Friday follow-up

A few loose ends that we recently wrote about have been tied up today, while few more are about to reopen next week. The Illinois House returns to Springfield Wednesday and Thursday to debate funding for a statewide construction plan and to reverse some of the governor's recent actions.

AFSCME: It’s fair
First, a lot of rallies, meetings and political undertones potentially came to rest Friday as about 37,000 state employees have a new, agreed-upon contract with their top employer, Gov. Rod Blagojevich’s administration. Members of the American Federation of State, County and Municipal Employees Council 31 vocally opposed increases in their health care costs that they say the administration sought. Months of negotiations led the union to request a mediator to bring the two sides closer together.

The result is a four-year contract that gives members a 15.25 percent wage increase during the life of the contract, and retired employees will retain the pension and health benefits they received under the former contract. However, employees are going to pay more for their health insurance premiums, co-payments and deductibles. Cohen said monthly premiums will increase by $12 twice during the next four years. “The state was asking for huge amounts, and we ended up are what we feel are modest amounts,” Cohen said, later adding: “Our members feel it was fair. When they looked at that contract, it wasn’t everything they wanted, but it was fair.”

He said they didn’t get relief from mandatory overtime, which they expect to intensify as more workers are laid off and the remaining employees do “more with less,” an all too familiar phrase.

The governor’s office also said in a statement that the contract was “fair" for both taxpayers and state workers. "Both sides spent months in negotiations, and this contract is the result of that tireless work.”

AFSCME: It’s unfair
Council 31, however, still disagrees with the administration about a separate issue: closing a once troubled facility for people with developmental disabilities. William A. Howe Developmental Center and the Tinley Park Mental Health Center in Chicago's south suburbs were decertified by the federal government for reports of neglect and other deficiencies. The lack of federal certification means the state no longer receives federal money to operate the facilities. But the Illinois Department of Human Services continued to operate and fund the centers without a federal match. We wrote about the centers, as well as some new plans for caring for people with disabilities, in the June Illinois Issues magazine.

AFSCME opposes shuttering the center because it would leave about 800 employees without their state jobs and benefits. About 600 are AFSCME members, said John Cameron, Council 31 spokesman. Some families also opposed the closing because they fear for the continuity of care for their loved ones with few alternatives. The administration announced that it planned to move residents to other state institutions or to community-based services. Yet, Cameron said, this affects people with high needs of services, and the union questions whether the state has enough capacity to support community-based services that already are under-funded and have long waiting lists.

The Illinois Council on Developmental Disabilities said about 15,000 individuals are on a waiting list for such services. However, the council said shutting one door opens another. Instead of placing people with disabilities in more institutions, advocates look to community-based services as a way to improve what they describe as an outdated system. Read more in the organization’s report, “Blueprint for system redesign in Illinois.”

Home for the House days
State Rep. Jim Watson, a Jacksonville Republican and staff sergeant in the U.S. Marine Corps, flew home from Camp Pendleton, Calif., today after serving more than six months in Iraq. Watch Illinois Issues magazine print edition to read more about the work he did to help one province establish its first form of representative government, which the U.S. military just handed over to the Anbar Provincial Council on Labor Day.

Watson arrives home just in time for the Illinois House to reconvene in a special session to discuss funding a capital construction program by leasing the Illinois Lottery to private investors.

But even if the House approves a lottery deal — with some modifications to the governor’s original proposal — it still has to go to the Senate, which isn’t scheduled to come back to Springfield before November. And even if the Senate approved a measure to let the governor lease the lottery, then it still would take months to figure out the amount of money it would generate and the amount of money that the state would have to borrow. Only then would the House draft a spending plan for that money, according to Rep. Gary Hannig, a Litchfield Democrat and deputy majority leader.

But voting on a lottery plan is a first step in that process. Expect the House to include such “safeguards" as requiring the state treasurer and comptroller to sign off on the lottery deal to ensure that it’s a good deal for taxpayers. Hannig also said an ethics portion would “ensure that there’s no temptation to engage in any kind of pay-to-play antics,” and they could limit the amount consultants and lawyers could make from the deal. “Hopefully we can pass this bill next week and send it to the Senate,” Hannig said. “And it isn’t that much different from what they have already passed.”

We’ll see about that.

The House also is expected consider some of the governor’s amendatory vetoes, including the unanimously approved ethics legislation that Blagojevich expanded. And House members could try to approve restoring some of the money the governor cut that resulted in hundreds of layoffs, closed state parks and closed state historic sites. But it would restore some, not all, of the cuts, Hannig said.

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Where's the Party?

The Illinois State Fair kicked off the political campaign season, with Democrats and Republicans rallying on the fairgrounds for the past two consecutive days. They’re rearing up for national conventions at the end of this month and beginning of next. Illinois Democrats hope to ride the coattails of the presumptive presidential nominee, U.S. Sen. Barack Obama, a Chicago Democrat, but that doesn’t mask the divisions of state party leaders. The Illinois GOP has an opportunity to win over disgruntled voters frustrated by the Democrats in power. On the other hand, the party recognizes the challenge of gaining momentum while the “Obama factor” is anticipated to draw a record number of Democrats to the polls November 4.

The strengths and weaknesses of each party were on full display during their State Fair rallies.

On a packed lawn, Democrats had a huge draw to hear New Mexico Gov. Bill Richardson, former presidential candidate with a national and international resume. He’s now a hard-core Obama supporter, visiting Illinois to support Obama and U.S. Sen. Dick Durbin.

Richardson substituted the words “dynamic” and “diverse” to replace the word “dysfunctional” when describing the Illinois Democratic Party. He downplayed internal tensions by saying: “I’m a governor. I have, with my legislature, differences. There’s that control tension that I think is healthy in a democracy.”

But state Comptroller Dan Hynes, a Democrat, indicated he thinks the tension is suffocating rather than healthy. He cast a harsh light on the party leaders while speaking at the Democratic County Chairmen’s Association Wednesday morning, saying the existing state of affairs in Illinois represent “the worst of times.” He cited this year’s $1.4 billion in budget cuts that cripple state services and said it’s not a policy problem, it’s a personality problem personified by power clashes between the governor, Senate President Emil Jones Jr. and House Speaker Michael Madigan.

The division carried over that afternoon to the State Fair during Governor’s Day (a.k.a. Democrat Day). The only other statewide officeholder to attend was Treasurer Alexi Giannoulias. Hynes didn’t attend. Neither did Madigan, Attorney General Lisa Madigan, Lt. Gov. Pat Quinn or Secretary of State Jesse White.

The front of the audience was filled with busloads of supporters holding blue signs that said, “Pass the jobs bill today.” But when the governor rose to speak, members of the American Federation of State, County and Municipal Employees union booed and waved green picket signs that read, “Governor, don’t cut our health care.” They chanted as they passed through the audience, interrupting the governor’s speech.

The boos faded as AFSCME employees exited the lawn, and they were replaced with cheers as the governor yelled over the commotion: “I would ask our friends in AFSCME to join us in our crusade. They’re going to keep their jobs. They’re going to keep their health care, but now start helping us create jobs for other people and provide health care to other people across our state.”

He later said AFSCME was just using a political ploy to draw attention during contract negotiations with the administration. Union members argue that the cost of their health insurance continues to increase while their wages and their manpower is stagnant, at best.

Republicans aren’t much better off. While they have ripe opportunity to take advantage of the unpopular Democratic governor and the Democratically controlled legislature, GOP candidates have an obvious uphill battle to grab attention and prove their relevancy as an option for disgruntled voters.

The GOP leaders were quick to point out, however, that the Democrats didn’t even have their state party chair, Michael Madigan, present. The GOP also had a few other things the Democrats lacked: American flags, people dressed in red, white and blue, the national anthem and an opening prayer. But the Republicans had an emptier director’s lawn.

Given that Republicans are in the minority in both the Illinois House and Senate and don’t hold a single statewide office, they have the advantage of declaring innocence in the state’s problems. “They’ve completely dropped the ball and have had an awful six years,” said House Minority Leader Tom Cross. But he acknowledged that the GOP needs to revive itself and be stronger advocates for lower taxes and reforms.

He and Senate Minority Leader Frank Watson repeatedly blamed Blagojevich, as well as Senate President Emil Jones Jr. and Michael Madigan, for a lack of progress on a balanced budget, a capital construction program, an ethics reform package and a host of pension and Medicaid reforms.

“They enable him to do the things that he’s done over the past six years to put the state in the fiscal crisis that we’re in today,” Watson said of his legislative counterparts. “They enable him. There has to be a political price to pay. The voters have got to understand, the public has to understand the difference between what we believe in and what they believe in.”

The one thing all parties agree on is that the state needs a capital plan to repair schools, roads and bridges.

Madigan announced a potential agreement to lease the Illinois Lottery as a way to finance an infrastructure program, seeming to inch closer to a compromise with Blagojevich. But Senate President Emil Jones Jr. said his caucus already negotiated a deal and approved two capital plans, a $36 billion version and a $25 billion version. He added that he hadn’t seen any proposal in writing from Madigan.

