House Dems paint picture without tax hike

By Bethany Jaeger, with Hilary Russell contributing
House Democrats maintain that without Republican votes, an income tax increase is likely to fail. And the back-up plan isn't pretty.

House Democrats did advance a two-year income tax increase and a phased-in earned income tax credit for low-income families this morning. Senate Bill 2252 would net about $4.5 billion for state coffers, House Majority Leader Barbara Flynn Currie said in committee. The personal tax rate would increase from 3 percent to 4.5 percent, while the corporate rate would increase from 4.8 percent to 7.2 percent, ending in 2011. The earned income tax credit would phase in from 5 percent to 7.5 percent the first year, followed by an increase to 10 percent the second year. It would be permanent after that.



Without new revenue, House Democrats could resort to sweeping money out of dedicated funds and refinancing debt as the only new revenue sources for a total of about $4.5 billion, according to Assistant Majority Leader Frank Mautino. That would result in state agencies getting about 80 percent of their annual budgets, and only about half of the grants for community services would get funded.

“So it’s not a partial budget,” Mautino said after committee. “That’s how much money is approved, and that’s how much they will get.”

Currie said during committee that the state is more than $7 billion out of whack today. And even if a temporary income tax increase generated $4.5 billion, the General Assembly would still have to curb spending.

“If anybody thinks this is a way to duck out of our responsibility to tighten our belts, the answer is, it doesn’t make it. But it will help prevent the kinds of disasters that real people face if we don’t do something to stem the tide.”

The lack of new revenue, she said, would result in a 68 percent cut across the board for state agencies. That would affect everything from childcare programs for low-income working parents to services for the developmentally disabled and mentally ill.

All Republicans in the committee voted against the tax increase and sided with business groups, which argued that the proposal would give Illinois the second highest tax rate in the country and further discourage businesses from investing in this state. Todd Maisch of the Illinois Chamber of Commerce added that the income tax increase would not address the deeper problem. “Between pensions and government-funded health care, if you don’t do anything to address those issues, you’re going to be back here in two years still needing another tax increase,” he said during committee. “The drivers of the costs are going to outrun the revenues you’re going to get from the tax increase.”

Rep. Mark Beaubien, a Barrington Hills Republican, said Illinois has gone down the road of a temporary tax increase before. “I think the citizens know where that’s going to go in the future.” The General Assembly levied temporary income tax increases twice in the 1980s. The 1989 increase was made permanent under then-Gov. Jim Edgar.

Meanwhile, the House committee also advanced a measure that would intend to soften the blow for retailers if the state increased the sales tax on cigarettes by a $1 over two years, as proposed in SB 44. Rep. John Bradley, a Marion Democrat, sponsored SB 415 in response to retailers' concerns, which we wrote about before. It would only take effect if the cigarette tax increase were approved.

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Nervous energy and four-point plans

The national economic doom and gloom is starting to cast ominous clouds on existing state budget problems, leading Gov. Rod Blagojevich and other state officials to propose some ways to adjust. So far, it seems as though the state is running in place. There’s no indication that the General Assembly and the governor are going to start getting along any time soon to follow through on some of these proposals. The legislature returns for its annual fall session Wednesday and Thursday. Friday is still up in the air.


The governor's proposal foreshadows this month's closure of numerous state parks and historic sites, as well as reduced human services, that resulted from $1.4 billion in budget cuts. While the first two rounds of money already have been transferred from special dedicated funds to help restore some of the funding, the governor hasn’t yet signed legislation authorizing the spending. He has until December 5 before it automatically becomes law.

In the meantime, Blagojevich released a four-point plan that includes borrowing money, asking the feds for some bailout money and withholding more state money. Announced through a news release, part of the plan would create a new law for emergency budget management. He seeks authority to hold as much as 8 percent of general revenue funds in reserves for state agencies, education, higher education, state pension funds and local government funding. That would be on top of the 3 percent reserves he already requested. Another portion of his new plan seeks as much as $3 billion in federal aid during the next three years.

