Tuesday, March 09, 2010

'Don't count on that'

By Jamey Dunn

Budget numbers that Gov. Pat Quinn’s staff presented at a media briefing this evening do not assume an income tax increase.

“The General Assembly has not acted on a tax increase and has given symbols that they don’t want to act on a tax increase,” said Jerry Stermer, Quinn’s chief staff.

However, Quinn’s budget is based on the assumption that Congress will extend an elevated Medicaid match of 65 percent instead of the usual 50 percent that was part of the stimulus package and that the General Assembly will pass a controversial two-tiered pension system proposal.

The budget is built on five “pillars of recovery” to try to solve the state’s estimated $13 billion deficit. The pillars are cuts, job creation, federal assistance, “strategic” borrowing and revenue increases. However, the final pillar was conspicuously missing from the briefing, and Stermer acknowledged that the problem can’t be solved in the next fiscal year.

“No observer — no economist — assumes we’ll be able to solve this horrific puzzle in a single year,” Stermer said.

Cuts

Quinn is again proposing furlough days for state employees and reducing pension benefits for newly hired state workers. The total savings for next year is estimated at more than $500 million. The assumption is that money from a pension reform would come in the form of borrowing, since the savings would not be immediate.

Income tax revenues that are sent to local government would be cut from 10 percent to 7 percent, which would total $300 million.

Education funding would be cut by $1.3 billion from higher education and K-12, with the bulk coming from K-12.

Health care would be cut by $325 million, including slashing funding for a drug assistance program for seniors in half, and starting a Medicaid managed-care pilot program.

Human services would take a $276 million hit, which would come from in-home care for the elderly, childcare and community mental health services

Stermer said that Quinn’s administration sought cooperation from legislators to make more cuts that would require changes in the law and got nowhere. “Every meeting that we have with legislators, they say: ‘Oh we don’t think our members will vote for that. Don’t count on that. Don’t count on that. Don’t count on that,’” he said.

Job creation

A $2,500 tax credit would go to companies with fewer than 50 employees for each new job they create. This plan would be capped at a total of $50 million. Quinn estimates that would create 20,000 jobs.

Federal support

The budget is based on the hope that Congress will extend a 62 percent match on Medicaid funds, up from the regular 5o percent as part of the stimulus plan and due to expire at the end of December, through the next fiscal year.

Borrowing

Quinn’s plan calls for $4.7 billion in borrowing.

Quinn's budget director, David Vaught. said borrowing makes people nervous because they compare it to their own borrowing on credit cards with double-digit interest. However, he said the last time the state borrowed money, it was at a rate of just over 1 percent. “Sovereign states don’t borrow on a credit card.”

Revenue increases

This evening’s presentation did not include any proposed revenue increase, and all the numbers presented, which Stermer said Quinn would present tomorrow, are based on no income tax increase.

“This budget that we are presenting shows the consequences of inaction last year. Had we raised taxes last year, as the governor called for, we wouldn’t be seeing deficits of this scope,” Vaught said.

As to whether Quinn would propose a specific revenue increase in his budget address, or divulge what he plans to do with the money that would come from one, no one in the room would answer that question.

“Quinn’s not included a tax increase in this budget, and that’s a conversation that has to happen,” Stermer said. When pressed on the issue, Stermer said, “The governor will talk about that tomorrow — noon sharp.”

So check back tomorrow for the details on Quinn’s budget address, set to take place before the General Assembly tomorrow — noon sharp.

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