The House later approved a roughly $1.1 billion capital bill that would draw federal funds that are waiting in Washington, D.C., for a state match. Republicans, however, called it a false hope and said the plan fails to give approval for the state to spend enough money. “Even if you thought last night was real, it doesn’t work,” Cross said. “It is a very small component of a bigger picture that has to be developed and be painted. But at the end of the day, it doesn’t work.”

Watch Illinois Issues magazine and this blog for more about a capital plan.

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Out with a bang

Illinois is closing out July in style and gearing up for more politics in August. The same day Gov. Rod Blagojevich unveiled a “compromise” capital plan to fund road and school construction projects throughout the state, his office was sued along with Senate President Emil Jones Jr.’s office for not releasing budget-related details. And the governor’s idea to transfer nearly 150 positions from Springfield three hours south to Harrisburg is the subject of hours of testimony opposing the idea, although southern Illinois folks like the idea of an economic boost. (More on that in the next post.) And after all that in one day, the condition of state government is unlikely to change any time soon.

I write “compromise” in quotes because there’s no deal on the capital plan without all parties on board. Although the governor’s office made a gesture to compromise by getting rid of the revenue source that House Speaker Michael Madigan ruled out — expanded gaming — it’s clear that the governor’s revised proposal still lacks support from House Democrats. The new version reduces the spending amount from $34 billion to $25 billion. So, yes, the casino-less proposal satisfies three of four caucuses, but those three caucuses were on board in the first place.

House Democrats’ concerns about the first plan still stand. Most prominently, they still don’t trust the governor to fairly distribute the capital funds. House Majority Leader Barbara Flynn Currie, a Chicago Democrat who represented the speaker in today’s meeting and in previous leaders’ meetings, reiterated Madigan’s stance: House Democrats won’t get on board unless the spending side of the capital plan is crystal clear. Steve Brown, Madigan’s spokesman, said specific line items are an “absolute requirement.” In an e-mail after the meeting, Currie echoed: “Assuming we could reach agreement on the revenue side — a big assumption — we would definitely want line-item allocations and some way to guarantee that dollars allocated are actually spent.”

Her kicker: “So I think we continue to be on a very steep uphill climb.”

The governor’s revised revenue ideas still lack consensus. House Democrats repeatedly have questioned the wisdom of the first revenue source: selling off all or part of the Illinois Lottery to the private sector. The state asset generates money for public education and has been estimated to be worth more than $10 billion, leading some to question why the state would sell it rather than revamp it and maximize its value. Proponents say the private sector could be more efficient and aggressive in managing the lottery’s potential.

Currie said, however, that privatization also could negate the original intent and appeal. “The lottery was originally sold as a way to help education, so buying a losing lottery ticket still helped the kids. Take away education, and people may feel they’ve been bamboozled.”

The governor’s proposal does include a “lockbox” for capital investments and lottery proceeds for education. And supporters of the lottery lease say the upfront cash and the ongoing state share of the profits would ensure that public schools would receive at least the same amount under the public-private partnership.

The other funding idea includes transferring higher-than-expected revenues from two state taxes, the motor fuel tax that goes into a dedicated Road Fund and the sales tax on gasoline that goes into the general revenue fund. Currie said her caucus could consider using “excess” revenues from the motor fuel tax (a.k.a. Road Fund) if the administration proves that the money would go directly to capital construction projects. Transferring excess revenues from the state sales tax on gasoline (a.k.a. general revenue fund) is a different story. “Diversions from GRF — which, essentially, is what taking gasoline sales taxes really is — could be a very tough sell,” Currie said. Without support from House Democrats, a capital plan is unlikely to advance.

Another lawsuit
Two nonprofit groups supporting limited government are suing Gov. Rod Blagojevich and Senate President Emil Jones Jr. for denying access to budget-related documents.

The Illinois Chapter of Americans for Prosperity based in Chicago and Judicial Watch Inc. based in Washington, D.C., filed suit in Sangamon County. They allege that both offices repeatedly denied requests under the Freedom of Information Act to release information about how a lump sum of $1.7 billion was spent in fiscal year 2008. In a Statehouse news conference Thursday, the two groups justified their suit by citing newspaper reports about questionable grants doled out by individual legislators. They’re asking the court to require Blagojevich and Jones to release information about specific uses of the money.

They’re targeting so-called member initiatives that distribute state grants to local nonprofits or units of local government, and so on, and the grants aren’t subject to competitive bidding processes or to legislative debates. Projects often are lumped together in a single dollar amount and lack specific descriptions of how that money would be used.

Jones’ office says its attorneys are reviewing the suit and don’t have a comment. I’m still waiting for a response from the governor’s office.

Joe Calomino, director of the Illinois Chapter of Americans for Prosperity, said the group did not sue House Democrats or Republicans because they released detailed information about money issued for member initiatives.

The group, which publishes an online blog called Pork Report, also is behind legislation that would create a Web site to track all money spent on all districts, all state contracts, all state employees and all tax credits to improve government transparency. It was intended to serve as a one-stop shop for taxpayers. The measure was unanimously approved by the House but stalled in the Senate.

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Are smaller bites easier to digest?

The waiting list of construction projects isn’t getting any shorter, and the cost of gas and materials isn’t getting any cheaper, so any talk of a statewide capital plan to fund those projects is important. But frustration can worsen when the Illinois House and Senate and the governor’s office seem so far away from making any kind of deal but continuously promote their own plans and try to make the others look bad.

Most recently, the House Democrats are taking this approach: If you can’t get a $34 billion capital plan for road and school construction projects done, then at least try to capture nearly $2 billion of the federal funds that are earmarked for Illinois but that are vulnerable if Illinois fails to act.

House Democrats this afternoon advanced measures that would attempt to capture $1.8 billion in federal funds designated for some Illinois infrastructure projects. (For those who like details: SB 1116 and SB 1460 would allow the state to issue $360 million in bonds to pay for the projects over many years. The state would have to repay the debt in increasing amounts every year, starting with about $2 million the first year and $20 million down the road.)

The governor’s office wasn’t too pleased with the plan, as indicated by this statement offered in an e-mail: “The House move puts us 1 percent closer to meeting our state’s infrastructure needs. Before the House starts pounding their chests and congratulating themselves, it’s our hope that they go back to work and pass the other 99 percent necessary to meet our infrastructure needs and create thousands of jobs.”

Proponents of the capital construction plan for Illinois compiled by former U.S. House Speaker Dennis Hastert and Southern Illinois University President Glenn Poshard often say the state could lose out on money sitting in Washington if Illinois doesn’t provide its share (the feds pay 80 percent; the state pays 20 percent).

The House Democrats are trying to send a signal to the feds that Illinois has the money ready to go to fund the projects most at-risk of losing the federal funds, said Rep. Gary Hannig, a Litchfield Democrat sponsoring the measure [emphasis added]. “This would allow us to make our 20 percent payment. In turn, we would expect the federal government to then come up with the 80 percent. But these are projects that our congressmen have determined and earmarked in a federal transportation bill.”

Steve Brown, Democratic spokesman, said the measure aims to bring in $1.2 billion for highway projects and $600 million for mass transit projects. He said House Democrats proposed those amounts in response to information from the Illinois Department of Transportation about the federal dollar amounts at risk without a state match. But IDOT couldn’t confirm that information or interpretation of the situation. Department spokesman Mike Claffey said IDOT didn’t have a comment but was looking into the legislation.

And as Hannig said, no one really knows when the federal earmarks will expire. “I think the view is that the sooner we try to access this money, the better, clearly.”

If the couple of measures won House approval, it still would need to pass the Senate. “If it passes, we’ll take a look at it when it gets here,” said Cindy Davidsmeyer, spokeswoman for the Senate Democratic leadership.

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Speaker: Gaming is dead

House Speaker Michael Madigan deflated all momentum behind a capital bill this afternoon with one statement: “Given the conditions that exist here in Springfield, I think that the proposed expansion of gaming is a dead issue.” And the state’s operating budget remains unbalanced, as the House continues to reject ideas that would plug what the governor describes as a $2 billion hole. While the House is expected to vote next week to restore some of the governor’s $1.4 billion in cuts, they’re unlikely to support revenue ideas to pay for them.

Madigan spoke in a Statehouse news conference shortly after the full chamber rejected the Senate’s gaming proposal, which would have allowed a new land-based casino in Chicago, a state-owned casino and a new riverboat somewhere in the state. It also would have allowed slot machines at horse race tracks.

The multibillion dollar revenue source was the crux of a $34 billion capital construction plan. Without it, Illinois enters its ninth year without a major capital plan and without federal matching funds earmarked for transportation projects.