Part of his proposal also relates to Comptroller Dan Hynes’ idea announced last week. It would allow the state to borrow money, which is nothing new. But instead of having to pay back the loan by the end of the state’s fiscal year (June 30), the state would have 12 calendar months to repay the loan. The premise is that because the comptroller would have more time to repay the loan, his office would have more flexibility in cash flow.

The proposal would need legislative approval by a three-fifths majority of each chamber so it could immediately take effect.

Right now, cash flow is a huge problem because the state can’t pay about $4 billion of its bills, including Medicaid payments to medical providers. The comptroller wrote in a letter to state officials to announce that the backlog could top $5 billion and inflict 20-week delays for payments by March. “To characterize this as an imminent crisis risks understatement,” he wrote.

Hynes’ spokeswoman, Carol Knowles, says the comptroller’s office is getting continuous complaints that unpaid bills threaten everything from police officers being unable to fill their gas tanks to prisons being unable to pay their vendors for food deliveries. Bills are paid as cash flows in, but the comptroller’s office also has to have enough money on hand to pay such long-term obligations as employee payroll and general state aid for schools. “It’s a very delicate balancing act,” she says, “and the larger the bill backlog is, the more difficult it is to answer the emergencies when they arise because it gets to the point where everything is an emergency.”

Senate Republicans describe the governor’s four-point plan as “begging and borrowing.” Sen. Christine Radogno, deputy minority leader from Lemont, says while she could support further belt tightening for state agencies or regular short-term borrowing as legitimate cash-management tools, she wants specifics that aren't available from the governor's press release. And she says she has concerns about short-term borrowing that crosses over into the next fiscal year, as proposed by Hynes. “I’m certainly willing to look at any proposal of the comptroller or the governor, but we just need to be careful not to fool ourselves and the taxpayers,” which, she says, are the same taxpayers who are footing the bill for the federal government’s $700 billion bailout package approved last month.

Cindy Davidsmeyer, spokeswoman for Senate President Emil Jones Jr., says he acknowledges that the state is facing a huge crunch, and he looks forward to hearing more details as they come out. House Speaker Michael Madigan’s spokesman, Steve Brown, says only that the plan is under review.

Education re-reform
Also Tuesday, a new diverse, well-funded education policy group announced efforts to issue comprehensive reforms by this spring, although it’s unlikely that the group’s recommendations would be ready to go by the time the legislature is supposed to enact a state budget for fiscal year 2010.

Founders of Advance Illinois, a nonprofit based in Chicago, plan to travel around this state and others to gather evidence during the next six months. The goal is to take a broad and long-term view of ways to reverse some of Illinois’ worst academic trends that hamstring its students and workforce.

“The bottom line is … that Illinois schools are performing, despite the fact that we’re the fifth largest economy in the country, at an average to below-average level,” says Robin Steans, executive director of Advance Illinois and sister of state Sen. Heather Steans of Chicago. “On any academic measure or any attainment measure you might care to look at, we’re trailing the nation. At all grade levels in all subject areas.”

Ellen Alberding, president of the Joyce Foundation, serves on the board and says the Chicago-based foundation funds educational policy efforts throughout the Midwest. Illinois’ condition sticks out, she said after the news conference, because a large gap exists between educational attainment of low-income minority students and higher-income white students. According to information released by the group Tuesday, Illinois ranks 6th in the nation for having one of the largest achievement gaps between African-American and white students. Alberding also said she was struck by a study of Chicago students that shows only 10 percent of eighth graders who score well on the Illinois Standards Achievement Test later score 20 or above on the ACT, which indicates that most students in the study were ill prepared for higher education.

“It’s outrageous that the state has its expectations so low,” she said.

The Joyce Foundation supports the new effort along with the Bill & Melinda Gates Foundation, the Chicago Community Trust, the Grand Victoria Foundation, the John D. and Catherine T. MacArthur Foundation, the McCormick Foundation and the New York-based Wallace Foundation.

