Thursday, March 01, 2012

House passes spending cap

By Jamey Dunn

The Illinois House is on track to cut from Gov. Pat Quinn’s proposed budget in the same way that it did last year.

The chamber today approved an estimate of what the state would have available to spend for the Fiscal Year 2013 budget, and the number was about $200 million less than Gov. Pat Quinn’s revenue estimate. The House estimate of general revenue funds that will be available for FY 2013 is $33.7 billion, and Quinn’s, $33.9 billion. “I thought we needed to take a conservative approach. I think we needed to give ourselves some breathing room,” said John Bradley, a Marion Democrat.

The resolution setting the estimate and committing the chamber not to approve a budget with more than $33.7 in spending passed with bipartisan support. The House approved an identical joint resolution, which will head over to the Senate for consideration. Last year the House only passed its own resolution and left the Senate behind in the budgeting process.

Opponents say setting a spending cap limits flexibility and could lend to unnecessary cuts. William McNary, co-director of Citizen Action Illinois, said the state should work off of projections but not set a cap. He said that lawmakers should instead base spending decisions on the need for and effectiveness of programs. “Upfront hard spending caps put the cart before the horse. It would arbitrarily set an appropriations number and try to get the need to fit to this number. ” He added: “One way to find over $200 million immediately is to use the [Commission on Government Forecasting and Accountability] revenue estimate. They’ve been historically reliable.” COGFA’s projection is $50 million more than Quinn’s.

This year’s House estimate is much more in line with the governor’s numbers than last year’s House projection, which was $750 million less than Quinn’s revenue estimate. “Last year we were below the numbers of [Commission on Government Forecasting and Accountability] and the Department of Revenue and [the Office of Management and Budget] and we were right. And so I would rather err on the side of safety and caution, then to be high and get into trouble at the end of the year--worse than what the state’s already in,” Bradley, who is the chair of the Houses’ revenue committee—which produce both the estimates from last year and this year.

Supporters of last year's admittedly conservative estimate said that any additional money would go toward paying off the backlog of overdue bills. The state has paid off about $1 billion of those bills with additional revenues. However, Illinois is projected to complete the current fiscal year with a deficit of about $500 million. One possible trigger for the deficit is the repayment of more than $600 million in interfund borrowing.

This year, some lawmakers support the idea of setting aside revenue before any operating expenses are paid and spending it on the backlog. The idea is similar to the way lawmakers paid the pension payment and debt service last year. “I would personally be in favor of taking money off the top to begin the process of paying off the backlog of bills,” Bradley said.

But such a move would add to the list of growing costs that are putting pressure on state spending. “We know the pension payment is up. We know we have Medicaid pressures, and we know we have general operating pressures. And we’ve only estimated about $500 million additional [revenue] from what was available last year, and you may have as much as $4 billion of additional pressure, not including the backlog of bills,” he said. Quinn proposed closing corporate tax loopholes to help pay off the bills. If lawmakers fail to close such loopholes, Quin also proposed spending about $160 million less than his projection and using the extra cash to pay down bills.

“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.’”

Rep. Ed Sullivan, a Mundelein Republican, warned that the state must get a handle on spending before last year's income tax increase is set to begin phasing out in FY 2015. “We have to address the structural problems that we have because in FY 15, [FY] 16 we’re on a cliff if we don’t start building in numbers to get rid of the tax increase. Or is the governor just saying, ‘We’ll make that tax increase permanent?’” Sullivan said that despite some large growth in expenses, such as a pension payment that will be about $1 billion more, Republicans do not want spending for FY 2013 to total more than the FY 2012 spending.

 He said some Republicans are frustrated that additional spending for the current fiscal year was approved last fall. “Last year we made this leap of faith,” and then the legislature passed additional spending bills. “The next step [in the budgeting process for FY 2013] is the big step, and the next step is the trust that we’re going to build between the caucuses,” he said.

 Bradley said that the House plans to handle the budgeting process in a similar manner as last year, when the projected revenue was carved up and assigned to different areas of state spending, such as education or human services. The budgeting committees for those sectors were then asked to craft a spending plan based on the amount they were assigned.


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