“This is another example of the speaker’s shenanigans to thwart the capital bill, which would put hundreds of thousands of people to work, and to impose an income tax on the people of Illinois next year,” the governor’s office wrote in an e-mail. The governor is not giving up on capital, said his spokesman Brian Williamsen in a phone conversation.

In a characteristically methodical way, the speaker led his caucus in rejecting most of the funding source of the capital plan. Yet Madigan added that he would not declare a capital plan dead, just gaming.

Without gaming, he said he’d consider previous revenue ideas, including one proposed by House Minority Leader Tom Cross last year that would offer a limited expansion of gaming at existing casinos or riverboats. The speaker also has his own version of a gaming plan that would reform the Illinois Gaming Board. And he cited a previous measure he supported: a constitutional amendment that would increase the Illinois income tax to fund education and construction needs.

Madigan denied, however, that he would propose an income tax increase after the November elections, as the governor and some Republicans repeatedly have charged. “I am not going to support an increase in the income tax during a lame duck session of the legislature,” Madigan said. He did not, however, rule out next spring. “Next spring is next spring. That’s a long time away.”

Senate Minority Leader Frank Watson said it’s unfortunate the speaker took gaming off the table to fund capital. “Revenue has to be generated to fund a capital bill, and gaming seemed to be the best alternative.” He added that although he’s not happy about it, Madigan’s statement could have a positive side. “I think we’ve been strung along for a long period of time … If this is going to bring closure to at least the revenue source, then, I guess, so be it.”

Watson said his caucus would be willing to consider alternative revenue sources for a capital plan, and he charged the speaker with the responsibility to propose such alternatives.

Capital bill summary: All parties say they’re not going to give up on capital, but none seems to offer alternatives that would serve as a compromise. Gaming was thought to be the compromise between most of the parties, but the House didn’t like the Senate’s procedural method that prevented the House from being able to make any changes to the gaming plan. So the General Assembly went from having what looked like a compromise to what turned out to be another dramatized clash between two chambers, leaving us where we started.

The operating budget is just as anti-climactic at this point. To be clear, the state does have an operating budget in place with most of the $59 billion spending plan activated. Yet the governor’s $1.4 billion in cuts announced Wednesday still leave an unbalanced budget, according to House and Senate GOP. According to the House speaker, “The word balance is one of these things that’s in the eye of the beholder.”

State Medicaid spending often is one area that can be delayed to balance the current year’s budget. Sen. Dale Righter, a Mattoon Republican, explained last night that regardless of the governor’s budget cuts that affect state Medicaid programs, the state still has to reimburse medical providers who care for Medicaid patients. “We still owe those bills. So the governor’s not cutting growth in government when he cuts Medicaid. He’s just pushing bills off into the future,” Righter said.

The rest of the governor’s spending cuts, particularly to human services, could be considered by the House next week. It’s scheduled to return Tuesday through Thursday. The Senate is not, meaning no cuts will be restored unless the Senate also agrees. That could be a while, considering Senate President Emil Jones Jr. said his chamber isn’t scheduled to come back to Springfield until the annual fall session in November. His spokeswoman said they would wait to see what the House did next week before deciding whether to override some of the governor’s vetoes before then.

But, there’s always the chance that the state budget could end up where it started, with relatively flat funding levels for most state services and some decreases for operations. “I could see nothing happening,” Cross said after the House rejected gaming.

The one option remaining on the table in the House is so-called fund sweeps. The Senate and the governor want to allow the governor to transfer about $530 million from dedicated funds to the state’s general fund. It’s been done for years under multiple administrations. Although fund sweeps appears to be the one common ground between all parties, Cross said it’s a) not enough and b) not guaranteed. “If you’re going to end up using fund sweeps, where does it go? Does it go back to pay bills? Does it go to [developmental disabilities]? Does it go to higher ed? To nursing? There’s not enough to take care of all these. So I don’t know. It’s possible at the end of the day nothing happens.”

Madigan said last night that his Democratic members want to define which funds could be swept and where the money would go. They also may want to reduce the amount transferred.

Sen. Donne Trotter, a budget negotiator for his chamber, said there’s actually about $1.9 billion available in the dedicated funds that otherwise is considered “surplus” at the end of each year. He said he’d be willing to consider changing the amount transferred, whether it’s more or less than $530 million. Madigan, however, said fund sweeps historically topped off at $300 million.

Either way, Trotter and many others agree that fund sweeps won’t solve the budget deficit, whether the state operates at $1 billion or $2 billion in the red.

Operating budget summary: There’s a lot of work to do. If the House overrides some of the governor’s budget cuts without approving ways to pay for them, the budget will tilt further out of balance. The level of funding for state services during the second half of the fiscal year could come down to how well the state economy performs and whether legislators agree on ways to plug remaining holes when they reconvene this fall.

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Two-week notice

State employees and service providers should know within 15 days whether state funding for the current fiscal year will decrease by more than $1 billion. Gov. Rod Blagojevich not only cut $1.4 billion Wednesday, but he also asked state agencies to tighten their belts and avoid spending their entire allotments to save another $700 million. His office couldn’t say whether those actions would result in layoffs.

He made the announcement during a special session of the General Assembly, convened to address an unbalanced budget for state operations. Legislators sent to the governor in late May a budget that Blagojevich says approved spending about $2 billion more than the state is expected to collect in revenue. While the Senate approved a series of ideas to plug that $2 billion hole beforehand, all of those ideas failed in the House.

The governor used the special session to blame House Democrats, i.e. House Speaker Michael Madigan, for approving an unconstitutional budget they knew would result in drastic cuts. The House reacted by scheduling a special committee of the entire chamber to hear pros and cons of all of the governor’s big ideas. In the past, those special committees have served as a springboard to trounce on the governor's plans before flat out rejecting them.

The governor called the House committee a circus. “Forget about phony committees on the whole that are circuses of excuses to do nothing and to fail to meet their constitutional responsibilities,” Blagojevich said at a Statehouse news conference before the House even voted on any of his revenue ideas. “But understanding they’re unlikely to do that, a couple of hours ago, I did their job for them. I balanced the budget. So now the ball’s in their court.”

The House Democrats did, indeed, reject one of his funding schemes that would have freed up $400 million. A House smaller committee soundly rejected a $16 billion pension bonding plan that would have restructured the state’s annual payments to the state’s five public employee pension systems.

But the House showed some wiggle room in transferring about $500 million in special dedicated funds to pad the state’s general fund — but not before gutting the governor’s original version that already received Senate approval in the spring. Madigan said the intent of the revised “fund sweeps” measure is to show a willingness to work with the governor on the idea. (It's a blank slate — they still have to insert the language.) But Madigan’s caucus wants to spell out which funds could be swept and where the money would go. Otherwise, his members object to giving free reign to the governor to sweep about half a billion dollars and spend it on whatever he pleases. Rep. Sara Feigenholtz, a Chicago Democrat and point person on human services, said she would be willing to consider fund sweeps if it saved human services from the budget ax. The governor’s cuts on Wednesday did reduce funding for human services by $210 million, erasing increases for autism programs, substance abuse treatment and mental health services.

House Minority Leader Tom Cross said the fund sweeps idea would “probably not [be] well received” in his caucus. While the GOP will continue to push for a statewide capital plan for construction projects, he reacted to the governor's cuts to the operating budget by saying: “We’re for less spending … but we weren’t part of the budget process.”

Some of the governor’s other cuts also scrap increases for higher education, which has gotten flat or reduced funding for a handful of years. (CLARIFICATION: Higher education still would receive a 2.8 percent increase across the board, minus community colleges. Their funding levels slightly decreased. The governor's higher education cuts relate to specific grants, including the monetary award program for needy students. So-called MAP grant funding stands to lose $18 million if it's not overridden by the legislature.) The same goes for about $150 million that would have funded school construction projects in 24 districts that have been waiting as long as five years for the state’s share of the cost.

The House has 15 days to respond to the governor’s cuts before they automatically become active. Legislators will hold another special session Thursday, when the House will continue to debate components of a $34 billion capital plan for a whole host of construction projects. Few expect the House to vote on the governor’s budget cuts before they wrap up and go home Thursday afternoon. If so, the chamber would have to return by July 24 if Democrats want to attempt to override the governor’s budget cuts.

The rest of the state budget that was left untouched by the governor immediately takes effect. That means legislators and constitutional officers could receive annual pay raises, or cost of living adjustments, that were left in the budget. Cross described it as “absurd.” “The whole idea of a (cost of living adjustment) is just mind boggling to me in this economic climate.”

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For better or worse

Don’t expect House Democrats to deliver on the governor’s wish list in the next two days. Gov. Rod Blagojevich called a special session of the General Assembly for Wednesday and Thursday to urge House members to approve a series of revenue-generating ideas, combined with a major capital plan, to help plug a hole in the state operating budget. If they don't, he said he’ll have to cut $1.5 billion from the budget approved in late May. The proposed capital plan also would allow the feds to release matching funds earmarked for road and school construction projects that have accumulated over the past nine years.

