Quinn’s desk, although some new spending was tacked on in the legislature's fall veto session.
“Starting with the same number this year should definitely make it easier to reconcile our budget proposals in the end,” said Park Ridge Democratic Sen. Dan Kotowski, a chairman of one of the chamber's two budgeting committees.
The estimate was approved with overwhelming support. However, Senate Minority Leader Christine Radogno emphasized that Republicans agree with the $33.7 million figure as an estimate for how much money there will be next fiscal year but do not necessarily agree that all of it should be spent. She said cuts would be needed to allow the income tax increase implemented last year to begin to phase out on schedule in Fiscal Year 2015. “It’s hurting Illinois families, and the jobs climate,” Radogno said.
Quinn takes issue with the lower revenue estimate. “The governor's FY 2013 revenue projections utilized economic forecasts from nationally recognized forecasting firms, with final revenue estimates developed by state agencies using detailed historical tax collection data and employment records,” Kelly Kraft, a spokeswoman for Quinn’s budget office, said in a written statement. “A difference of more than $200 million will lead to even further reductions during a time when many legislators call for cuts, but when cuts are proposed they say, ‘Don't cut here.’”
Wednesday, February 15, 2012
Quinn's staff expects more revenue for upcoming budget
By Jamey Dunn
Gov. Pat Quinn’s budget team indicated today that he would likely have more money to work with in his upcoming budget than initially thought.
Budget Director David Vaught told a Senate budget committee in Chicago today that there would be “some revision” in the revenue estimate that was part of a three-year budget projection released in January. That document called for about $33.1 billion in total revenues. Vaught did not give specifics on how the numbers would change before Quinn's budget speech, which is scheduled to take place in a week, but he said revenues are “trending up.”
Vaught told the committee that Quinn does not intend to make the 9 percent cuts to all areas of spending that the January projection called for. Vaught said Quinn is not planning “across the board reductions of this size and scope in all areas.” But he added, “We will have them in some areas.” Quinn has said that he does not want to reduce spending on education and health care. Vaught reiterated Quinn’s desire to reform the Medicaid and pension systems this year, calling the growing costs of both “the squeeze” on other spending. Vaught said another goal for the year is to bring down the cost of health care to the state for retired public employees. He said a previous proposal to charge premiums to some retirees over a set income level would likely be up for consideration again. He also emphasized the need to address the backlog of bills but did not share details on what, if any, new ideas Quinn may present in his speech. Quinn has supported borrowing to pay down the backlog, but so far, that plan has found a chilly reception from many lawmakers.
Vaught added that Quinn plans to look at health care and human services as two separate areas of the budget this year because advocates complained that lumping them together led to human services being cut to keep up with growing Medicaid costs.
Steve Schnorf, a member of the Budgeting for Results Commission and a former director of the Bureau of the Budget under former Gov. George Ryan, warned against a repeat of the fight over revenue estimates that happened last spring as lawmakers started the budgeting process for the current fiscal year. The House created a smaller estimate that the Senate and Quinn disagreed with, but that was what the budget was ultimately based upon. “Starting with an agreed upon revenue number … creates buy-in from all the players,” Schnorf said. “I think that buy-in is important.”
Vaught said that the three-year projection created last year was done hastily and that his office was “a little uncertain” about the revenues that the then newly passed income tax increase would bring in. He said the estimate this year is much more certain.
Today’s hearing was held to discuss the implementation of a new budgeting system, which would focus on the desired goals of programs and allocate money based on the success of programs toward reaching those goals. The system, known as Budgeting for Results, was signed into law by Quinn last year shortly after he presented his budget plan. This will be the first budget proposed under the new law, which requires the governor to create his plan based only from existing revenue. That means that — unlike last year — Quinn cannot pitch new revenue sources and tie spending to them.
Schnorf said that plans like Budgeting for Results aren’t new. “Most administrations have an initiative of some sort like this,” he said. “You go back through the last 30 years of press clippings and you would find initiatives like this announced by administrations.” But Schnorf said he thinks Quinn and lawmakers are committed to make the program work, and he predicted it would not become “sizzle rather than steak.”
However, Schnorf warned lawmakers that if they focus only on tangible goals when making decisions and have an eye for programs that are measured as successful, they might not like the budgeting outcomes. He said that public schools, for example, may not rate as high performers and asked lawmakers: “Does that mean we should take the money away from them and invest the money somewhere else that has a better return on investment?"
He said that promoting successful programs during tight budget times would come at the cost of other programs that may not seem successful under Budgeting for Results measures but are nonetheless important to the state. “In a time of scarcity, the only way you can reward someone for performing well is by punishing someone else,” Schnorf said. “Every dollar you spend is a dollar you don’t have. You have to take it from somewhere else.”
Gov. Pat Quinn’s budget team indicated today that he would likely have more money to work with in his upcoming budget than initially thought.
Budget Director David Vaught told a Senate budget committee in Chicago today that there would be “some revision” in the revenue estimate that was part of a three-year budget projection released in January. That document called for about $33.1 billion in total revenues. Vaught did not give specifics on how the numbers would change before Quinn's budget speech, which is scheduled to take place in a week, but he said revenues are “trending up.”
Vaught told the committee that Quinn does not intend to make the 9 percent cuts to all areas of spending that the January projection called for. Vaught said Quinn is not planning “across the board reductions of this size and scope in all areas.” But he added, “We will have them in some areas.” Quinn has said that he does not want to reduce spending on education and health care. Vaught reiterated Quinn’s desire to reform the Medicaid and pension systems this year, calling the growing costs of both “the squeeze” on other spending. Vaught said another goal for the year is to bring down the cost of health care to the state for retired public employees. He said a previous proposal to charge premiums to some retirees over a set income level would likely be up for consideration again. He also emphasized the need to address the backlog of bills but did not share details on what, if any, new ideas Quinn may present in his speech. Quinn has supported borrowing to pay down the backlog, but so far, that plan has found a chilly reception from many lawmakers.
Vaught added that Quinn plans to look at health care and human services as two separate areas of the budget this year because advocates complained that lumping them together led to human services being cut to keep up with growing Medicaid costs.
Steve Schnorf, a member of the Budgeting for Results Commission and a former director of the Bureau of the Budget under former Gov. George Ryan, warned against a repeat of the fight over revenue estimates that happened last spring as lawmakers started the budgeting process for the current fiscal year. The House created a smaller estimate that the Senate and Quinn disagreed with, but that was what the budget was ultimately based upon. “Starting with an agreed upon revenue number … creates buy-in from all the players,” Schnorf said. “I think that buy-in is important.”
Vaught said that the three-year projection created last year was done hastily and that his office was “a little uncertain” about the revenues that the then newly passed income tax increase would bring in. He said the estimate this year is much more certain.
Today’s hearing was held to discuss the implementation of a new budgeting system, which would focus on the desired goals of programs and allocate money based on the success of programs toward reaching those goals. The system, known as Budgeting for Results, was signed into law by Quinn last year shortly after he presented his budget plan. This will be the first budget proposed under the new law, which requires the governor to create his plan based only from existing revenue. That means that — unlike last year — Quinn cannot pitch new revenue sources and tie spending to them.
Schnorf said that plans like Budgeting for Results aren’t new. “Most administrations have an initiative of some sort like this,” he said. “You go back through the last 30 years of press clippings and you would find initiatives like this announced by administrations.” But Schnorf said he thinks Quinn and lawmakers are committed to make the program work, and he predicted it would not become “sizzle rather than steak.”
However, Schnorf warned lawmakers that if they focus only on tangible goals when making decisions and have an eye for programs that are measured as successful, they might not like the budgeting outcomes. He said that public schools, for example, may not rate as high performers and asked lawmakers: “Does that mean we should take the money away from them and invest the money somewhere else that has a better return on investment?"
He said that promoting successful programs during tight budget times would come at the cost of other programs that may not seem successful under Budgeting for Results measures but are nonetheless important to the state. “In a time of scarcity, the only way you can reward someone for performing well is by punishing someone else,” Schnorf said. “Every dollar you spend is a dollar you don’t have. You have to take it from somewhere else.”
Friday, December 02, 2011
Advocates hope for federal Internet sales tax solution
By Jamey Dunn
Illinois retailers are renewing a push for a federal law that would require online vendors to collect taxes on their sales.
Illinois lawmakers passed a law earlier this year that requires online sellers to collect state taxes if they work with marketers located in the state. Amazon.com and Overstock.com severed ties with marketers Illinois, which led to a few of such businesses to leave the state. The U.S. Supreme Court ruled that states cannot require businesses to collect the tax unless they have a physical presence in the state.