Board members include a vast political mix, starting with co-chair and former Gov. Jim Edgar. The Republican unsuccessfully pitched a plan in the 1990s to reduce local property taxes and increase state income taxes as a way to reform education funding. He said Tuesday that he still believes the state relies too heavily on local property taxes to fund education, but the group would not focus on funding reforms. It only would announce recommendations for funding reforms as part of a more comprehensive plan, he said.

Deflecting the focus away from the question of whether taxes would increase, however, will be a challenge.

The other co-chair is former U.S. Commerce Secretary Bill Daley, the Democratic brother of Chicago Mayor Richard Daley and a rumored candidate for governor in 2010. Also among the board members is former U.S. House Speaker Dennis Hastert, a Republican who helped lead negotiations between Blagojevich and legislative leaders to draft a capital program for road and school construction projects. That plan stalled. Former state Sen. Miguel del Valle, a Democrat and current city clerk of Chicago, used to chair the Illinois Senate Education Committee. Del Valle said Tuesday that Advance Illinois “is the most promising” of all the efforts he’s seen to reform public education.

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Only half way there ...

... With a long way to go.

Gov. Rod Blagojevich approved a way to restore money that was cut from the state budget earlier this year, but human service providers, state parks and historic sites and hundreds of state employees are still in limbo.

Blagojevich signed into law a deal between the House and the Senate that authorizes the governor to transfer about $221 million from special dedicated funds that have “excess” money. (For example, a plumbing licensure fund has about $750,000 available from fees paid by people applying for a plumbing license.) The transferred money would go into a new fund, called the FY09 Budget Relief Fund, which serves as a lockbox that can only be used to restore money to human services, state parks and historic sites and constitutional officers who had to lay off employees or require paid days off.

But that's only half the solution. The other half is an appropriations bill, SB 1103, which authorizes the comptroller to write the checks. Without spending authority, the “fund sweeps” money just sits there.

The governor's office issued this statement: “The governor did sign the funds sweep bill, but the budget office and agencies have expressed concern over certain funds that are included in the bill. With that in mind, there is no certainty at this time how much money will actually be available and, thus, it would be preliminary to say how far this money will go.”

Rep. Gary Hanning, a Litchfield Democrat and House member who negotiated the deal, said the bill was in the public domain in the House for a week, and it sat in the Senate for two weeks. Democrats and Republicans of both chambers had an opportunity to voice concerns and ask for changes, some of which were accommodated before they sent it to the governor.

“All through that period of time, the governor and his people sat silently by and never weighed in one way or the other, so we assumed that they were OK with this bill,” Hannig said.

The governor's office offered another statement that his office made its concerns known in September, and the rest is up to the controller to decide which funds can be moved over.

Carol Knowles, spokeswoman for Comptroller Dan Hynes, said the measure, which the governor signed into law without changes, spells out which funds to sweep, how much to sweep and when to sweep. “There is no ambiguity what the law states,” she said. The transfers should be completed within the next day.

But even if the governor signs the spending bill without making any changes, he's not compelled to actually spend the money. To do that, he would have to send a voucher over to the state comptroller, who would then write the check. “He could sign the bill, but if he doesn't send over the vouchers, the comptroller still can't issue a check,” Hannig said.

The governor has until the first week of December to act on the spending bill. It could come up in the annual fall session — if there even is a “veto” session (because the House and Senate already acted on all but a few of the governor's various vetoes last month).

One more note: Before this mess started, the governor sought authority to transfer about $530 million (scroll down) from special funds. But his proposal would have let him sweep the money at any time in any amount up to about $530 million, Hannig said. The House changed the proposal to limit the spending to $221 million and to identify which funds could be swept and what the money could be spent on.