The House rejected the revenue and capital ideas this spring, and there’s little evidence to suggest House Democrats would change their minds this summer. House Republicans, who would be needed to approve a capital plan, are expected to support the governor's proposal. Their ability to vote on it, however, depends on whether the proposal even makes it to the House floor in the next two days.

A lot of issues are at play here: 1) stubborn political agendas, particularly between House Speaker Michael Madigan vs. the team of Blagojevich and Senate President Emil Jones Jr.; 2) distrust of the governor to disperse money for the capital projects; 3) fuzzy math, or inconsistent projections about the money needed to balance the budget; 4) fuzzy projections about whether the state would jeopardize about $9 billion in federal funds if Illinois failed to approve a capital plan this year; and 5) the campaign season leading up to the November elections.

Regardless of which combination of factors comes out strongest this week, the consequences of not acting on the governor’s wishes likely would threaten some state employees’ paychecks and some service providers’ reimbursements. With little hope that the House will come through on the governor’s wishes, he’ll likely feel a lot of pressure to cut out portions of the budget by week’s end to prevent state government from shutting down. A spokeswoman for his budget office said last week, “The governor has said there will not be a state shutdown.”

So what would be better for the state? Option a) Balance the budget by allowing the governor to sweep about $500 million of special funds, float a $16 billion pension bonding scheme and approve a major construction plan? That would include leasing the Illinois Lottery, constructing new gaming facilities and expanding of other forms of gambling. Or option b) Reject most or all of those ideas and force the governor to cut $1.5 billion from the budget, which would erase funding increases for higher education and social services and reduce funding levels for many other state operations.

(A bipartisan state panel issued an analysis about a variety of the governor’s proposals. See the report here, but note that it was issued in February based on the governor’s original plans that have since been revised.)

This morning, the governor’s negotiating team pleaded its case for a compromise during a teleconference, led by former U.S. House Speaker Dennis Hastert and Southern Illinois University President Glenn Poshard.

Poshard referred to inconsistencies within the House Democrats’ complaints about the $34 billion capital plan. First, he said, they approved a $57 billion operating budget for one year and gave the governor total discretion to trim where he sees fit. Then they argued that they couldn’t support the capital plan — which Poshard said breaks down to about $5.5 billion a year — because they don’t trust the governor to spend the money as planned. Poshard countered that by describing “accountability provisions” that would check the governor’s power and grant legislative oversight. “Any contention that there’s no limit on the governor’s authority here and that he can end up doing what he wants to do with this money is just absolutely untrue,” Poshard said. He welcomed legislators to propose more ideas, which he said could be considered and added in a matter of days if done in earnest.

Steve Brown, spokesman for House Speaker Michael Madigan, said this afternoon that other proposals were suggested from the beginning but not included in their final proposal. Brown referred to provisions that would define all money allotted to specific projects, reform ethics provisions for the state’s gaming authority and decrease the fee that Chicago would have to pay to acquire a new gaming facility. Brown added that the speaker would be unlikely to sit down with Poshard and Hastert to discuss the ideas. “I don’t know what that gains. I mean, they’ve been aware of all these things for weeks, if not months.”

Requiring construction projects to be defined line by line has never been done before, Poshard said, adding that it could limit the Illinois Department of Transportation’s ability to adjust if projects came in over or under budget. “We discussed all those things, openly, honestly, thoroughly. To come up now and use those two things as concerns and issues, I don’t think are valid at all.”

As far as the best outcome for the state, Brown said this week’s so-called committee of the whole could help legislators decide what to do. The committee is scheduled to start about 1 p.m. and end about 5 p.m., when they’re scheduled to split off into a smaller committee to consider ways to close the budget gap. Brown said they could return Thursday morning but expect to wrap up that afternoon.

Then all eyes will turn to the governor’s office, which likely was the intent of House Democrats when they approved an unbalanced budget in the first place.

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We have a budget, but no construction plan

By Bethany Jaeger and Patrick O’Brien
The state will continue to operate with some funding increases for education and human services, but schools and transportation districts across the state will continue to wait for state funding for badly needed construction projects. The Illinois General Assembly wrapped up business for the spring session and isn’t scheduled to return until November, but all are waiting to find out whether the governor will call them back to Springfield to address a capital program.

The last day of regularly scheduled session had some surprises, some predictable outcomes. But it leaves a lot of questions. Here are a few examples of what the legislature did, what it did not do and where we go from here:

What the legislature did:
The House and Senate approved a $59 billion operating budget that could spend about $1 billion more than the state could collect in revenue next fiscal year, which starts July 1. Legislators will leave it up to Gov. Rod Blagojevich to cut programs and projects to get closer to a balanced budget.

The GOP in both chambers rejected the budget for being out-of-balance crafted solely by Democrats. “The ironic thing is you’re going to have the governor be the adult in the situation,” said House Minority Leader Tom Cross during floor debate.

The budget as approved also would increase funding for higher education and human services, including pay for home care workers. It does not improve the Medicaid payment cycle, meaning many doctors could continue to experience cash flow problems as they wait an average of 70 days for state reimbursements.

Both chambers also approved free mass transit rides for some individuals with disabilities, a follow-up to the governor’s initiative to add free rides for seniors as part of a deal to save Chicago-area mass transit from cutting services. And downstate mass transit districts finally are expected to receive the increase in state funding that helps them pay operating costs, which also was promised but never delivered as part of the Chicago-area mass transit deal.

Also, as we mentioned this morning, both chambers sent an ethics reform package to the governor that would ban state contractors from donating to officeholders who let the contracts.

What the legislature did not do:
While House Democrats agreed to let the governor decide how to carve out the budget, they rejected a long-awaited capital program because many of them don’t trust the governor to divvy out the money as promised.

House Speaker Michael Madigan, who held a rare 35 minute news conference after the House was about to finish business, said the governor’s leadership style is one “which brings on conflict and confrontation rather than conciliation.” He said the operating budget limits the way the governor can spend money, but the capital plan wouldn't guarantee the governor would release the funds promised.

What’s next for the capital plan?
The capital plan ballooned to a $34 billion proposal by the Senate, and the longer it’s delayed, the more likely it is to keep increasing in cost. It has expanded and retracted countless times in the past few years. This time, negotiators, led by former U.S. House Speaker Dennis Hastert and Southern Illinois University President Glenn Poshard, did a lot of homework to select the funding sources and the projects that were most agreeable to all parties, but the scope of the plan required a lot more revenue than previously discussed. So the revenue ideas multiplied from creating one new land-based casino in Chicago and expanding positions at the nine existing riverboats to creating three new gaming facilities, expanding gaming at existing riverboats and allowing slot machines at horse tracks. The plan also would bank on a fourth new riverboat when the state’s long-dormant 10th gaming license is cleared of legal troubles. The plan is massive. And it’s controversial.

Now that the House Democrats shot down the opportunity, most legislators look to the November session. Delaying the capital plan does four things:

First, it allows legislators to wait until after the November elections to take a tough vote on a controversial funding source, such as gaming or, gulp, taxes. The speaker said, in general, one of the first places he’d look for more state revenue is an increase in the state income tax. “It’s the fairest tax. If you make money, you pay the tax. If you don’t, you don’t pay the tax.”

And in fact, the speaker said the biggest problem with recent attempts to approve a capital plan is that legislators don’t want to accept the tough choices. “My position is there should be a construction program, but it’s going to require some people to do something which is going to carry some pain. They’re not going to be applauded when they vote for a fee increase or a tax increase.”

He wouldn’t offer any alternative revenue sources tonight, “but we’re open,” he said.

Second, a delayed capital plan waits to find out the results of the federal corruption trial against Tony Rezko, a former insider to the Blagojevich Administration. The longer legislators delay a capital plan, the closer it gets to the end of Blagojevich’s term.

Sen. Dale Risinger, a Peoria Republican, described why he thinks those who want to wait contribute to the ballooning of the next capital program: “We get near the end of the Blagojevich Administration, so there will be some people who say, ‘Well let’s just wait until we have a new administration and see which direction we want to go.’ Unfortunately, with the inflation, the cost of construction goes up. And a couple more years of deterioration of our infrastructure means the program has to be that much larger the next time, which makes it even harder to do.”

Third, it risks losing future federal matching funds. The feds already earmarked about $9 billion for the state, but Illinois hasn’t committed its share. The longer the state waits to put forward the match, the less competitive it gets in securing highway funds in the next federal transportation bill.

Where do we go from here?
We wait to find out whether the governor will call legislators back before November to address a capital plan.

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The imperfect storm

By Bethany Jaeger
A tornado warning interrupted the House and Senate this evening before they could debate larger portions of the state operating budget, further delaying the ability to approve a spending plan before the constitutional deadline of midnight Saturday.