While the Illinois law may have chased off some businesses, proponents say it helped to draw national attention to the issue. Illinois' law has begun to bring in some tax dollars. According to the Department of Revenue, dozens of Internet retailers have registered with the state. Sue Hofer, a spokesperson for the department, said it does not yet have figures on how much is being collected under the law. “We are making process. It’s not everyone, and it certainly isn’t several of the much larger ones," Hofer said.
Until recently, Amazon and other large online retailers either cut ties in states that tried require them to collect taxes or fought the issue in court. Amazon lost its legal battle in New York and currently collects taxes there. However, the company worked out a deal with California lawmakers that has led to Amazon actively lobbying for a law to address the issue nationally. If a national solution does not pass, Amazon has agreed to collect taxes in California next year.
U.S. Sen. Richard Durbin has backed a national solution for years, but retailers, both online and brick and mortar, say a new version of the Illinois Democrat's plan has a real shot at approval in Congress.
Bricks-and-mortar retailers maintain that not collecting the taxes gives online sellers an advantage because they can offer what seems to be a lower price. Illinois residents who buy goods from non-collecting Internet retailers still owe the tax and are required to declare their purchases on their income tax returns. This was the first year that the Illinois Department of Revenue included a line on tax returns specifically for online purchases. According to the department, residents declared their purchases on about 270,000 returns, bringing in an estimated $11 million in revenue for the state. Those advocating for Durbin’s plan say that is a fraction of the revenue that could come in if online retailers were required by Congress to collect the tax.
David Vite, president of the Retail Merchants Association, says expecting customers to keep track of their online purchases — as well as differentiate between a seller such as Target that does collect the sales tax because it has stores in the state and one such as Amazon that doesn’t — isn’t realistic, and the consequences for getting it wrong are too dire. “They are confronted with possible perjury charges. They are filing a false income tax return. That’s not fair to the customer. That’s not fair to the citizens,” he said.
The U.S. Supreme Court ruling that bars states from making out-of-state retailers collect taxes focused on mail order purchases and did not address online sales because it was made 1992, long before e-commerce was a consideration. The court did open the door in its opinions for Congress to revisit the topic. “The underlying issue is not only one that Congress may be better qualified to resolve but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions. … Accordingly, Congress is now free to decide whether, when, and to what extent the states may burden interstate mail order concerns with a duty to collect use taxes.”
A new plan, called the Marketplace Fairness Act in the U.S. Senate and the Marketplace Equity Act in the U.S. House, would allow states to require tax collection if they take steps to streamline taxes and make the process simpler for retailers, which would likely be collecting taxes across multiple states. Previous versions would have required states to sign onto a universal Streamlined Sales Tax Agreement.
Under the new proposal, states could sign onto the agreement or take less sweeping steps to simplify tax collection, such as agreeing to a universal classification of items for taxing purposes. Currently, a snack cake may be classified for taxing purposes as food in one state and candy in another, or a scarf might be clothing in one state and an accessory in another. These different classifications might also be taxed at different rates. The goal is to build a classification system that applies nationwide. “The Market Place Equity Act would be easier to comply with for the state of Illinois,” Vite said.
The act is currently held up in Congress over concerns about what size businesses it should apply to. Lawmakers are considering an exemption for small business. Talks on the exemption size range from businesses bringing in $500,000 each year to up to $1 million. Some retailers, such as eBay, say that a small business exemption in the law should be larger, potentially up to $30 million.
“The idea that small business retailers on the Internet are a threat to the survival of small business storefronts is ridiculous. The threat to small independent retailers is coming from giant multibillion-dollar competitors online and offline, which has been the case for nearly half a century,” Tod Cohen, vice president and deputy general counsel of government relations for eBay, told a U.S. House committee this week according to a written transcript. “You hear a lot about fairness in this debate. Some have claimed that a 'level playing field' means all retailers using the Internet should be held to the same remote sales tax standard. However, sameness is not fairness. Small businesses retailers face many competitive disadvantages when compared to larger retailers. They have proportionally higher costs of doing business, including providing employee benefits. And one must especially consider the costs of shipping when considering the playing field for small e-commerce businesses. Shipping prices, as with other costs, are directly related to sales volumes and how close the retailers [are] to the customer.”
But Amazon and others oppose such a large exemption. “Fairness among sellers should be created and maintained. Sellers should compete on a level playing field. Congress should not exempt too many sellers from collection, for these sellers will obtain a lasting unlevel playing field versus Main Street and other retailers. Congress should rectify the current imbalance and avoid a future imbalance,” Paul Misener, vice president for global public policy for Amazon.com, told the House committee this week, according to the written transcript. “With today’s computing and communications technology, widespread collection no longer would be an unconstitutional burden on interstate commerce, and Congress feasibly can authorize the states to require all but the very smallest volume sellers to collect.”
Vite said he doubts the commitment of retailers who want a high threshold for exemption. “I’m not sure they’re serious about getting anything done yet. Amazon is.” Vite and others are hopeful that a solution can be reached soon, whether it is the new plan, which has bipartisan support, or a version of Durbin’s previous proposals. “Whichever one passes, we’re happy with,” he said. “The Marketplace Equity Act is probably the [plan] that has the most likelihood of passing.”
For more on the effort to collect sales tax on online purchases, see Illinois Issues April 2011
Illinois retailers are renewing a push for a federal law that would require online vendors to collect taxes on their sales.
Illinois lawmakers passed a law earlier this year that requires online sellers to collect state taxes if they work with marketers located in the state. Amazon.com and Overstock.com severed ties with marketers Illinois, which led to a few of such businesses to leave the state. The U.S. Supreme Court ruled that states cannot require businesses to collect the tax unless they have a physical presence in the state.
While the Illinois law may have chased off some businesses, proponents say it helped to draw national attention to the issue. Illinois' law has begun to bring in some tax dollars. According to the Department of Revenue, dozens of Internet retailers have registered with the state. Sue Hofer, a spokesperson for the department, said it does not yet have figures on how much is being collected under the law. “We are making process. It’s not everyone, and it certainly isn’t several of the much larger ones," Hofer said.
Until recently, Amazon and other large online retailers either cut ties in states that tried require them to collect taxes or fought the issue in court. Amazon lost its legal battle in New York and currently collects taxes there. However, the company worked out a deal with California lawmakers that has led to Amazon actively lobbying for a law to address the issue nationally. If a national solution does not pass, Amazon has agreed to collect taxes in California next year.
U.S. Sen. Richard Durbin has backed a national solution for years, but retailers, both online and brick and mortar, say a new version of the Illinois Democrat's plan has a real shot at approval in Congress.
Bricks-and-mortar retailers maintain that not collecting the taxes gives online sellers an advantage because they can offer what seems to be a lower price. Illinois residents who buy goods from non-collecting Internet retailers still owe the tax and are required to declare their purchases on their income tax returns. This was the first year that the Illinois Department of Revenue included a line on tax returns specifically for online purchases. According to the department, residents declared their purchases on about 270,000 returns, bringing in an estimated $11 million in revenue for the state. Those advocating for Durbin’s plan say that is a fraction of the revenue that could come in if online retailers were required by Congress to collect the tax.
David Vite, president of the Retail Merchants Association, says expecting customers to keep track of their online purchases — as well as differentiate between a seller such as Target that does collect the sales tax because it has stores in the state and one such as Amazon that doesn’t — isn’t realistic, and the consequences for getting it wrong are too dire. “They are confronted with possible perjury charges. They are filing a false income tax return. That’s not fair to the customer. That’s not fair to the citizens,” he said.
The U.S. Supreme Court ruling that bars states from making out-of-state retailers collect taxes focused on mail order purchases and did not address online sales because it was made 1992, long before e-commerce was a consideration. The court did open the door in its opinions for Congress to revisit the topic. “The underlying issue is not only one that Congress may be better qualified to resolve but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions. … Accordingly, Congress is now free to decide whether, when, and to what extent the states may burden interstate mail order concerns with a duty to collect use taxes.”
A new plan, called the Marketplace Fairness Act in the U.S. Senate and the Marketplace Equity Act in the U.S. House, would allow states to require tax collection if they take steps to streamline taxes and make the process simpler for retailers, which would likely be collecting taxes across multiple states. Previous versions would have required states to sign onto a universal Streamlined Sales Tax Agreement.
Under the new proposal, states could sign onto the agreement or take less sweeping steps to simplify tax collection, such as agreeing to a universal classification of items for taxing purposes. Currently, a snack cake may be classified for taxing purposes as food in one state and candy in another, or a scarf might be clothing in one state and an accessory in another. These different classifications might also be taxed at different rates. The goal is to build a classification system that applies nationwide. “The Market Place Equity Act would be easier to comply with for the state of Illinois,” Vite said.