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Warning: Rocky road still ahead

State parks and historic sites would stay open. Substance abuse prevention and treatment services would avoid losing $55 million in state funding and the same amount in federal funding. State funding for human services would return to the levels approved by the legislature in May. The same would apply to the constitutional officers, which could hire back employees already laid off. Mass transit districts would receive more than $36 million in reimbursements for having to provide free rides to seniors and people with disabilities. But there’s a big “if.”

That will happen if Gov. Rod Blagojevich signs a plan approved by both chambers. The House approved the budget restorations earlier this month, and the Senate followed suit on Tuesday. But there’s no telling how long this could take. The Senate could send the approved measures to the governor’s desk right away, or it could wait for whatever reason. And once the governor does get the measures, he still has 60 days to sign them into law, veto them completely or send them back to the legislature with changes. Given the timeline or lack thereof, it’s questionable whether state parks and historic sites will close in October and November as scheduled.

All agree that the ball is in the governor’s court.

Rep. Mark Beaubien, a Barrington Hills Republican and budget negotiator for his caucus, expressed a concern about Blagojevich's next move. “Now he has the ability to take the veto pen and play games and eliminate programs to try to make different people look bad.”

Brian Williamsen, a Blagojevich spokesman, said the governor’s office has to review all of the details and added that it’s too early to speculate on a timeline. Williamsen could not say whether the governor would delay closing parks and historic sites if the House and Senate plan had potential to become law.

The House and Senate agreed to sweep unused money from the special state funds to collect about $221 million, which is included in SB 790. The package also would create a new fund, dubbed the “Budget Relief Fund,” so that the money could not be used for anything other than restoring the budget cuts spelled out in the spending bill, SB 1103.

The 15 votes against the fund sweeps were among Senate Republicans, who said there is no guarantee that the governor will sign the measure and, if he does, that he’ll release the money as intended.

The deal to accept the House’s version of the plan came only after much of the day was spent behind closed doors negotiating an even larger plan that would have increased funding for various programs, but the wish list ballooned out of control and eventually collapsed at the last minute. Literally at the same time, the Illinois Department of Revenue issued new information that revenue projections are coming in lower than anticipated. Income and sales tax revenues, as well as other tax revenues, are coming in below the levels on which this year’s budget was predicated. The difference: $200 million.

That slightly deflates the cushion that the governor has when distributing money throughout the fiscal year. But Rep. Gary Hannig, a Litchfield Democrat and budget negotiator for his caucus, said the $221 million in budget restorations that advanced to the governor’s desk Tuesday pay for themselves by transferring the same amount from special funds.

Sen. Donne Trotter, the Senate Democrats' budget negotiator, looked to the regularly scheduled fall session in November. “If there’s still an appetite to do more, then we can do more at that time.”

But the question of what the governor would do loomed like a black cloud. “There [are] no assurances — nothing that I can give — other than we know that there is a need, a necessity to get this done,” Trotter said. “And I think that we saw that, at least, in a rare occasion, the entire Senate that is present today voted for it. So we know at least what the legislators would like to see done. … It’s up to him of what he’s going to do otherwise.”

Which message are you sending?
Building on yesterday’s ethics reforms, the state Senate advanced a more sweeping measure that the governor tried but failed to advance through his executive powers. All GOP senators voted in support of the measure, five Democrats voted present and one Democrat voted against it.

Sen. Don Harmon, voted “present." The Oak Park Democrat sponsored yesterday’s successful pay-to-play ban, but he opposed the measure containing the governor’s proposals today because it sends the wrong message. He warned that approving a bill that almost everyone agrees is fatally flawed would undermine the behind-the-scenes negotiations already happening between both chambers and the governor’s office. He said it also could give the impression that the Senate is more interested in claiming that it advanced comprehensive ethics reforms than it is in ironing out the complicated and significant details with the House.

“Let’s negotiate this bill before we start throwing bombs across the building,” Harmon said before the Senate voted to approve the measure.

Fifty senators disagreed with Harmon and said approving the new reforms contained in SB 780 sends a different message: The Senate is ready to enact comprehensive reforms that could help regain the public’s trust during these troubling times. (That message is more likely to sound better on campaign literature landing in voters’ mailboxes from now until the November 4 elections.)