We all had to head to the basement of the Statehouse, where tunnels connect buildings on the Capitol complex. Amanda Vinicky, reporter for WUIS public radio station out of the University of Illinois at Springfield, caught up with House Speaker Michael Madigan in one of the tunnels. We listened to her audio file. She asked the speaker about the status of the budget, the leadership style of the governor and the lack of trust plaguing the democratic process.

Madigan’s advice for others was to consider the past five or six years — and to “prepare for the worst.”

The General Assembly is expected to approve a state budget before the deadline, but the budget also is expected to contain a rather large hole. Madigan said the legislature’s job is to approve the spending authority. The actual spending is up to the governor. “If he feels that some of those numbers should be changed, he has a reduction veto.”

The state Constitution grants the governor the power to strike out portions of the budget or to reduce the amount of money dedicated to specific programs.

The lawmakers also are considering the capital plan drafted by former U.S. House Speaker Dennis Hastert and Southern Illinois University President Glenn Poshard, who were recruited by Gov. Rod Blagojevich to bring everyone together on a multi-year plan for construction projects. Madigan has not attended any of the meetings with the negotiators and the other legislative leaders. Of the governor’s previous meetings, Madigan said, “I have found meeting with Gov. Blagojevich to be totally non-productive, and so we decided to take a different approach.” That included sending his majority leader, Rep. Barbara Flynn Currie, in his place.

The $31 billion capital plan has grown to $33 billion under the Senate proposal (see below). It now has a specific list of projects that would be funded, something legislators demanded before they could consider approving a deal. But rank-and-file legislators, particularly Democrats, continue to question whether they could trust Blagojevich to release the money for projects in their districts. Madigan reiterated the reason behind lawmakers’ hesitation: “It’s all about trust. It’s all about trust and whether people are prepared to trust Gov. Blagojevich and trust his record of broken promises.”

The legislative leaders are meeting with the governor in his Statehouse office as I post this. The Senate is expected to meet in committees yet this evening to discuss the capital plan and the proposed funding sources, including leasing the Illinois Lottery; expanding gaming to include a new and two additional riverboats, as well as expanding positions at existing facilities; and transferring money from the state’s Road Fund and the general fund. The House is done for the evening but will start with committees at 8:30 a.m. Saturday. Expect a long day and night.

Here are a few other items of interest that unfolded earlier Friday:

Potential CeaseFire agreement
Rep. Susana Mendoza, a Chicago Democrat, said she’s able to vote for a state budget now that an agreement has been made with Senate Democrats to reinsert $6.25 million into the state budget for a CeaseFire, gun violence prevention program.

The CeaseFire campaign employs ex-convicts to work as mediators to diffuse tension in communities with “hot spots” of gun and gang violence. They also connect clients to community services for jobs, education and other social services. The program is administered by the Chicago Project for Violence Prevention located at the University of Illinois at Chicago’s School of Public Health.

Gov. Rod Blagojevich last summer vetoed $6 million for CeaseFire from state budget as part of a series of budget cuts totaling about $460 million.

In early May, a Northwestern University study announced the program as successful in deterring gun violence. Professor Wesley Skogan at the Evanston school found that the number of shootings dropped between 16 percent and 34 percent in four Chicago neighborhoods with CeaseFire programs. Six CeaseFire communities saw a 42 percent average reduction in shootings during the first year of the program.

The study also shows that the program has lasting effects on such other challenges as getting jobs, returning to school or disengaging from gangs. Clients interviewed for the survey also reported that they built relationships with their mediators so that if, for instance, they felt tempted to use drugs again, they could call their mediator in the middle of the night.

The study concluded that the program saves the state and the taxpayers money by decreasing the number of emergency room visits and the number of criminals in the justice system.

Potential Medicaid reimbursements for hospitals
The state could garner up to $4.5 billion in federal funds over five years that Illinois would redistribute to hospitals, primarily facilities that care for the most needy patients. The legislature is advancing a plan that would need the governor’s signature and the feds’ approval.

About 200 hospitals in the state already have participated in a so-called hospital assessment program, collecting a total of $$2.3 billion over three years. That program is set to expire June 30. The plan approved by the House Friday afternoon (and expected to win Senate approval Saturday) would create a new program for the next five years.

The new plan would be larger than the existing program. It would distribute more than $640 million a year to the hospitals that voluntarily pay an assessment (a.k.a. tax) that leverages federal matching funds. This plan also differs in that more hospitals, particularly in the Chicago suburbs, would be considered “losers,” meaning they would pay out more than they collected in federal reimbursements. The feds view that favorably because the system would better redistribute the money to the most critical and needy hospitals in rural and low-income areas, says House Majority Leader Barbara Flynn Currie, a Chicago Democrat.

She added the state also needs the plan because without federal approval, “we will be looking for substantial dollars to fill a very deep hole in the state’s Medicaid budget.”

Sen. Jeff Schoenberg, an Evanston Democrat sponsoring the measure in his chamber, said hospitals agreed to the plan. “Everybody recognized that we all have a stake in it together, and without this infusion of new federal Medicaid funding, many hospitals in the state will have to either curtail their services or close their doors entirely. And we simply cannot allow that to happen.”

That’s partially because without the program, hospitals on average would be paid only 64 percent of what it actually costs to deliver the care, said Howard Peters with the Illinois Hospital Association.

The state also leverages about $130 million that’s left over from the Medicaid reimbursement program to obtain additional federal matching funds. They must be spent on health care, including services for mental health, developmental disabilities and long-term care. Schoenberg said that he would like to use some of the excess money for substance abuse and treatment programs, many of which have long waiting lists. That would require legislative approval.

Just for fun
To the right: Rep. Mike Fortner, a West Chicago Republican, explains the physics of a tornadic cell to fellow legislators and lobbyists after a tornado was sighted in Springfield.

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A lot has to happen in three days

The governor’s office called it significant, and it is significant when major state government officials stand together in favor of the first major construction plan in nine years. But it’s also significant that House Speaker Michael Madigan wasn’t there. And although everyone present said they agreed on the general proposals for financing a capital plan, they’re still negotiating fine details that would have significant effects on construction projects for roads, bridges and schools.

As usual this time in the legislative session (three days left to act on a state operating budget before the Constitutional deadline and before Republicans get a seat at the table), lots of things are in the air. For instance, the House stripped most of the Senate’s version of a state budget and will import its own revised plan. The Senate, meanwhile, stripped numerous House-approved measures because they would have required all rules for new laws to be approved by the General Assembly. The rules currently are reviewed and approved by a much smaller panel. By the Senate rejecting the rulemaking provision, those measures have to go back to the House.

Separate from the operating budget is the capital budget. Gov. Rod Blagojevich made it clear this afternoon he is not tying the two together. That’s good news for those waiting for an agreed operating budget because the proposed capital plan involves controversial revenue sources that could take awhile to win the support of enough legislators. It would require the state to lease the Illinois Lottery for an immediate influx of cash, expand gaming to include new casinos and slots at racetracks and divert money from the Road Fund and the state’s general fund. See more here.

House Minority Leader Tom Cross said the legislators who might hesitate to support those revenue ideas might be willing to consider given the dire need. “Let’s be clear. Not every member of our caucus is going to support this. And that’s the case in all four caucuses, but we have gone nine years without capital. So you’re seeing a willingness and an openness for members to look at ideas that maybe they wouldn’t have embraced eight years ago.”

The Senate GOP Caucus added that it’s concerned about the integrity of the plan for distributing the money, according to Senate Minority Leader Frank Watson. He said he wants a “lockbox” provision to ensure money would go to the projects promised. And he wants remaining money, which he said was roughly $650 million, to go into a fund that would help offset the loss of revenue going to education — because if the state leased a portion of the lottery, which is supposed to help fund the state’s public education system, then the state would lose that constant stream of money). That’s still in negotiations, Watson said. “The bill is not final, but we hope that when we get it, we’ll have a comfort level that will enable us to support this. And I feel that it will.”

The governor says he’s not looking beyond May 31 and said it’s hopeful to get a capital plan and an operating budget done by then. Jones touched on an “Obama factor,” which means Illinois Democrats plan to campaign for U.S. Sen. Barack Obama’s presidential bid before the Democratic National Convention in Colorado in late August. “We are currently working on the budget,” Jones said. “We are currently working on this capital plan. And we intend to be out of here because the next president of the United States will be looking for us in Denver.”

A Madigan spokesman wasn’t immediately available late this afternoon. I’ll add his comments as soon as I can.

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The puzzle gets another piece

The Senate unleashed its $16 billion pension deal tonight in a tense but brief hearing. The House did not include a pension package in its series of budgets approved yesterday, indicating a rough road ahead for the plan that the governor has tried for two consecutive years.

The governor achieved a $10 billion pension deal in 2003, and higher than expected savings resulted. This time, market forces change the equation a bit.

Sen. Don Harmon, an Oak Park Democrat, said the deal would take care of the next payment and reset a payment cycle set in 1995 for state contributions. The goal is to knock down Illinois’ $42 billion pension liability 11 years earlier than scheduled.