The act is currently held up in Congress over concerns about what size businesses it should apply to. Lawmakers are considering an exemption for small business. Talks on the exemption size range from businesses bringing in $500,000 each year to up to $1 million. Some retailers, such as eBay, say that a small business exemption in the law should be larger, potentially up to $30 million.
“The idea that small business retailers on the Internet are a threat to the survival of small business storefronts is ridiculous. The threat to small independent retailers is coming from giant multibillion-dollar competitors online and offline, which has been the case for nearly half a century,” Tod Cohen, vice president and deputy general counsel of government relations for eBay, told a U.S. House committee this week according to a written transcript. “You hear a lot about fairness in this debate. Some have claimed that a 'level playing field' means all retailers using the Internet should be held to the same remote sales tax standard. However, sameness is not fairness. Small businesses retailers face many competitive disadvantages when compared to larger retailers. They have proportionally higher costs of doing business, including providing employee benefits. And one must especially consider the costs of shipping when considering the playing field for small e-commerce businesses. Shipping prices, as with other costs, are directly related to sales volumes and how close the retailers [are] to the customer.”
But Amazon and others oppose such a large exemption. “Fairness among sellers should be created and maintained. Sellers should compete on a level playing field. Congress should not exempt too many sellers from collection, for these sellers will obtain a lasting unlevel playing field versus Main Street and other retailers. Congress should rectify the current imbalance and avoid a future imbalance,” Paul Misener, vice president for global public policy for Amazon.com, told the House committee this week, according to the written transcript. “With today’s computing and communications technology, widespread collection no longer would be an unconstitutional burden on interstate commerce, and Congress feasibly can authorize the states to require all but the very smallest volume sellers to collect.”
Vite said he doubts the commitment of retailers who want a high threshold for exemption. “I’m not sure they’re serious about getting anything done yet. Amazon is.” Vite and others are hopeful that a solution can be reached soon, whether it is the new plan, which has bipartisan support, or a version of Durbin’s previous proposals. “Whichever one passes, we’re happy with,” he said. “The Marketplace Equity Act is probably the [plan] that has the most likelihood of passing.”
For more on the effort to collect sales tax on online purchases, see Illinois Issues April 2011
Wednesday, April 27, 2011
Budget expert: Tax increase shouldn't phase out
By Jamey Dunn
Illinois' recent income tax increase cannot be temporary, as is currently written in the law, if the state wants to avoid deep cuts to social services, according to one budget expert.
“I think it’s disingenuous for [lawmakers] to have claimed that this is a four-year tax increase that is set to expire. They did the right thing by raising revenue. They did the wrong thing by making it temporary,” said Ralph Martire, director of the Center for Tax and Budget Accountability, a think tank focused on budget policy. “I think one of the most disingenuous pieces of public policy that has been perpetuated on voters and taxpayers for decades now is that they can have public services and never have to pay for them. At some point, you need adequate sustainable revenue raised in a responsible way.”
Martire joined several human services advocates today during a news conference to encourage lawmakers to make budget decisions that will not deeply cut their sector of state government. Their focus was on the differences between what each chamber estimates the state will have to spend for the next fiscal year. “The governor has proposed a budget for the coming fiscal year 2012 — $35.2 billion in spending — that’s short on revenue. But the big question is how short on revenue, because we have two different revenue estimates being utilized by the House and the Senate,” Martire said.
The House produced an estimate that is about $1 billion less than the Senate's prediction, which is based on numbers from the legislature’s bipartisan Commission on Government Forecasting and Accountability. Martire said COGFA has a solid history of accurate revenue projections, while he characterized the House’s estimate as part of a political deal between Democrats and Republicans aimed at cutting the budget. “This is Illinois. Any concern about being fiscally responsible is a good thing in this state. … The problem is, don’t let a political compromise stand in the way of reality. Especially when reality would mean significant cuts to your General [Revenue] Fund.”
Martire added, “$9 out of $10 in the General [Revenue] Fund go to just four things: education, health care, human services and public safety.”
House members and Senate Republicans, who also back the estimate, say that the state should be “conservative” when planning its spending in order to phase out the income tax increase as planned and get the state back in the black. House Speaker Michael Madigan said in March that if the legislative chambers cannot agree on some parts of the budget, House members and Senate Republicans might partner in a conference committee, which works to hash out the differences in bills passed by each chamber, to approve leaner spending that aligns with the House estimates.
Meanwhile, Senate President John Cullerton has called for about $1 billion in cuts from Gov. Pat Quinn’s proposed budget, a plan that human service providers said after the governor’s budget speech would decimate treatment for many Illinoisans with mental health or substance abuse issues. Senate Republicans say the state has to cut $5 billion from Quinn’s proposal to avoid a $22 billion deficit in five years.
While lawmakers cannot agree about how much the state needs to cut for next fiscal year, Comptroller Judy Baar Topinka said Illinois will likely end the current fiscal year this June with about $8 billion in “unaddressed obligations.”
"After years of hand-wringing about the state's finances and deficit spending, here we are looking to end yet another fiscal year in the red," Topinka said in a written statement. "The prescription for our financial recovery is simple: Stop spending more than we bring in. But sadly, that still has not occurred."
Topinka said the state will owe about $4.5 billion in late payments to schools, vendors and social service providers. An additional $1 billion in bills is expected to come in during the lapse period that the state uses to catch up on costs from the previous fiscal year, and the state will owe $1.2 billion for state employee health insurance and $850 million owed to corporations for their tax refunds. Both Madigan and House Minority Leader Tom Cross have said that any money that comes in beyond the House’s conservative revenue estimate would be spent paying off the state’s overdue obligations.
Martire pointed to other budget fixes, such as borrowing to pay off the bill backlog, that many lawmakers seem to have dismissed. “There are rational options available on the table to close this budget gap,” he said. Madigan said there is little enthusiasm in the House for Quinn’s $8.75 billion. However, Sen. John Sullivan, a Rushville Democrat, is toying with ways to bring down that number by targeting payments to certain areas or bringing the bill cycle down a one- or two-month time frame instead of paying everything off at once.
Martire also advocates that the state begin taxing some services because Illinois has shifted in recent years to a more service-based economy. A recent COGFA report estimates that such a tax could bring in $8.5 billion in revenue if business-to-business services were included and $4 billion if they were not.
As for the cuts that could result from lawmakers using a lower revenue estimate, human services providers said they would be devastating. They point to other cuts to social services in recent years and say the area has taken disproportionate pain when compared with other parts of state government. They say cuts to social services are more expensive in the long run because those looking for a safety net must turn to emergency rooms or possibly end up in costly prisons or institutions.
“There might not be someone to answer that 2 a.m. emergency call to the hospital for a rape victim. There might not be a 24-hour hotline. And this would impact rape victims across the state,” said Sean Black, a spokesperson for the Illinois Coalition Against Sexual Violence, which operates 33 rape crisis centers throughout the state. “When they call for help, there might not be the help. Or [they] might be on a waiting list that they would have to wait three, four, five, six weeks or months to get [help]. And the longer people wait for help, the more devastating the trauma is. And the more devastating not just for them but for those around them — their families, their communities, their workplaces their colleagues. The ripple effect is much more than just a single agency in a town. The ripple effect is the entire community.”
Illinois' recent income tax increase cannot be temporary, as is currently written in the law, if the state wants to avoid deep cuts to social services, according to one budget expert.
“I think it’s disingenuous for [lawmakers] to have claimed that this is a four-year tax increase that is set to expire. They did the right thing by raising revenue. They did the wrong thing by making it temporary,” said Ralph Martire, director of the Center for Tax and Budget Accountability, a think tank focused on budget policy. “I think one of the most disingenuous pieces of public policy that has been perpetuated on voters and taxpayers for decades now is that they can have public services and never have to pay for them. At some point, you need adequate sustainable revenue raised in a responsible way.”
Martire joined several human services advocates today during a news conference to encourage lawmakers to make budget decisions that will not deeply cut their sector of state government. Their focus was on the differences between what each chamber estimates the state will have to spend for the next fiscal year. “The governor has proposed a budget for the coming fiscal year 2012 — $35.2 billion in spending — that’s short on revenue. But the big question is how short on revenue, because we have two different revenue estimates being utilized by the House and the Senate,” Martire said.
The House produced an estimate that is about $1 billion less than the Senate's prediction, which is based on numbers from the legislature’s bipartisan Commission on Government Forecasting and Accountability. Martire said COGFA has a solid history of accurate revenue projections, while he characterized the House’s estimate as part of a political deal between Democrats and Republicans aimed at cutting the budget. “This is Illinois. Any concern about being fiscally responsible is a good thing in this state. … The problem is, don’t let a political compromise stand in the way of reality. Especially when reality would mean significant cuts to your General [Revenue] Fund.”