The legislation would enact more limits to political campaign contributions and shine more sunlight on who makes money off of whom. It would prohibit businesses with significant state contracts from donating to legislators and statewide political parties, prevent legislators from working in numerous government jobs as a second source of income, require more disclosure of legislators’ lobbying activities and reform the way the legislature enacts its own pay raises.

Through a news release, the governor applauded the Senate’s action. “This vote sends a message to the people that the tired tradition of double dipping, the fraudulent way pay raises are doled out and the deceitful way legislators who moonlight as attorneys can hide their clout-heavy client list should be a thing of the past.” His news release urged the House to continue the momentum and approve the more sweeping ethics reforms.

The Campaign for Political Reform, a Chicago-based good government group, testified against the legislation last night, saying it was fatally flawed and constituted more “political rhetoric” during the election season. But Cindi Canary, director of the think tank, said she has been working with other legislators and the governor’s office for the past few weeks on the governor’s ethics language.

The Senate president addressed the whole chamber but, at more than one point, seemed to speak directly to Harmon and Sen. Ira Silverstein, a Chicago Democrat who also voted “present.” (In the Illinois legislature, a “present” vote is intended to demonstrate opposition a flawed bill but support of the concept.) Both Harmon and Silverstein also happen to be among the names floating around as contestants to be the next Senate president when Jones’ term ends in January.

Jones said senators who oppose SB 780 want to either protect someone else or preserve their fundraising abilities so they can run for higher office. Silverstein later said that Jones’ comments are part of a political game and won’t hurt other negotiations. “But enough is enough,” he said. “You have to stand up for what you believe in.”

The only senator voting against the legislation was Sen. Mike Jacobs, an East Moline Democrat who often speaks out against Blagojevich. He repeated earlier sentiments that “the cancer of Illinois is the governor.” Jacobs made the point that the governor’s ethics legislation approved by the Senate today would not target the actions of convicted felon and political insider Tony Rezko, found guilty of 16 counts of federal corruption. It also wouldn’t have stopped another political insider and hefty campaign contributor, Ali Ata, from testifying that he donated to the governor’s campaign in exchange for a high-powered state job.

Sen. James DeLeo, the Chicago Democrat sponsoring the governor's ethics bill, defended the measure and said it wouldn’t stop drug dealing or bank robbing, but it would improve the transparency of state government.

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Pay-to-play ban becomes law

Monday did become Ethics Day. After three years of back-and-forth, the Illinois House and Senate finally agreed and enacted landmark ethics reforms that will become effective January 1. The governor and some legislators already are trying to expand the so-called pay-to-play ban, but that could take just as long as the first effort. In the meantime, Monday’s action is likely to generate a lot of campaign mail as incumbents and candidates enter the home stretch before the November 4 elections.

Meanwhile, as I write this, budget negotiators from both chambers and both political parties are meeting behind closed doors to hash out a plan that would prevent state parks and historic sites from closing this fall, as well as prevent hundreds of state employees from losing their jobs. Whether they will strike a compromise, however, won’t be known until Tuesday, when both chambers will reconvene in another off-season legislative session.

All day Monday, which included multiple special sessions called by Gov. Rod Blagojevich, served as a perfect example of how everything will change in January. In addition to new ethics laws that will affect the governor’s fundraising abilities, January marks the end of Senate President Emil Jones’ reign. Throughout the day, there was an acute awareness that Jones is on his way out of office with numerous individuals interested in taking his place. More on that later.

One set of ethics reform down, more to go
The Illinois Senate agreed with the House to override Blagojevich’s changes to HB 824, meaning new campaign contribution rules will take effect in the new year. Businesses holding state contracts worth more than $50,000 will not be able to donate to the political campaigns of the officeholder who signs the contract.

