Wednesday, February 22, 2012

Governor's budget proposal was specific on spending but not on reforms

By Jamey Dunn 

Gov. Pat Quinn set a dour tone as he kicked off the budgeting process today but shared few details on what he cites as his two biggest goals for the year.

“This budget contains truths that may not be what you want to hear, but these are truths that you need to know,” Quinn said in the opening lines of his budget address. “And I believe you can handle the truth.”

Quinn said he plans to close two developmental disability centers, two mental health centers and either close or consolidate 59 other state facilities. Fourteen of the proposed closures include developmental centers, mental health centers and corrections facilities. ( For a list of these institutions, see yesterday's blog.) The rest are consolidations within state agencies. Quinn said that overall, he is calling for $425 million less in spending by state agencies than the current fiscal year.

“I think he did a very good job of setting out what the problems of the state budget are. He delivered a very strong message,” House Speaker Michael Madigan told Illinois Lawmakers after Quinn’s speech. “He topped it all off by saying to them, ‘Don’t expect to go home until we get our job done,’ which was a legitimate request from a governor to the legislature.”

Quinn laid out the need for pension and Medicaid reform in no uncertain terms. He called for a $2.7 billion reduction in Medicaid spending and set a deadline for a bipartisan pension working group to make its recommendation by April 17. He told lawmakers, “Don’t plan on going home for the summer” if Medicaid spending is not addressed. Another group of legislators is working to hammer out recommendations for Medicaid reform.

House Minority Leader Tom Cross said there is enough time in the spring legislative session to tackle the two difficult issues. “We don’t have a choice.”

“The first step is to educate the public on how tough these decisions are. And I think he did that today. That makes it easier for the legislators to end up voting for some of these tough issues,” Senate President John Cullerton told Illinois Lawmakers.

Cullerton said that Quinn is letting the working groups negotiate behind the scenes. “The governor can’t propose a solution yet because we’ve got to wait and see what everybody wants to do collaboratively,” he said.

The House led the budgeting process last year, but Madigan said he wants Quinn to be involved this year. “The governor must sign that bill in order for it to be effective, and so the sooner that he joins the group, the better.”

But some Republicans we’re disappointed that Quinn didn’t give specifics today. “He’s the governor. He’s the leader,” Cross said. He said he wants more specifics on what pension reforms Quinn would support. “Are you for having the employees pay a little more? Are you for cost shifting [to local school districts and universities?] Are you for addressing the [cost of living increases?] He’s said they're all on the table, but what does he want? I mean this is not new stuff.”

Quinn was specific about some new spending he would like to see included in the budget. He proposed a $50 million bump to the Monetary Assistance Program (MAP) grants for college students and $20 million in additional spending for early childhood education.

“We cannot increase spending. Period. The end. Right now, we just can’t do it. So those things ought to be off the table, and we can focus on the big issues at hand,” said Senate Minority Leader Christine Radogno.

Quinn also called for closing tax loopholes to help pay down the state’s backlog of overdue bills to vendors, social services providers and schools.

Unlike past years, the governor did not pitch a borrowing plan to pay off the state’s bills. Sen. John Sullivan, a Rushville Democrat, said he hopes that once Medicaid and pension reforms are addressed, Republicans may be more receptive to borrowing or some other solution to pay down the bills. He said when he has tried to find support across the aisle for borrowing proposals he has sponsored in the past, Republican senators say that pension and Medicaid reform have to be part of the negotiations.

Quinn proposed closing tax loopholes to help pay down the state’s backlog of overdue bills to vendors, social services providers and schools. However, if the lawmakers choose not to do that, or no other plan is approved to pay off the bills, Quinn’s proposal calls for $163 million in unspent revenue to go toward a backlog that is about $8 billion. “It’s kind of a drop in the bucket as far as what it’s really going to do to address the issue,” Sullivan said.

The governor called for lawmakers to do a comprehensive assessment of tax breaks — a suggestion that came up on both sides of the aisle while lawmakers debated a tax breaks package passed in December that focused on appeasing a few businesses that were threatening to leave the state. “For too long, we’ve had a revenue code that looks like Swiss cheese, with plenty of loopholes for the powerful. Many of these loopholes are passed on politics, not economics,” Quinn said in his address.

Quinn pointed to a specific tax exemption for oil companies that drill in the ocean and sit on the intercontinental shelf. There is a federal exclusion for such companies, and since Illinois’ tax code mirrors the federal code in most instances, there is a state exemption as well. Quinn said that eliminating this exemption and requiring oil companies that make profits in Illinois to pay a state income tax would bring in about $75 million a year. Quinn said revenues brought in from ending such exemptions could also be used to give tax credits to families.

“I’m absolutely exhausted after a decade … of every governor talking about closing corporate loopholes,” said Doug Whitley, president of the Illinois Chamber of Commerce. “I think it’s kind of a fool's errand. … If those oil rigs were in southern Illinois, I would say: ‘Fine. Tax them.’”

Whitley said there are not may corporate tax breaks left to close. He said besides the net operating loss, which lawmakers put back in place under the tax breaks deal reached late last year, there are about $400 million in exemptions to the corporate income tax. “The real loopholes in the tax code are individual loopholes. Loopholes for citizens,” he said. Whitley pointed to the property tax and the fact that the state exempts some foods and medicines from sales taxes.

Whitley was positive about Quinn’s speech overall. “Generally speaking, I thought the governor had a good talk today. … I don’t think that he needed to show all of his cards in this speech. He simply said, 'Let's play the game.'” He said now the question is, “Can legislators spend hundreds of hours together and end up with a [budget] that they can agree on that does in fact save hundreds of million of dollars?”


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