Martire added, “$9 out of $10 in the General [Revenue] Fund go to just four things: education, health care, human services and public safety.”
House members and Senate Republicans, who also back the estimate, say that the state should be “conservative” when planning its spending in order to phase out the income tax increase as planned and get the state back in the black. House Speaker Michael Madigan said in March that if the legislative chambers cannot agree on some parts of the budget, House members and Senate Republicans might partner in a conference committee, which works to hash out the differences in bills passed by each chamber, to approve leaner spending that aligns with the House estimates.
Meanwhile, Senate President John Cullerton has called for about $1 billion in cuts from Gov. Pat Quinn’s proposed budget, a plan that human service providers said after the governor’s budget speech would decimate treatment for many Illinoisans with mental health or substance abuse issues. Senate Republicans say the state has to cut $5 billion from Quinn’s proposal to avoid a $22 billion deficit in five years.
While lawmakers cannot agree about how much the state needs to cut for next fiscal year, Comptroller Judy Baar Topinka said Illinois will likely end the current fiscal year this June with about $8 billion in “unaddressed obligations.”
"After years of hand-wringing about the state's finances and deficit spending, here we are looking to end yet another fiscal year in the red," Topinka said in a written statement. "The prescription for our financial recovery is simple: Stop spending more than we bring in. But sadly, that still has not occurred."
Topinka said the state will owe about $4.5 billion in late payments to schools, vendors and social service providers. An additional $1 billion in bills is expected to come in during the lapse period that the state uses to catch up on costs from the previous fiscal year, and the state will owe $1.2 billion for state employee health insurance and $850 million owed to corporations for their tax refunds. Both Madigan and House Minority Leader Tom Cross have said that any money that comes in beyond the House’s conservative revenue estimate would be spent paying off the state’s overdue obligations.
Martire pointed to other budget fixes, such as borrowing to pay off the bill backlog, that many lawmakers seem to have dismissed. “There are rational options available on the table to close this budget gap,” he said. Madigan said there is little enthusiasm in the House for Quinn’s $8.75 billion. However, Sen. John Sullivan, a Rushville Democrat, is toying with ways to bring down that number by targeting payments to certain areas or bringing the bill cycle down a one- or two-month time frame instead of paying everything off at once.
Martire also advocates that the state begin taxing some services because Illinois has shifted in recent years to a more service-based economy. A recent COGFA report estimates that such a tax could bring in $8.5 billion in revenue if business-to-business services were included and $4 billion if they were not.
As for the cuts that could result from lawmakers using a lower revenue estimate, human services providers said they would be devastating. They point to other cuts to social services in recent years and say the area has taken disproportionate pain when compared with other parts of state government. They say cuts to social services are more expensive in the long run because those looking for a safety net must turn to emergency rooms or possibly end up in costly prisons or institutions.
“There might not be someone to answer that 2 a.m. emergency call to the hospital for a rape victim. There might not be a 24-hour hotline. And this would impact rape victims across the state,” said Sean Black, a spokesperson for the Illinois Coalition Against Sexual Violence, which operates 33 rape crisis centers throughout the state. “When they call for help, there might not be the help. Or [they] might be on a waiting list that they would have to wait three, four, five, six weeks or months to get [help]. And the longer people wait for help, the more devastating the trauma is. And the more devastating not just for them but for those around them — their families, their communities, their workplaces their colleagues. The ripple effect is much more than just a single agency in a town. The ripple effect is the entire community.”
Sunday, May 31, 2009
Down to the wire
By Jamey Dunn and Bethany Jaeger, with Hilary Russell contributing
Some of yesterday’s moving parts actually started revolving around each other late in the day Thursday. The Illinois Senate approved two major revenue enhancements, one a sizable tax hike and another a major gaming expansion. That immediately put the onus on the House, which was in the middle of trying to advance an “insurance budget” to fund agency programs at bare bones levels.
Income tax increases and education funding
The momentum started in the Senate. Democrats tweaked a bill that was intended to address education funding, which would include an income tax increase of 2 percentage points for individuals. It would increase from 3 percent to 5 percent. Different versions of the measure have long been presented by Sen. James Meeks, a Chicago Democrat, but never found the support to pass. However, a looming deadline and $7 billion budget deficit this fiscal year has created new possibilities for an old concept.
One difference this time around is that the plan would only raise the corporate income tax rate from 4.8 percent to 5 percent, a much smaller increase than previously sought. It also would expand the sales tax to include services.
Senate President John Cullerton said the tax restructuring would help solve some of the chronic budget woes, but the plan would still come up $2 billion short of what the state needs to fully fund pensions and to maintain current spending levels. A vote for the tax plan, he said, inherently would be a vote for $2 billion in budget cuts.
House Bill 174 (the "new 750"), would provide some targeted tax relief. It would raise the personal exemption and increase the earned income tax credit over two years to protect low-income residents. It also would provide property tax relief, which attracted Democratic Senators.
Over time, the tax plan would funnel more money into education and higher education, something Meeks wanted for years to address funding disparities between school districts throughout the state.
Republicans opposed the tax increase and sales tax expansion, describing it as a mistake during a recession. Sen. Matt Murphy, a Palatine Republican, said: “There’s a lot of different ways we can go at this if we go line-by-line through this budget, and I know because I’ve done it. This will cause more Illinoisans to lose their jobs, without a doubt.”
The bill passed with only Democratic votes. Sen. Dan Kotowski, a Park Ridge Democrat, gave an emotional speech about making his last-minute choice to vote for the bill. He said he had been praying about his decision and cast the vote that he knew would make his family proud. He said he had been telling leadership that he would vote “present,” but he changed his mind during floor debate. After the vote, Kotowski encouraged some House Republicans to follow suit.
Cullerton said that passing the bill in the Senate may help House Democrats feel safer about changing their minds. However, he said that the bill would need Republican support to pass. “When one chamber starts and passes a bill, they see that we’re still walking around — we’ve got a different version of what the governor has — that there’s a way to do this. So I think it’s a good start.”
But Gov. Pat Quinn is still backing the income tax proposal that has been introduced in the House. “I think the [temporary income tax] plan we have here in the House is probably the one we’ll have to go with. It’s straightforward. It’s pretty simple. It’s for two years. And the whole idea is for at least at this time to hold off dire catastrophes.”
Gaming
Momentum to consider alternative revenue sources continued with a Senate vote to expand gaming by adding four new facilities, including new gaming facilities in Chicago, Waukegan, Rockford and Danville. Existing gaming facilities, including horse tracks, also could start operating more slot machines. Senate Bill 744 would generate at least $150 million upon issuing the licenses, according to Sen. Terry Link, a Waukegan Democrat. Once the new facilities were up and running and the economy improved, he said the package could generate up to $1 billion a year.
Building new casinos and riverboats has been tried numerous times in the past few years, and similar proposals haven’t advanced in the House. But, Link said: “They need money and here’s a good way to give them money. So I think it's future is a lot better tonight.”
Rep. Bill Black, a Danville Republican who would receive a gaming facility in his district through Link’s bill, said the state may need an income tax increase. Then again, he said: “When you’re drowning and a life preserver floats by, your impulse is to grab it. When you have a community that’s so desperate for investment and jobs, you turn to things you normally wouldn’t even consider. I would support the riverboat. I don’t have the luxury to say I don’t.”
Bare bones budget
The so-called “insurance budget” advanced by House Democrats as a back-up plan would fund state agencies at about 80 percent of the level they were funded at last year, which would be about 50 percent of the governor’s proposed budget.
Majority Leader Barbara Flynn Currie tried early in the day to advance a temporary income tax increase. That wasn’t gaining enough votes. So late Saturday night, Currie tried to at least approve the “insurance budget” to keep the lights on, so to speak. Without it, agencies would be funded at 32 percent of Quinn’s proposed budget.
But after word spread that senators approved an income tax increase across the rotunda, several House Democrats started to peal off support for a bare bones budget. Rep. Sara Feigenholtz, a Chicago Democrat and vocal advocate of human services, urged fellow lawmakers to hold off on a bare bones budget to “continue to fight for more solutions.”
Currie said she would prefer either version of an income tax over a bare bones budget, but it was a way to ensure something landed on the governor’s desk just in case chaos ensued Sunday, the last day of the regularly scheduled session.