The Senate president said the new law contained in HB 824 doesn’t go far enough. “It turns hard money into soft money,” Jones said, later adding, “They’ll still be able to give the soft money through the back door.” He meant that instead of donating directly to the officeholder, state contactors will still be able to give money to statewide political parties that turn around and filter the money to the officeholder who signs the contract, anyway.

Jones supports the governor’s proposals, which would expand the so-called pay-to-play ban. The governor’s amendatory veto language was inserted into a new bill. It would:

• Ban businesses that hold significant state contracts from donating to legislators and statewide political parties, as well as statewide officeholders;
• Prohibit legislators from working second jobs in any unit of government, with some exceptions;
• Clarify the process by which legislators vote to accept their pay raises.

The Senate sponsor, Chicago Democratic Sen. James DeLeo, said SB 780 would level the playing field and help legislators avoid the perception that money buys influence.

Cindi Canary, executive director of the Illinois Campaign for Political Reform and a main force behind HB 824, said it felt odd, but she had to oppose the new measure during a Senate committee Monday evening. She said the more expansive ethics legislation is “not ready for prime time, yet.”

She said she supports the concept but believes the governor’s proposal isn’t the right vehicle for enacting contribution limits on legislators. Banning state contractors from donating to elected officials who have no control over state contracts could invite a legal challenge based on the First Amendment that protects free speech, she said. She also questioned the fallout of prohibiting active state legislators from also working in some public sector jobs but not others. And she said the one aspect that would be ready to go if it were proposed as a stand-alone measure is the portion that would clarify the system of approving legislative pay raises.

Sen. James Clayborne, a Belleville Democrat, agreed with Canary and said the governor’s proposals need some more work, but he voted to advance the measure to the full chamber in hopes of working through more changes before a final vote.

Restoring budget cuts
Meanwhile, budgeteers are working behind closed doors in an effort to compromise to restore some of the governor’s $1.4 billion in budget cuts, which are resulting in plans to close 11 state parks and 13 historic sites, lay off hundreds of public employees and drastically reduce state funding for such human services as substance abuse treatment and prevention.

Earlier this month, the House approved two measures that would sweep about $221 million from special funds to plug some but not all of the budget holes. (See the spending portion in SB 1103.)

Sen. Donne Trotter, a Chicago Democrat and budget negotiator, said the Senate Democrats found $42 million of that $221 million that they would like to spend in a different way than approved by the House. That includes $37 million the House included to reimburse mass transit districts for the free rides granted to seniors and people with disabilities enacted earlier this year. The Senate Democrats would take that out and shift the funding, for instance, to increase the amount of money for college grants through the Monetary Award Program. The House also would restore funding for constitutional officers at 100 percent of the original funding level, while the Senate Democrats would restore them at 75 percent.

Republicans are involved in the budget negotiations. According to Patty Schuh, spokeswoman for Senate Minority Leader Frank Watson, the GOP Caucus prioritizes restoring funding for state parks, historic sites and human services. But members argue that it doesn’t make sense to restore funding to the parks and historic sites and then sweep money from the special fund dedicated to the Department of Natural Resources.

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More of the same

Most state agencies and services will remain funded at or below the same levels as last year, with slight increases for such items as education, higher education and the legislature’s annual 3.8 percent pay raises. The Illinois House failed today to restore most of the budget cuts that Gov. Rod Blagojevich implemented to balance a lopsided spending plan sent to his desk this summer. And the Senate still doesn’t plan to return to override nearly $480 million of the budget cuts that the House voted to restore this afternoon.

In May, the House and Senate approved a spending plan that exceeded the amount of money the state was projected to generate by about $2 billion, according to the governor’s budget office. So the governor cut $1.4 billion, often striking the increases that legislators sought for everything from alcohol and substance abuse treatment to frontline staff at prisons. But he also scratched entire lines from the budget, including $16 million from a Monetary Award Program for low-income college students.