It’s “similar but not identical” to the plan floated in 2003. Gov. Rod Blagojevich secured a lower interest rate and generated money that could pay down the ballooning liabilities. But the plan had a twist. While it still ramped up payments in future years, the General Assembly allowed the governor to pay the required amount that year and then skip $2.3 billion in state contributions in fiscal years ’06 and ’07.

Harmon said this deal would only go into the state's five pension systems and would not include a “pension holiday.” Instead, he said it would ease the budget deficit. “It’s less money we don’t have.” He also said it would result in a $55 billion savings over the life of the bond issuance and allow a more manageable and regular payment schedule through 2038.

Senate Republicans on the committee, including Sen. Bill Brady of Bloomington, said the state still has the same unfunded obligation, $42 billion, and adds to its bond debt that it still has to repay. Counter to Harmon, Brady said the proposal would undercut the state’s payment by $500 million. If the state did nothing, the schedule calls for a $3.3 billion payment next fiscal year. Under the proposal, Illinois would contribute $2.8 billion, Harmon said.

Tension mounted as vice chair of the committee, Sen. Michael Noland, an Elgin Democrat, kept trying to cut off debate to avoid dramatics. It didn’t work, and Harmon invited more questions. In the end, Republicans walked out of the room to protest the 15-minute debate on a $16 billion proposal.

The Taxpayers’ Federation of Illinois opposes the new proposal because it lacks pension reforms that the group has called for for numerous years. The measure also pushes back the ramped up payments until later and sparks concern when playing with a significant amount of state dollars in the stock market, said David Eldridge, the group’s legislative director. In other words, there’s no guaranteed savings that the state achieved in the 2003 deal.

Some common ground
By Patrick O’Brien
Earlier Thursday, a Senate committee moved the budget proposals for 69 state agencies, including the Department of Natural Resources and each statewide executive office. According to Sen. Donne Trotter, a Chicago Democrat and point person on the budget, most agencies would receive little or no increase over last year’s funding.

One notable exception is higher education. The House and Senate proposals are almost identical. State universities would receive a 2.8 percent increase, which follows years of stagnant funding or decreases.

The Senate’s higher education budget was a “very optimistic sign,” said Rep. David Miller, a Chicago Democrat. “There’s going to be some changes at the end, but we’re not simply starting from scratch.”

IDOT: It’s that bad
By Bethany Jaeger
The Illinois Department of Transportation will spend a majority of $10.9 billion on fixing existing bridges and repairing old roads during the next six years. It’ll spend a fraction, $633 million, on building new roads. Milton Sees, transportation secretary, said in a Statehouse news conference Thursday that lower-than-expected motor fuel tax revenues and increased costs of materials means state dollars buy less than they did a few years ago.

He said, it is that bad. “We continue to struggle with deteriorating roads, urban congestion problems and [miss] rural economic growth opportunities as a result of the situation we find ourselves in.”

The department has felt the effects of higher gasoline prices as drivers find ways to reduce their consumption, whether it’s by buying hybrid vehicles or just not driving as much, Sees said. And because the motor fuel tax is a flat amount per gallon, it doesn’t increase with the price of gasoline. “So as consumption goes down, our revenues decline along with that.”

According to Dick Smith, IDOT’s director of the office of planning and programming, the motor fuel tax usually generates about $1.2 billion a year. So a 1 percent decrease expected for the current fiscal year translates to about $12 million. The department expects only about 1 percent growth in revenues during the next six years, as well.

The $30 billion infrastructure program announced by the governor’s capital coalition Tuesday, would help, and Sees called it “doable.” (The six-year plan released Thursday does not depend on the approval of a pending capital plan.)

Sees said there is a specific list of projects that would be funded under a capital plan, but it’s a “working document that’s not ready for release.” He did say the projects would include adding lanes to relieve traffic congestion and building new interchanges along the state highway system. It also would provide some much-needed money for resurfacing projects that otherwise wouldn’t get attention in the six-year plan.

‘Pay to play’ may be voted on Friday
By Patrick O'Brien
The ethics measure that seeks to divorce state contracts from political contributions to officeholders may see a vote on the Senate floor Friday, according to Harmon, who also is sponsoring the reform package. He said Thursday night that he believes the plan would pass the House if it makes it out of the Senate first. A last-second change to include nonprofit groups cleared a Senate committee today, and Harmon said the bill won’t be further altered.

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Trust plagues Goldie Locks and the three bears

By Bethany Jaeger and Patrick O'Brien
Former U.S. House Speaker Dennis Hastert started and ended a Statehouse news conference Tuesday by underlining the General Assembly and the governor’s troubled task of enacting a capital plan:

“We have about $9.5 billion in federal trust funds for covering a lot of things —highways, water projects, airports, transit — that if we don’t pass a piece of legislation that meets this time period so we can get shovels moving, trucks moving on the highway and take advantage of this construction season, those dollars will start to diminish because the trust fund’s diminishing.”

The other problem is a lack of trust between Gov. Rod Blagojevich and the state legislators. They can’t a) agree on a way to generate revenue to pay for a capital plan and b) spell out how that money will be spent.

Hastert was appointed by the governor along with Southern Illinois University President Glenn Poshard to serve as a buffer and move along negotiations for a statewide infrastructure plan. Hastert described the meetings with the legislative leaders as Goldie Locks and the three bears. The “porridge was never exactly right for everybody.” They drafted a proposal that he said should be acceptable to all. He ended the news conference this way:

“Is this perfect? No. But it’s the best that we could cobble together … and I think it has a very good chance of moving if everybody comes to the table and works together in a process. Will that happen? I can’t predict that. Thank you very much. End of session.”

He and Poshard announced a $31 billion capital plan, up from the governor’s original $25 billion proposal, for everything from water and sewer projects to long-term road projects that have been on hold for years. It also would fund projects for higher education facilities, as well as early childhood education space needs, and many other state and local initiatives for economic development and transportation.

At stake is $9.3 billion in federal earmarks for state projects, which Poshard and Hastert said are dwindling and vulnerable if Illinois doesn’t put forth the matching funds soon. “If we can’t get the job done with what we’ve done in the last highway bill … we don’t have a ghost of a chance getting those numbers again.” Illinois Department of Transportation Secretary Milton Sees said he expects to lose between $3 billion and $4 billion when the feds draft their next highway bill without a timely state match.

The proposed plan would generate those state matching funds by — this should look familiar — leasing the Illinois Lottery for immediate influx of cash; building a Chicago casino and expanding gaming, including slots at racetracks; diverting money from the state’s Road Fund, as well as the state’s main general fund, to back up the construction bonds.

The idea of leasing the lottery and expanding gaming, however, have gotten stuck in the legislative process before. And even if legislators trusted the governor to distribute the money as promised, they would risk alienating some voters by agreeing to privatize a state asset and expand gaming. On the other hand, they might win some supporters by rejecting the idea to raise taxes.

Trust is the underlying issue, however. Poshard said Democrats and Republicans in each chamber submitted priorities and requests, some of which were included in Tuesday’s proposal. But they also had the chance to weigh in on what it would take for them to trust the process of distributing the money, which Poshard and Hastert combined into “accountability provisions.” They include creating a “trust” fund (or lockbox) for revenue to be held until distributed, weekly leaders’ meetings, quarterly reports on status of the funds, a “good faith effort” on behalf of the governor to release the money as soon as money and spending authority are granted, and the trusty “memoranda of understanding,” essentially signed IOUs.

Quote Senate Majority Leader Frank Watson: “We need a lockbox that Houdini can’t get out of.”

But, here’s another telling Hastert quote: “The reason that we’re here is because there’s a stalemate, and we tried to come in —and sometimes fools rush in where angels fear to tread — but to try to bring the parties together. We have brought all five parties together, or, at least 4 and a half, at the table every day.”

Although leaders have been meeting with the governor and his negotiators since April, Illinois House Speaker Michael Madigan sent his majority leader, Rep. Barbara Flynn Currie, on his behalf. And Hastert said when he did meet with Madigan, Madigan listened but didn’t offer anything.

Meanwhile ...
The House started unveiling its version of a budget for the day-to-day operations of the state. That’s the annual budget as opposed to the multi-year capital budget. House Democrats, essentially, are advancing flat budgets for state agencies with some increases for union contracts and administrative costs. House Republicans, however, are banding together to oppose the plan.

Higher education is an exception in that it would get a 3 percent boost in funding, and
the committee unanimously advanced the higher ed budget plans.

We’ll have more on this tomorrow, when the Senate also could unveil legislation for its budget proposal.

Note: It doesn’t look like ethics reform will be called this week. We’ll keep you posted.

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Beginning of the end?