If all else fails, Currie said she would call the bare bones budget again before Sunday’s midnight deadline. Here’s what it would do:
On the revenue side:
Some of yesterday’s moving parts actually started revolving around each other late in the day Thursday. The Illinois Senate approved two major revenue enhancements, one a sizable tax hike and another a major gaming expansion. That immediately put the onus on the House, which was in the middle of trying to advance an “insurance budget” to fund agency programs at bare bones levels.
Income tax increases and education funding
The momentum started in the Senate. Democrats tweaked a bill that was intended to address education funding, which would include an income tax increase of 2 percentage points for individuals. It would increase from 3 percent to 5 percent. Different versions of the measure have long been presented by Sen. James Meeks, a Chicago Democrat, but never found the support to pass. However, a looming deadline and $7 billion budget deficit this fiscal year has created new possibilities for an old concept.
One difference this time around is that the plan would only raise the corporate income tax rate from 4.8 percent to 5 percent, a much smaller increase than previously sought. It also would expand the sales tax to include services.
Senate President John Cullerton said the tax restructuring would help solve some of the chronic budget woes, but the plan would still come up $2 billion short of what the state needs to fully fund pensions and to maintain current spending levels. A vote for the tax plan, he said, inherently would be a vote for $2 billion in budget cuts.
House Bill 174 (the "new 750"), would provide some targeted tax relief. It would raise the personal exemption and increase the earned income tax credit over two years to protect low-income residents. It also would provide property tax relief, which attracted Democratic Senators.
Over time, the tax plan would funnel more money into education and higher education, something Meeks wanted for years to address funding disparities between school districts throughout the state.
Republicans opposed the tax increase and sales tax expansion, describing it as a mistake during a recession. Sen. Matt Murphy, a Palatine Republican, said: “There’s a lot of different ways we can go at this if we go line-by-line through this budget, and I know because I’ve done it. This will cause more Illinoisans to lose their jobs, without a doubt.”
The bill passed with only Democratic votes. Sen. Dan Kotowski, a Park Ridge Democrat, gave an emotional speech about making his last-minute choice to vote for the bill. He said he had been praying about his decision and cast the vote that he knew would make his family proud. He said he had been telling leadership that he would vote “present,” but he changed his mind during floor debate. After the vote, Kotowski encouraged some House Republicans to follow suit.
Cullerton said that passing the bill in the Senate may help House Democrats feel safer about changing their minds. However, he said that the bill would need Republican support to pass. “When one chamber starts and passes a bill, they see that we’re still walking around — we’ve got a different version of what the governor has — that there’s a way to do this. So I think it’s a good start.”
But Gov. Pat Quinn is still backing the income tax proposal that has been introduced in the House. “I think the [temporary income tax] plan we have here in the House is probably the one we’ll have to go with. It’s straightforward. It’s pretty simple. It’s for two years. And the whole idea is for at least at this time to hold off dire catastrophes.”
Gaming
Momentum to consider alternative revenue sources continued with a Senate vote to expand gaming by adding four new facilities, including new gaming facilities in Chicago, Waukegan, Rockford and Danville. Existing gaming facilities, including horse tracks, also could start operating more slot machines. Senate Bill 744 would generate at least $150 million upon issuing the licenses, according to Sen. Terry Link, a Waukegan Democrat. Once the new facilities were up and running and the economy improved, he said the package could generate up to $1 billion a year.
Building new casinos and riverboats has been tried numerous times in the past few years, and similar proposals haven’t advanced in the House. But, Link said: “They need money and here’s a good way to give them money. So I think it's future is a lot better tonight.”
Rep. Bill Black, a Danville Republican who would receive a gaming facility in his district through Link’s bill, said the state may need an income tax increase. Then again, he said: “When you’re drowning and a life preserver floats by, your impulse is to grab it. When you have a community that’s so desperate for investment and jobs, you turn to things you normally wouldn’t even consider. I would support the riverboat. I don’t have the luxury to say I don’t.”
Bare bones budget
The so-called “insurance budget” advanced by House Democrats as a back-up plan would fund state agencies at about 80 percent of the level they were funded at last year, which would be about 50 percent of the governor’s proposed budget.
Majority Leader Barbara Flynn Currie tried early in the day to advance a temporary income tax increase. That wasn’t gaining enough votes. So late Saturday night, Currie tried to at least approve the “insurance budget” to keep the lights on, so to speak. Without it, agencies would be funded at 32 percent of Quinn’s proposed budget.
But after word spread that senators approved an income tax increase across the rotunda, several House Democrats started to peal off support for a bare bones budget. Rep. Sara Feigenholtz, a Chicago Democrat and vocal advocate of human services, urged fellow lawmakers to hold off on a bare bones budget to “continue to fight for more solutions.”
Currie said she would prefer either version of an income tax over a bare bones budget, but it was a way to ensure something landed on the governor’s desk just in case chaos ensued Sunday, the last day of the regularly scheduled session.
If all else fails, Currie said she would call the bare bones budget again before Sunday’s midnight deadline. Here’s what it would do:
On the revenue side:
- Sweep $356 million from dedicated funds four times throughout the year.
- Refinance debt to get a 4 percent interest rate and save $600 million next year, saving $237 million over the life of the bonds.
- Along with tapping into federal funds and starting other efficiencies, it would generate about $1 billion.
- State agencies could receive lump sums at half the funding level proposed by the governor.
- The administration would have to figure out how to spread the money around and to cut certain grant programs.
Friday, May 29, 2009
Too many moving parts
By Bethany Jaeger, with Jamey Dunn and Hilary Russell contributing
Plan A failed before it even got to the House floor for an official vote Friday.
Democrats said they don’t have enough support for a temporary income tax increase without Republican votes, so rank-and-file legislators were sent home early while leaders met to hammer out Plan B behind closed doors. Meanwhile, different plans to expand gaming and restructure state taxes to change the way the state funds education were floating around in the Senate. But that chamber went home early, too, leaving many legislators to see the May 31st adjournment date slipping away as no combination of revenue and spending options appear within reach.
House Democrats emerged from a closed-door meeting this afternoon with reports of competing priorities. Rep. Monique Davis of Chicago described it this way: “Some people want a tax increase. Other people don’t want a tax increase. Some people want a smaller tax increase. Others want it a little larger. Some don’t want to bypass the pension payment plan. Some people want to make the pension payment. So we’re absolutely all over the board.” She said House Speaker Michael Madigan is letting his members decide. “I think speaker’s doing what he does and that’s let everyone make up their own minds and their own decisions, but we’re going to have to realize what those decisions mean.”
House Minority Leader Tom Cross said Democrats don’t need GOP votes. They could do it on their own. “They’ve got 70 votes — 70 votes. Does anybody in this building think that if the speaker really wants to do this, he can’t do it? Everybody knows that if the speaker wants to get something done, he puts 60 votes on.”
Even if a majority of Democrats or Republicans agreed to raise the state income tax, the General Assembly would still have to cut spending, according to assistant Majority Leader Frank Mautino of Spring Valley.
But they can’t agree on where to scale back, either. That’s partially because Democrats say one of the only places left to cut is from the part of the budget that provides grants to community services, including everything from programs for AIDS patients to after-school clubs. But individual legislators don’t want to stop funding projects or programs in their districts.
“The state budget has become this mosaic of all these individual grant programs that even in times of crisis, we can’t move away from,” said Rep. Marlow Colvin, a Chicago Democrat, adding in frustration, “so it’s ridiculous.”
Mautino added: “There have been uncomfortable votes in the General Assembly, but never a hard vote. Any vote you make this year, someone gets hurt.”
House Democrats do agree that lawmakers can’t balance the state budget solely but cutting spending. “We don’t have enough money for a full year at the levels there at this year,” said spokesman Steve Brown.
Among the alternative plans being considered is minimizing the budget to reflect the level of revenue available. That would include approving lump sums of state funding to agencies, which would then have to decide how to spread the money around to keep the lights on and the doors open until the money ran out. It’s expected that they would have to return to the Capitol to ask for more money early next year.
“I see leaving Springfield with a budget that reflects exactly what we have and what we’re willing to vote for in revenue,” Mautino said, later adding, “We’re just all trying to find something that will keep services running and provide the least amount of pain possible because there’s going to be pain — no matter what we do.”
Across the rotunda, Sen. John Sullivan, a downstate Democrat, said as the day progressed, it appeared more likely that the legislature would resort to a budget based solely on revenues available. But he wasn’t happy about it. “If we go past the 31st without a full budget being passed, all we’ve done is put off the inevitable,” he said. “We’re going to have to come back at some time and face reality.”
Both chambers will resume business Saturday, potentially, with Plans B and beyond.
Plan A failed before it even got to the House floor for an official vote Friday.