While the governor’s office said Blagojevich acted “responsibly” to balance the budget, Rep. Gary Hannig, a Litchfield Democrat, called the governor’s method of balancing the budget “unfair” and said the cuts went “too far and were too deep.” Hannig said most Democratic members would have preferred that Blagojevich make more uniform cuts across the board or delay the payment of bills until the next fiscal year.

Minority Leader Tom Cross said the House GOP agreed that some cuts were “too deep,” but he added that they all could have avoided the situation had the House Democrats not approved a state budget that they knew had such a wide spending gap.

“We don’t agree that it’s unbalanced,” Hannig said. “We think it’s up to the governor to manage it.”

A majority of House members, including some Republicans, did vote to restore Medicaid funds that, if cut, would further delay state reimbursements to hospitals and nursing homes that care for Medicaid patients. And they agreed to restore money for such social services as the state Autism Program and centers for independent living arrangements for people with developmental disabilities, but both the Medicaid delays and the human service funding levels are likely to stand because the state Senate still does not plan to return to Springfield to overturn any budget cuts without new revenue sources to pay for them.

“There’s no money to go with it,” said Cindy Davidsmeyer, spokeswoman for Senate President Emil Jones Jr. “They did not pass any revenue.”

The one revenue idea that seemed to gain momentum in the House has now coasted to a stop. Rep. Sara Feigenholtz, a Chicago Democrat in charge of the Human Services Appropriations Committee, said she was trying to cut a deal with House Republicans to transfer extra money from specific dedicated funds to the state’s general fund, which would free up money to reverse some of the budget cuts to human services. That fell through, Feigenholtz said. “But we’re going to keep plugging away at it.”

The House and Senate are scheduled to return to Springfield November 12 for regular session to consider vetoes. House Speaker Michael Madigan closed today’s business by saying, “If the need arises in the interim, I may call the House into session.”

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Let's be clear

Yes, Gov. Rod Blagojevich cut $1.4 billion out of the state budget, but even House Minority Leader Tom Cross recently said the governor didn’t have a choice. The Illinois General Assembly approved a budget that, by the governor’s count, authorized spending $2 billion more than it could afford.

While the state Senate approved a few revenue ideas that would pay for the extra spending, the House did not. The Democratic leadership said it’s up to the governor to balance the budget, so legislators expected the governor to make such cuts. Blagojevich had to either cut the increased spending over last year’s amounts or, as he described it, write checks that bounce.

So now the scene has been set for the House to vote this week on whether to restore some or all of the funding cuts. Democrats likely will have enough votes to advance the restored funding levels; yet, the House is unlikely to approve the revenue ideas needed to pay for the increased spending. The budget overrides also would need Senate approval within 15 days. In that chamber, Democratic leadership so far has been disinclined to return to Springfield before the annual November session, particularly if the House only restores funding levels without the associated revenue enhancements.

The scenario increases the likelihood that at least some or most of the funding levels will remain as enacted by the governor, at least until November.

There is a chance the House could approve one quasi revenue enhancement, but it just transfers money from dedicated accounts to the state’s general account. The so-called fund sweeps have been estimated to free up about $300 million to spend on whatever the House specifies, potentially human services.

Don’t expect a whole lot of Republicans to support that plan, and don’t count on the Senate to suddenly go along with fund sweeps that Senate President Emil Jones Jr. recently dismissed as a “drop in the bucket.”

At a Statehouse news conference this morning, Republican Caucus Chairman Rep. Dan Brady of Bloomington said it would be extremely difficult for GOP members to “pick and choose” which funding cuts to restore when Republicans never approved extra spending in the first place. (The caucus united in late May to cast “no” votes on the spending plan crafted by Democrats, but Democrats, the majority party, had enough votes by themselves to approve the budget bills.) Brady added that his caucus historically has opposed transferring money out of dedicated funds into the state’s general fund, although they're caucusing right now to decide where they stand.

That’s a brief synopsis of how we got here. When considering where we could go, look toward November. The House Democrats and the governor could swap a few jabs at each other in the meantime, particularly as it gets closer to the November 4 elections. However, little might change before then.