By Bethany Jaeger
State legislators and the governor have 12 calendar days before the state Constitution requires them to approve a state budget for day-to-day operations. There’s a strange feeling in the Capitol, almost a calm before the storm, that casts a shadow over the possibility that they’ll adjourn on time. There’s always an end-of-session rush to try to meet the deadline or face the need to acquire more votes — read, Republican input. But there’s no telling whether the brooding storm will produce a workable budget plan or whether lawmakers will fail to compromise and take the state into another overtime session. Either way, the next two weeks will be chalked up with wish lists with controversial funding sources (or lack thereof). Budget hearings in the House start tomorrow, when the Senate also returns to the Capitol.

Race to the Capitol
The state’s operating budget is one challenge. The other is a capital program for infrastructure projects across the state, which has been held up for years. Legislators could soon receive a proposal for such a plan. Leaders are expected to meet with Gov. Rod Blagojevich’s appointed negotiators Tuesday, and they could unveil an actual proposal soon, says Rep. Jay Hoffman, a Collinsville Democrat and floor leader for the governor.

Local governments, school districts and transportation departments anxiously wait for billions of dollars of state capital funds. Representatives of the horse racing industry and the 40,000 employees it includes say they have a way to fund that capital plan.

The horse racing industry leaders are back at the state Capitol to plead for state assistance. This time they’re trying to convince lawmakers that if the state helps them, they can turn more profits and help fund a $20 billion infrastructure program for the entire state.

The argument is that horse racing in Illinois is losing horses, trainers, agribusiness, and lots of money tied to the industry to other states. Many of those states subsidize the industry and offer larger prizes for winning a race. Blagojevich signed a measure into law nearly two years ago that would have shaved 3 percent of the profits from the state’s casinos to support the ailing horse racing industry, but the measure immediately landed in court.

In addition to the challenge of deciding how to revive the horse racing industry, lawmakers have to weigh the complicated option of using gaming to fund a statewide capital plan. Numerous industry insiders and a few pro-gaming legislators held a news conference in the Statehouse Monday afternoon to pinpoint HB 4194 as the solution.

Democrats Reps. Lou Lang of Skokie, Bob Molaro of Chicago, Hoffman of Collinsville and Republican Rep. Roger Eddy of Hutsonville joined the packed news conference. The controversial measure, sponsored by Lang, would create a Chicago casino, expand slot machine positions at the state's nine existing riverboats and allow slot machines at horse racetracks. It’s estimated to generate $2 billion that could be used for capital. But not only would it take a while for the state to actually collect the money, no one really knows whether the plan could raise that much money given the slowing economy. While Lang said the measure would have enough votes to advance to the Senate, lawmakers hesitate to support any revenue-generating idea without a specific and trusted process for distributing that money. Trust wears thin in the Statehouse, to put it nicely.

Leaders plan to meet Tuesday with former U.S. House Speaker Dennis Hastert, a Republican, and Southern Illinois University President Glenn Poshard, a Democrat, who have toured the state to urge lawmakers to compromise on the governor’s $25 billion capital plan.

Hotel fraud?
By Patrick O’Brien
A chronically troubled hotel with deep Illinois connections is headed for more trouble.

State Treasurer Alexi Giannoulias said in a Statehouse news conference Monday that an internal audit showed former owners of a Springfield hotel cheated the state out of millions of dollars. He turned the case over to state and federal investigators to find out if any laws were broken.

“I have a feeling this is just the tip of the iceberg,” he said.

Giannoulias paid auditors to review financial records of the President Abraham Lincoln Hotel and Conference Center in Springfield after the state took over the hotel from local businessman Bill Cellini last spring. Cellini has been named but not accused of wrongdoing in the ongoing corruption trial of Tony Rezko, political fundraiser and advisor for Gov. Rod Blagojevich.

The state gave investors a multimillion loan to renovate the hotel in the 1980s, but they rarely reported a profit and, therefore, didn’t have to make loan payments most years.

Giannoulias said investors diverted about $2 million in hotel profits for personal use, including paying more than $700,000 for legal representation against the state. Under the terms of loan, the hotel conducted its own financial audits that were then turned over to the state for review, according to Giannoulias. This allowed the pocketing of hotel profits to go unnoticed, he said.

Giannoulias said investors owe $30 million on the loan, but since the state took over the hotel, it generated a $1.2 million profit in one year. He turned the case over to the Illinois attorney general and to the FBI.

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Throw it into reverse

The Civic Federation lacks confidence in state leaders to rake in new cash and spend it wisely, which is partially why it withdrew its support of an income tax increase proposed last year.

The federation is a nonpartisan research body consisting of powerful corporate leaders in the Chicago area. It released a report today, reversing its position on a state income tax increase to generate new money to help pay down old and compounding debt.

“Last year, we supported a reasonable income tax increase if, and only if, it was tied to reform,” said Laurence Msall, president of the Civic Federation. He also serves on the Illinois Issues Advisory Board. “And some of those reforms would be very similar to what the Illinois General Assembly and the governor demanded of the Chicago Transit Authority, in terms of what they had to do before the state was support additional funding for them.”

Part of the Chicago Transit Authority deal negotiated in January included saving taxpayer dollars by increasing employee contribution rates, increasing the retirement age to 65 and shaving down health care benefits for future employees.

Last year, Msall said, the committee offered a modest income tax increase as an alternative to the Gov. Rod Blagojevich’s failed gross receipts tax on businesses. The recommendations started with momentum at the beginning of the year but deflated under a whole host of budget issues lasting throughout the year. And the legislature and the governor haven't shown signs of banding together behind reform any time soon.

“We have seen no evidence that there has been any serious effort, unlike three years ago when the governor stood up in a state budget address and said: ‘We have a big problem. We’re going to have to reform our pension benefit system,’” Msall said. “The General Assembly adopted only the most modest of those recommendations and then proceeded to take pension holidays, making the problem even worse.”

FYI: A special panel created by statute issued recommendations in 2005. You can read them here. Read more about the legislature’s pension holidays in Illinois Issues magazine here and in a state report here.

The Civic Federation's report says the governor’s proposed budget fails again to make “reasonable” payments to the pension system for public employees. As a result, the state’s compounding debt includes $44 billion in unfunded pension liabilities and another $24 billion in health care liabilities for retired state employees. Fun fact: That's about half of the state's entire budget.

The group also said it can’t support the governor’s proposed infrastructure program, which depends on privatizing the Illinois Lottery for an immediate influx of cash. The Civic Federation report said the proposal lacks a detailed plan for spending the money.

“There is no comprehensive improvement plan. There is a series of projects and lists,” Msall said. “You owe it to the public — and the General Assembly should demand — that they know what priorities are before they approve the extraordinary borrowing against the future revenue stream, which is what the lottery is.”

The governor’s budget office says the Illinois Board of Higher Education is responsible for evaluating and prioritizing its capital projects that would be included in a statewide infrastructure plan, and the state depends on a statutory formula for distributing capital funds for school construction projects. The Illinois Department of Transportation also has an extensive list of roads and bridges in need of repair, as well as a list for new roads and projects.

The Civic Federation’s overall message from last year still applies, however. The state should reduce, not increase, operating costs and new spending, which is why the group supports the governor’s proposals to cut most state agency budgets by 3 percent and to consolidate state agency functions to reduce administrative costs.

See “Shaky Business” in Illinois Issues, May 2007, to read about the business community’s support for a state income tax increase last year.

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Let the countdown begin

By Patrick O'Brien
Illinois very likely is heading toward another overtime session. The House has 14 working days until the constitutional deadline for adjournment, May 31. The Senate has 13. Given that some legislative days have been cancelled — the House canceled this Friday, and the Senate cancelled today so some members could work for the presidential campaign of U.S. Sen. Barack Obama in Indiana — legislators don’t seem rushed to finish business by May 31. (After that, both chambers need a three-fifths majority to approve legislation.)

History could be telling. David Dring, spokesperson for House Minority Leader Tom Cross, says the budget process mirrors last year’s, when each chamber passed a competing budget and a stalemate ensued. Lawmakers were called to Springfield at least once in all 12 months last year. This session, there haven’t been leaders’ meetings on the budget, yet. Leaders have met three times to discuss a statewide capital plan, although there’s little progress to report.

Dring added that he still thinks a May turnaround is possible if the political will is there. “A lot can happen in three weeks around here if people work together.”

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Fissures

By Bethany Jaeger and Patrick O’Brien
At the same time Gov. Rod Blagojevich and top Democrats and Republicans met in his Statehouse office to talk about a long awaited capital plan, House members one floor above rejected an idea Thursday to help pay for it. Members of both political parties voted against letting voters decide whether to increase the state income tax rate for the wealthiest citizens.

After the vote, House Speaker Michael Madigan walked out of the Capitol without attending the leaders’ meeting. It appears last year’s political fissure between the speaker and other leaders and the governor still exists, and maybe even deepened. House Majority Leader Barbara Flynn Currie attended the meeting instead.

Former U.S. House Speaker Dennis Hastert and Southern Illinois University President Glenn Poshard attended the meeting as part of Blagojevich’s plan to move along negotiations with bipartisan input.