Democrats said they don’t have enough support for a temporary income tax increase without Republican votes, so rank-and-file legislators were sent home early while leaders met to hammer out Plan B behind closed doors. Meanwhile, different plans to expand gaming and restructure state taxes to change the way the state funds education were floating around in the Senate. But that chamber went home early, too, leaving many legislators to see the May 31st adjournment date slipping away as no combination of revenue and spending options appear within reach.
House Democrats emerged from a closed-door meeting this afternoon with reports of competing priorities. Rep. Monique Davis of Chicago described it this way: “Some people want a tax increase. Other people don’t want a tax increase. Some people want a smaller tax increase. Others want it a little larger. Some don’t want to bypass the pension payment plan. Some people want to make the pension payment. So we’re absolutely all over the board.” She said House Speaker Michael Madigan is letting his members decide. “I think speaker’s doing what he does and that’s let everyone make up their own minds and their own decisions, but we’re going to have to realize what those decisions mean.”
House Minority Leader Tom Cross said Democrats don’t need GOP votes. They could do it on their own. “They’ve got 70 votes — 70 votes. Does anybody in this building think that if the speaker really wants to do this, he can’t do it? Everybody knows that if the speaker wants to get something done, he puts 60 votes on.”
Even if a majority of Democrats or Republicans agreed to raise the state income tax, the General Assembly would still have to cut spending, according to assistant Majority Leader Frank Mautino of Spring Valley.
But they can’t agree on where to scale back, either. That’s partially because Democrats say one of the only places left to cut is from the part of the budget that provides grants to community services, including everything from programs for AIDS patients to after-school clubs. But individual legislators don’t want to stop funding projects or programs in their districts.
“The state budget has become this mosaic of all these individual grant programs that even in times of crisis, we can’t move away from,” said Rep. Marlow Colvin, a Chicago Democrat, adding in frustration, “so it’s ridiculous.”
Mautino added: “There have been uncomfortable votes in the General Assembly, but never a hard vote. Any vote you make this year, someone gets hurt.”
House Democrats do agree that lawmakers can’t balance the state budget solely but cutting spending. “We don’t have enough money for a full year at the levels there at this year,” said spokesman Steve Brown.
Among the alternative plans being considered is minimizing the budget to reflect the level of revenue available. That would include approving lump sums of state funding to agencies, which would then have to decide how to spread the money around to keep the lights on and the doors open until the money ran out. It’s expected that they would have to return to the Capitol to ask for more money early next year.
“I see leaving Springfield with a budget that reflects exactly what we have and what we’re willing to vote for in revenue,” Mautino said, later adding, “We’re just all trying to find something that will keep services running and provide the least amount of pain possible because there’s going to be pain — no matter what we do.”
Across the rotunda, Sen. John Sullivan, a downstate Democrat, said as the day progressed, it appeared more likely that the legislature would resort to a budget based solely on revenues available. But he wasn’t happy about it. “If we go past the 31st without a full budget being passed, all we’ve done is put off the inevitable,” he said. “We’re going to have to come back at some time and face reality.”
Both chambers will resume business Saturday, potentially, with Plans B and beyond.
Tuesday, May 26, 2009
Prepare for revenue vs. spending showdown
By Bethany Jaeger
The General Assembly has five days until the constitutional deadline of May 31 to approve a state operating budget, and there are only three days until Senate President John Cullerton wanted to adjourn so everyone could go home by this weekend.
Things are still pretty fluid in the Capitol, with lots of options being discussed but few commitments being made to any of them.
“There’s Plan A, Plan B, Plan C, and, so far, we have not seen B nor C,” said Sen. Donne Trotter, budget negotiator for Senate Democrats.
Plan A includes funding basic portions of the budget to keep the lights on and to secure federal stimulus funds regardless of whether the legislature approves an income tax increase. And that plan, approved by the House last week, wouldn’t fulfill spending obligations for state programs and public employee pensions. House and Senate Democrats are circulating lists of programs that would not be funded under the core budget plan, forcing members to rank programs that could be cut or not.
Those lists are leading up to the plea for a state income tax increase, but for that to happen, Democrats need Republican support. Senate President John Cullerton said he doesn’t believe his caucus has 30 votes necessary to approve an income tax increase, leading him to turn to Republicans. The GOP, however, doesn’t want to approve an income tax increase unless the General Assembly first tries to trim spending and make existing programs more efficient, including instituting managed care policies and other Medicaid reforms.
Sen. Dale Righter, a deputy Republican leader from Mattoon, said, “To say that there isn’t any waste in state government is to say, ‘I agree with the last six years of Rod Blagojevich’s budgets,’ and I don’t think any of them want to say that.” He added that constituents want comprehensive reforms that affect every dollar the state spends, not just a percentage of it. He said enacting a half-year budget would unlikely include any reforms.
“Once you support that and put that into law, then you’ve locked that in place. And you’ve said, ‘OK, there’s nothing we can do about that spending.’ And I don’t think that’s the message we want to send.”
As Democrats and Republicans consider their options behind closed doors tonight, consider this breakdown of general revenue versus spending and the large gap between the two, according to Democrats.
Spending side
Revenue side
The General Assembly has five days until the constitutional deadline of May 31 to approve a state operating budget, and there are only three days until Senate President John Cullerton wanted to adjourn so everyone could go home by this weekend.
Things are still pretty fluid in the Capitol, with lots of options being discussed but few commitments being made to any of them.
“There’s Plan A, Plan B, Plan C, and, so far, we have not seen B nor C,” said Sen. Donne Trotter, budget negotiator for Senate Democrats.
Plan A includes funding basic portions of the budget to keep the lights on and to secure federal stimulus funds regardless of whether the legislature approves an income tax increase. And that plan, approved by the House last week, wouldn’t fulfill spending obligations for state programs and public employee pensions. House and Senate Democrats are circulating lists of programs that would not be funded under the core budget plan, forcing members to rank programs that could be cut or not.
Those lists are leading up to the plea for a state income tax increase, but for that to happen, Democrats need Republican support. Senate President John Cullerton said he doesn’t believe his caucus has 30 votes necessary to approve an income tax increase, leading him to turn to Republicans. The GOP, however, doesn’t want to approve an income tax increase unless the General Assembly first tries to trim spending and make existing programs more efficient, including instituting managed care policies and other Medicaid reforms.
Sen. Dale Righter, a deputy Republican leader from Mattoon, said, “To say that there isn’t any waste in state government is to say, ‘I agree with the last six years of Rod Blagojevich’s budgets,’ and I don’t think any of them want to say that.” He added that constituents want comprehensive reforms that affect every dollar the state spends, not just a percentage of it. He said enacting a half-year budget would unlikely include any reforms.
“Once you support that and put that into law, then you’ve locked that in place. And you’ve said, ‘OK, there’s nothing we can do about that spending.’ And I don’t think that’s the message we want to send.”
As Democrats and Republicans consider their options behind closed doors tonight, consider this breakdown of general revenue versus spending and the large gap between the two, according to Democrats.
Spending side
- Legislators are working with about $23.8 billion to dole out, including federal stimulus funds.
- The House last week approved $16.9 billion to keep the lights on and to secure federal stimulus funds, leaving about $6.9 billion to split among state programs.
Revenue side
- According to Senate Democrats, the state would need an additional $4 billion just to get to last year’s funding levels (a.k.a. a zero-based budget).
- And then it would need between $2 billion and $4 billion to pay the state’s full share into the public employee pension systems.
- That means, according to Trotter, that budget negotiators anticipate needing up to an additional $8 billion to get up to last year’s funding levels and to fully fund the pensions.
- Shorting the pension payments is always on the table. Making a minimal payment, however, would not pay down the compounding liabilities.
- So is approving a temporary budget that would distribute the money on hand but would not be enough to get through the year. Cullerton said he opposes the idea of a half-year budget.
- Gov. Pat Quinn also has proposed a two-tiered pension system so that newly hired teachers and state employees would earn less generous retirement benefits. While the administration suggests long-term savings would result, teachers’ unions strongly disagree and point to a report by the legislative Commission on Government Forecasting and Accountability.
Thursday, May 21, 2009
Capital plan passes both chambers
By Jamey Dunn and Hilary RussellPhotograph by Hilary Russell
Right: The Illinois House approved a revenue package by a vote of 86-30-1, with opposition mostly objecting to new gaming sources.
The House tonight approved a major capital construction program, wrapping up one of the three major issues that lawmakers seek to tackle before session adjourns at the end of the month. The next step for the bill is approval from Gov. Pat Quinn, but whether that will happen quickly and when projects would begin is still up in the air.
The $26 billion plan will be funded by tax, fee and fine increases. The state will contribute about $11.5 billion, which will leverage federal and local funds. An expansion of lottery ticket sales and legalizing video gaming in bars, restaurants and truck stops will generate revenue for the state’s contribution.
However, House Minority Leader Tom Cross said he does not know exactly when construction would start. “Maybe summer, early fall. But I think even if you don’t have specific shovels in the ground, you’ve got engineers and architects putting plans together,” he said after the program won House approval. “We’ve got some good movement in that mini-capital plan, so there’s some activity out there. Would we all love to see it all tomorrow? Yeah, but it’s not going to happen.”
Some of the proposed revenue sources would not immediately bring in money. Video gaming would require implementing a complicated oversight process. Many establishments already have video poker machines, and some illegally pay out to winners. If the legislation becomes law, the payouts would have to be documented and regulated. Existing machines would have to be replaced or retrofitted to meet monitoring standards spelled out in the legislation. Proponents claim that the new regulation could weed out organized crime that has been perceived to be associated with illegal video poker.
Leasing the Illinois Lottery to a private entity is contingent on approval from the U.S. Department of Justice, and the state has no control over how soon, if ever, that will come. Selling lottery tickets online is an unprecedented move. If approved, getting the operation up and running could take awhile.
Legalizing video gaming and the proposed changes to the lottery kept the plan from getting unanimous support. Cross said it was a difficult vote for some members of the GOP caucus. “It’s going to be difficult, and it’s going to have a little pain in it. And, there are people that didn’t like it,” he said.
Some Democrats didn’t like it, either. The majority of “no” votes among Democrats came from suburban Chicago lawmakers. Many echoed Quinn’s statement yesterday that the state’s operating budget, which funds government operations, health care, education and social services, should have taken priority over a construction plan.
Rep. John Fritchey, a Chicago Democrat and the only lawmaker to vote “present” on the revenue sources, said he was hesitant to approve what he considered a gaming expansion and the privatization of the lottery. He added that while the legislature found money to build new schools, lawmakers haven’t yet figured out how to pay for the teachers who would work in those schools.
Legislators also expressed concern that Quinn might not sign the capital plan into law until the General Assembly sends an operating budget to his desk. He has 60 days to act before the capital program automatically becomes law. Cross said that Quinn had told him he would sign the bill, but he worries that Quinn could delay the signing.
Regardless, lawmakers expressed relief that both chambers finally approved a long-awaited infrastructure program after consecutive years of false starts.
Rep. Lou Lang, a Skokie Democrat, said: “The state of Illinois has needed an infrastructure bill for a very long time. We need to put people to work, we need to fix roads, bridges and schools and water mains, and I believe this is an economic stimulus package done by the state of Illinois. And it was critical that it passed.”
Now the legislature can turn its focus to the operating budget and government reforms. While some procurement and employee ethics reforms advanced to the Senate today, the Senate also could begin debate about the governor’s Illinois Reform Commission’s proposals tomorrow.
Tuesday, May 19, 2009
Inch by inch
By Jamey Dunn and Bethany Jaeger
In a pivotal step toward finalizing the capital plan, Gov. Pat Quinn met with Democrat and Republican leaders of both chambers in Quinn’s Statehouse office this afternoon.
Senate President John Cullerton, Senate Minority Leader Christine Radogno, House Speaker Michael Madigan and House Minority Leader Tom Cross met for several hours. But none of them commented to the media after the meeting.
Rikeesha Phelon, spokeswoman for Cullerton, said it was the first substantial meeting between the four leaders and the governor since he took office. She said that an agreement has been reached between Democrats and Republicans in both chambers and that Cullerton left the meeting confident of a vote on the capital plan coming tomorrow.
Measures to approve new revenue sources and to grant bonding authority to the state are expected to move first. According to Radogno’s spokeswoman, Patty Schuh, the revenue sources will all be included in a single bill. Some Republicans wanted two separate bills so they could avoid taking a difficult vote on expanding gaming.
The bulk of spending will be in a bill that could come up for a vote tomorrow, and some individual projects that still need to be negotiated will be in a later bill. Schuh said that the leaders and Quinn still want to avoid giving out large chunks of money without specifically designating them to projects.
Meanwhile, the House advanced basic parts of the operating budget that would authorize standard spending regardless of whether legislators approved an income tax increase, which Quinn continues to urge as needed. The spending would include money to keep the lights on, as well as funding for education and Medicaid, two areas that have to meet federal requirements to capture economic stimulus funds. Funding contracts for state employee unions also is required.
At least two major questions remain: Will the state fund all $4 billion of its scheduled contribution into the public employee pension systems (a typical year’s contribution would be about $1.2 billion)? And will the legislature resort to increasing the state income tax, outlining budget cuts, or both?
“Without a tax increase, are you going to fund the pensions at normal costs, which means unfunding about $3 billion?” said Rep. Frank Mautino, an assistant majority leader. “And then how do you decide which of the remaining items you’re going to pay for?”
In a pivotal step toward finalizing the capital plan, Gov. Pat Quinn met with Democrat and Republican leaders of both chambers in Quinn’s Statehouse office this afternoon.
Senate President John Cullerton, Senate Minority Leader Christine Radogno, House Speaker Michael Madigan and House Minority Leader Tom Cross met for several hours. But none of them commented to the media after the meeting.
Rikeesha Phelon, spokeswoman for Cullerton, said it was the first substantial meeting between the four leaders and the governor since he took office. She said that an agreement has been reached between Democrats and Republicans in both chambers and that Cullerton left the meeting confident of a vote on the capital plan coming tomorrow.
Measures to approve new revenue sources and to grant bonding authority to the state are expected to move first. According to Radogno’s spokeswoman, Patty Schuh, the revenue sources will all be included in a single bill. Some Republicans wanted two separate bills so they could avoid taking a difficult vote on expanding gaming.
The bulk of spending will be in a bill that could come up for a vote tomorrow, and some individual projects that still need to be negotiated will be in a later bill. Schuh said that the leaders and Quinn still want to avoid giving out large chunks of money without specifically designating them to projects.
Meanwhile, the House advanced basic parts of the operating budget that would authorize standard spending regardless of whether legislators approved an income tax increase, which Quinn continues to urge as needed. The spending would include money to keep the lights on, as well as funding for education and Medicaid, two areas that have to meet federal requirements to capture economic stimulus funds. Funding contracts for state employee unions also is required.
At least two major questions remain: Will the state fund all $4 billion of its scheduled contribution into the public employee pension systems (a typical year’s contribution would be about $1.2 billion)? And will the legislature resort to increasing the state income tax, outlining budget cuts, or both?
“Without a tax increase, are you going to fund the pensions at normal costs, which means unfunding about $3 billion?” said Rep. Frank Mautino, an assistant majority leader. “And then how do you decide which of the remaining items you’re going to pay for?”
Tuesday, May 12, 2009
Video gaming advances
by Jamey Dunn
A bill that would expand gambling to help pay for new schools passed in a House committee today.
The measure, sponsored by Rep. Frank Mautino, a Spring Valley Democrat, would allow establishments where liquor is served, fraternal organizations, veterans' clubs and truck stops to have video gaming machines such as video poker. Many places already have the machines, but they can't legally pay out winnings. If approved, the state would require establishments that offered video poker to be licensed and would legalize betting on the games. The machines also would be taxed, with revenue going toward school construction projects and local governments.
Mautino said he did not make racetracks or off-track betting facilities eligible to operate video poker machines because he wanted to keep the bill simple in hopes of increasing its chances of passage. “For years this bill has been around, and it gets involved in the giant end-of-session bills, which usually collapse under their own weight,” he said.
Here's a break down of some of the numbers associated with the measure:
House Speaker Michael Madigan said last week that he does not want to consider any gaming expansions this session.
A bill that would expand gambling to help pay for new schools passed in a House committee today.
The measure, sponsored by Rep. Frank Mautino, a Spring Valley Democrat, would allow establishments where liquor is served, fraternal organizations, veterans' clubs and truck stops to have video gaming machines such as video poker. Many places already have the machines, but they can't legally pay out winnings. If approved, the state would require establishments that offered video poker to be licensed and would legalize betting on the games. The machines also would be taxed, with revenue going toward school construction projects and local governments.
Mautino said he did not make racetracks or off-track betting facilities eligible to operate video poker machines because he wanted to keep the bill simple in hopes of increasing its chances of passage. “For years this bill has been around, and it gets involved in the giant end-of-session bills, which usually collapse under their own weight,” he said.
Here's a break down of some of the numbers associated with the measure:
- 25 percent The percentage of net profits from the video gaming machines that would be taxed.