After more than an hour, House Minority Leader Tom Cross came out of the meeting and said nothing substantial was discussed beyond the scope of a $10 billion plan, the same number mentioned last year. Cross also said the deal would be a consensus proposal designed so it wouldn’t have to be changed in either chamber, indicating long negotiations given the non-existent relationship between Madigan and Blagojevich, as well as between Madigan and Senate President Emil Jones Jr.

Cross and Senate Minority Leader Frank Watson were optimistic that a deal could be reached this spring session. But Watson also said that May 31st, the day the session is scheduled to end, “is just another day in the week.”

They scheduled another meeting for next week. Hastert and Poshard also are holding more public hearings around the state.

No progress for progressive tax
The so-called graduated income tax was expected to fail. Even the Democratic sponsor, Rep. Michael Smith of Canton, said he wasn’t surprised, that he knew some Democrats would vote against the idea and that Republicans would band together to reject it.

The measure would have created two brackets for the state income tax, applying a 3 percent rate on those making less than $250,000 and a 6 percent rate on those making more. Projected to generate $3 billion, it would have been split equally on education, a statewide capital plan and tax relief with an increased personal income tax exemption. If legislators approved the idea, voters would see the question on a ballot asking them whether to change the state Constitution, which currently applies a 3 percent flat rate regardless of income level.

Republicans argued that the Democrats knew the measure would fail but wanted the chance to be on record of supporting a plan to increase education funding and capital projects before the November elections. “You know it won’t pass,” said Rep. Bill Black, a Danville Republican. “Get your roll call. Attack the rich. Attack each other. Attack philosophical differences, if you will. But at the end of the day, what have we gained? We haven’t gained a yard. It’s not 1st and 10. It’s 4th and 2 in the fourth quarter, and this isn’t going to help. It just further divides us from the job we need to do.”

Smith said he resented the notion and was serious about wanting the proposal to advance, but his expectations couldn’t have been too high because he didn’t have any “serious conversation” with senators to get a feel for how the measure would fare in that chamber. The measure could come back for another vote or in some other form, he said. “I’m not going to drop the issue.”

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Lawmakers: Can you follow the money?

By Patrick O’Brien
Lawmakers still don’t know why Gov. Rod Blagojevich gave a $1 million grant to the wrong organization. The administration sent Deputy Gov. Louanner Peters to take the grilling Wednesday before a House committee, whose members say there are more questions now than before the hearing.

Peters testified for more than an hour but provided little new information about the grant to the Loop Lab School in Chicago. The governor said that the money was supposed to go to rebuild the administrative offices of Pilgrim Baptist Church in Chicago after a fire gutted the building. The school was renting the office at the time.

Beyond a history lesson about the landmark building, Peters continually cited an ongoing investigation by the Illinois Department of Commerce and Economic Opportunity that she said prevented her from discussing the grant. She couldn’t say how long the investigation would take. She referred to John Filan, chief financial officer of the state, who oversees the department but who wasn’t there to answer questions.

Peters dutifully responded to every inquiry, mostly referring questions to the administration’s lawyers. Peters also compared the grant in question to the pet projects of legislators, saying there was little oversight over those projects.

The stonewalling was complete when Peters and another administration official raced out of the room after the hearing without taking questions.

It’s still unclear how the school, a separate entity from the church, ended up with money instead. The governor previously called it a “bureaucratic mistake” that was handled by two former employees.

Rep. Jack Franks, a Woodstock Democrat and frequent Blagojevich critic, scheduled the hearing. He said real estate documents show the property went into foreclosure two months after the school paid John Thomas $1.3 million for the second floor of the building. The Chicago Sun-Times reported, based on unnamed sources, that Thomas was an FBI informant in the current federal trial of Blagojevich insider Tony Rezko.

Franks questioned Peters on what he deemed inconsistencies in the governor’s account of the deal, saying the grant was fast-tracked and ignored obvious “red flags” in the school’s recent past. Franks said the grant never should have gone through because a cease and desist order related to a sexual harassment charge against the school was on record. There also were concerns over a felony conviction of a school administrator who the governor later pardoned.

The school currently isn’t operating.

Franks promised more meetings on the subject and requested a list of documents from Peters for a future hearing. “We need to find out if this was a mistake or if it was done on purpose,” he said.

CDB: “Time is money”
By Bethany Jaeger
At the same time next door, more House members heard that the longer it takes to approve a statewide capital bill, the more likely the state will have to pay top dollar for unanticipated emergency repairs to state buildings, including schools.

“Time is money,” said Janet Grimes, executive director of the Capital Development Board, which oversees construction projects for state facilities. “Prices have been rising by as much as 5 percent a year. The price for construction has risen 27 percent since the last time the state allocated funds for the school projects.”

The number of projects classified as an emergency has tripled since fiscal year 2002, she said. “At that time, 13 projects were handled as emergencies, totaling $3 million. And last year that tripled. So we had 40 emergency projects totaling $10.5 million ... It’s definitely cheaper, smarter and more responsible to maintain buildings, and the state simply hasn’t been doing that.”

The agency seeks $2 billion for its portion of the capital plan, but Grimes said it’s up to legislators to approve the funding source. So far, that's selling the Illinois Lottery or expanding gaming. Both are buried in politics, which promise to drag out the debate and leave public buildings waiting for a long time.

Franks: “Throw the bums out”
By Bethany Jaeger
Constitutional Amendment 28: If voters believe a constitutional officer or a state legislator is taking the state in the wrong direction, Franks, the Woodstock Democrat, says they should have the ability to recall that official and elect a replacement.

The so-called recall provision would require voters to approve a change in the state Constitution. The legislature has to approve Franks’ measure for a ballot to pose the question of whether to allow a recall. The Illinois House continues to consider Franks’ measure and changed it Wednesday to remove judges from the measure, but it still has a long way to go.

Eighteen other states have a recall provision, according to Franks.

Opponents argue that voters already have the ability to kick officials out of office. “It’s called an election, frankly,” said Rep. Al Riley, a Matteson Democrat, during debate. Rep. Jay Hoffman, a Collinsville Democrat, added that a recall provision could lead lawmakers to become even more paranoid that they would lose their seats for disagreeing with their constituents.

Franks said it’s an “extraordinary measure that shouldn’t be taken lightly” and isn’t meant to be used if voters simply hold a grudge against a particular candidate. He added that a recall provision is necessary to regain voters’ trust in government, particularly given the recent series of federal investigations into state officials, including the current and past governor. Lt. Gov. Pat Quinn supports the idea, and the governor has said he too would support a recall provision.

“They think that their officials are supposed to be corrupt,” Franks said. “They think that’s just how it’s always going to be. And they don’t have the ability to change it.”

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Ill. delegation wants lawmakers to stop fighting

Hat-tip Newsalert. Surely they're not the only ones who wants the bickering to stop. From the St. Louis Post Dispatch...

Illinois' entire congressional delegation joined the pleas Monday urging the governor and state lawmakers to end months of acrimony and pass a capital spending bill.

Legislators return to work today in a Capitol building that remains hotly divided. A sign of the times, state House Minority Leader Tom Cross, R-Oswego, said in a Chicago radio interview Friday that the atmosphere in Springfield was "frosty" and predicted that the state government could be in for a repeat of last year's overtime summer budget session.

The legislative leaders and the governor's office seem to agree on only one point: The last capital construction bill was passed in 1999 and state roads, bridges, schools and more could sorely use a new one.

Hence, a letter signed by U.S. Sens. Dick Durbin and Barack Obama, both Democrats, along with the state's 19 representatives in Congress, Republican and Democrat alike.

"With each passing month, it becomes more apparent that our constituents want — and deserve — a new capital bill that addresses our state's extensive infrastructure needs," the letter reads. "Whether driving over multiple potholes or waiting for a late train or bus, Illinois residents are voicing their dissatisfaction with the status quo."

It's not the first time prominent officials have pleaded with Illinois lawmakers to put aside their differences. Both Durbin and Obama have made the suggestion previously.

But the question is and apparently has always been how to pay for it. Various proposals include more casinos or gaming positions, which has some support from some sides; leasing all or part of the lottery, which has enthusiastic support from Gov. Rod Blagojevich, a Chicago Democrat; and some form of an income tax increase, which has fierce opposition from the governor.

The bickering last year forced the legislative session, which traditionally ends May 31, into August. At one point, Blagojevich and state House Speaker Michael Madigan, D-Chicago, were practically not speaking. Even the friendly relations between the governor and state Senate President Emil Jones Jr., D-Chicago, were tested. Republicans Cross and Senate Minority Leader Frank Watson, R-Greenville, had to play peacemaker for a while.

The congressional delegation has an added concern: hundreds of millions of federal dollars for infrastructure remain in limbo, unmatched by the state. And more than a few officials fear that those dollars could dry up if intra-Springfield fighting continues.

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