- 20 percent The amount that would go toward building schools.
- 5 percent The amount that would go to local governments.
- $2 The maximum wager per hand.
- $500 The maximum payout per hand.
- 21 The minimum age to play.
- $5,000 The maximum fine an establishment would pay for allowing someone under 21 to gamble.
- 25 The percent of licensing fees and fines that would go toward treating gambling addiction.
- 75 The percent that would go toward regulating the process.
House Speaker Michael Madigan said last week that he does not want to consider any gaming expansions this session.
Friday, February 06, 2009
Time for some long-term fiscal planning
State Comptroller Dan Hynes already painted a dismal picture of the state's fiscal status with his projection of a nearly $9 billion deficit in fiscal year 2010, which starts July 1. He estimated that could drop to a roughly $6 billion deficit if the state received $3 billion from the federal stimulus package, but the federal bailout amount for states is in flux at this very minute. Adding to the problem is that the current fiscal year 2009 budget keeps getting more and more out of whack. The revenue forecast looks worse than it did in November, according to the legislature’s economic forecasting arm.
Last fall, the bipartisan Commission on Government Forecasting and Accountability said revenues for the current fiscal year 2009 would fall $550 million below the previous year, or $1.34 billion less than the level budgeted.
Part of that spending plan assumed the state would collect $435 million by selling the state’s 10th riverboat license, but the winning bid for the license came in at only $125 million — and it won’t be available in time to ease this year’s budget crunch. According to the Illinois Gaming Board, the money could come in two chunks, one in fiscal year 2010 and the rest in 2011.
In short, the current year’s revenue picture “worsened virtually over night to nearly $1 billion less than the previous year,” the commission said in its January revenue forecast.
The commission added that it may need to make further adjustments when state income and sales tax revenues decline as the national recession unfolds. The cumulative damage: at least $1.6 billion by March.
As all four legislative leaders met with Gov. Pat Quinn this past week, talk of tax increases and budget cuts circled the Capitol. Public administration professor David Merriman at the University of Illinois at Chicago said even if the state gets $3 billion in federal bailout money, cuts spending and increases the state income tax by 1 percentage point, it's still going to be a rough road ahead. "The state needs to do long-term fiscal planning, and they need the legislature to take that seriously," he said.
Watch for more context and analysis in the March edition of Illinois Issues magazine.
Last fall, the bipartisan Commission on Government Forecasting and Accountability said revenues for the current fiscal year 2009 would fall $550 million below the previous year, or $1.34 billion less than the level budgeted.
Part of that spending plan assumed the state would collect $435 million by selling the state’s 10th riverboat license, but the winning bid for the license came in at only $125 million — and it won’t be available in time to ease this year’s budget crunch. According to the Illinois Gaming Board, the money could come in two chunks, one in fiscal year 2010 and the rest in 2011.
In short, the current year’s revenue picture “worsened virtually over night to nearly $1 billion less than the previous year,” the commission said in its January revenue forecast.
The commission added that it may need to make further adjustments when state income and sales tax revenues decline as the national recession unfolds. The cumulative damage: at least $1.6 billion by March.
As all four legislative leaders met with Gov. Pat Quinn this past week, talk of tax increases and budget cuts circled the Capitol. Public administration professor David Merriman at the University of Illinois at Chicago said even if the state gets $3 billion in federal bailout money, cuts spending and increases the state income tax by 1 percentage point, it's still going to be a rough road ahead. "The state needs to do long-term fiscal planning, and they need the legislature to take that seriously," he said.
Watch for more context and analysis in the March edition of Illinois Issues magazine.
Wednesday, November 19, 2008
Keep your sights on 2011
The state’s bipartisan legislative Commission on Government Forecasting and Accountability projected the state’s budget shortfall between $2 billion and $3 billion for the current fiscal year, FY09. And that striking deficit includes a one-time windfall when the state collects on a lease of the 10th casino license.
Yesterday, Gov. Rod Blagojevich pitched a four-point plan. Tonight, Rep. Gary Hannig, the chief budget negotiator for House Democrats, said he plans to discuss legislation Thursday that would advance one of the governor’s proposals. (Watch for the new language in an amendment of SB 2083.) It would allow the governor to withhold 8 percent of general revenue funds in “reserve.”
This and previous governors have applied that power to state agencies under the governor’s control in the past, but the new proposal would expand that authority and allow Blagojevich to impound some additional funding for K-12 education, higher education and state pension funds. It also potentially would allow Blagojevich to collect some tax revenues typically shared with city and county governments.
The same power to reserve up to 8 percent also would be extended to other statewide officers. The governor already applied a 3 percent reserve on state agencies and cut funding for constitutional officers earlier this year. The potential for further reserves begs the question of how state managers would be able to cut more programs or institute more furlough days than they already have.
Hannig said the current proposal also would allow Blagojevich to apply the reserves unevenly, potentially requiring 8 percent reserves, say, for higher education but not for K-12 education. The House will have to flesh out the details of this serious but controversial proposal, Hannig said. “Our view in the House is in light of the fact that we’re scheduled to go home tomorrow and not return until January 12 that we shouldn’t just ignore the governor’s proposal.”
Hannig pointed out: “The language says he may. So he may not.”
Hannig’s budget negotiating counterpart in the Senate, Sen. Donne Trotter, agreed. “He doesn’t have to do this against any agency. This is an alternative to us getting dollars from the feds or selling the license, so it’s a contingency plan.”
While the House could move the bill Thursday, Trotter said the Senate could still act on it by week’s end or in the first two days of session in January.
Either way, the FY09 budget is in bad shape, and the Commission on Government Forecasting and Accountability projected that FY10 will be worse. The first thing that sticks out, Hannig said, is a massive payment to the state’s five pension systems for public employees. He anticipates an additional $1.2 billion payment, and if revenue projections are accurate, the state might not even garner $1.2 billion in growth for FY10.
“If we don’t do something, we may not even be able to make the pension payment next year, let alone anything else,” Hannig said.
To avoid ending on a bad note, take the advice of Scott Pattison, executive director of the National Association of State Budget Officers. He spoke to Statehouse reporters during a national conference in North Carolina last week and said: Look forward to FY11, when things actually might start to look better. Hannig agreed with that projection and compared post-FY11 to a spring day after the long, dark days of winter.
Yesterday, Gov. Rod Blagojevich pitched a four-point plan. Tonight, Rep. Gary Hannig, the chief budget negotiator for House Democrats, said he plans to discuss legislation Thursday that would advance one of the governor’s proposals. (Watch for the new language in an amendment of SB 2083.) It would allow the governor to withhold 8 percent of general revenue funds in “reserve.”
This and previous governors have applied that power to state agencies under the governor’s control in the past, but the new proposal would expand that authority and allow Blagojevich to impound some additional funding for K-12 education, higher education and state pension funds. It also potentially would allow Blagojevich to collect some tax revenues typically shared with city and county governments.
The same power to reserve up to 8 percent also would be extended to other statewide officers. The governor already applied a 3 percent reserve on state agencies and cut funding for constitutional officers earlier this year. The potential for further reserves begs the question of how state managers would be able to cut more programs or institute more furlough days than they already have.
Hannig said the current proposal also would allow Blagojevich to apply the reserves unevenly, potentially requiring 8 percent reserves, say, for higher education but not for K-12 education. The House will have to flesh out the details of this serious but controversial proposal, Hannig said. “Our view in the House is in light of the fact that we’re scheduled to go home tomorrow and not return until January 12 that we shouldn’t just ignore the governor’s proposal.”
Hannig pointed out: “The language says he may. So he may not.”
Hannig’s budget negotiating counterpart in the Senate, Sen. Donne Trotter, agreed. “He doesn’t have to do this against any agency. This is an alternative to us getting dollars from the feds or selling the license, so it’s a contingency plan.”
While the House could move the bill Thursday, Trotter said the Senate could still act on it by week’s end or in the first two days of session in January.
Either way, the FY09 budget is in bad shape, and the Commission on Government Forecasting and Accountability projected that FY10 will be worse. The first thing that sticks out, Hannig said, is a massive payment to the state’s five pension systems for public employees. He anticipates an additional $1.2 billion payment, and if revenue projections are accurate, the state might not even garner $1.2 billion in growth for FY10.
“If we don’t do something, we may not even be able to make the pension payment next year, let alone anything else,” Hannig said.
To avoid ending on a bad note, take the advice of Scott Pattison, executive director of the National Association of State Budget Officers. He spoke to Statehouse reporters during a national conference in North Carolina last week and said: Look forward to FY11, when things actually might start to look better. Hannig agreed with that projection and compared post-FY11 to a spring day after the long, dark days of winter.
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