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Tough times

The waiting list we told you about in June in Illinois Issues magazine could get worse if the General Assembly doesn’t override the governor’s recent veto of more than $43 million from community-based treatment programs for substance abusers.

The budget cuts could cause layoffs, program closures and “insurmountable” waiting lists for services, said Keith Kuhn, community director at Gateway Foundation in Springfield. The trickle-down effect would reach emergency rooms, mental health services, prisons and courts.

“A lot of the progress that we’ve been making in Illinois in trying to reduce the number of individuals incarcerated for addiction-related issues, a lot of those gains will be lost,” Kuhn said during a Statehouse news conference this afternoon. “And that would be a real shame that we had invested that much time, money and effort to only take significant steps back.” He described such a system as “barbaric” in the way it would approach addiction-related services.

Kuhn said the governor’s cuts reduce state funding for addiction treatment services in half, from $86.6 million to $43.3 million. “When factoring in other areas also receiving funding reductions, the cuts to our existing treatment service system total a little over $55 million.” Specific programs include those for domestic violence, youth in the court systems and temporary assistance for needy families. And once the state funding depletes, federal matching funds also decrease. So the effect doubles from $55 million to $110 million, he said, adding that amounts to about half of the $252 million total budget for substance abuse services.

Unlike other state programs where the governor simply erased the increases above last year’s funding levels, the cuts for some substance abuse prevention and treatment programs were “zeroed out,” or erased completely, said Peggy Powers, chief operating officer of the Illinois Alcoholism and Drug Dependence Association in Springfield. “This is gutting what was actually awarded during FY08.”

“The fact that it’s cut from the base of the FY08 funding level is something that has not occurred wholesale in any other programming,” she said. “We don’t know how the addiction treatment system came into the crosshairs of the governor’s cutting ax, but it certainly has, and it’s an incredibly crucial item.”

There’s some skepticism that the governor’s budget cuts target the particularly sensitive area of substance abuse to grab attention and to further apply pressure on the House Democratic leadership to approve funding mechanisms that would prevent these cuts. The governor’s budget office did not return my phone call this afternoon.

The House is scheduled to come back to Springfield Tuesday through Thursday to consider the governor’s budget cuts and attempt to override some of them. Some items that were reduced require a simple majority of 60 votes. Other items that were cut out require 71 votes to be restored.

Some could be restored under a revised revenue idea in the House that would allow the governor to sweep about $300 million from special dedicated funds and pad the state’s general fund. But it has potential to get complicated when the House Democrats likely tie those so-called fund sweeps to specific program areas — possibly such human services as substance abuse treatment and prevention.

Fund sweeps wouldn’t guarantee funding. The Senate would have to approve the revenue idea, as well as any overrides of the governor’s veto. But the Senate so far isn’t planning to come back before November. That could change.

November would be too late, according to Kuhn, who said agency offices would have to close or take on huge debt to stay open before then.

Many other groups also are worrying that the budget cuts would hinder current and future services. The Child Care Association of Illinois issued a press release saying a $45 million cut will affect services for abused and neglected children and foster parents. The Partners for Parks and Wildlife, including members of the Sierra Club, the Illinois Association Park Districts and the Nature Conservancy, will join forces to fight a 20 percent funding decrease for the state Department of Natural Resources. The group projects a loss of 163 jobs and zero out funding for the Water Supply Planning and Management Program and the Wildlife Prairie Park in Peoria.

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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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It's close

By Patrick O’Brien and Bethany Jaeger
The House and Senate may have drawn closer to agreeing on a state budget today, but it’ll come down to Friday and Saturday to find out whether the legislature is headed into overtime session.

Negotiators likely have found a common ground on school funding, which would increase by between $500 million and $530 million, according to Rep. Gary Hannig, the House budget negotiator. Higher education funding levels also are relatively close, granting nearly a 3 percent increase across the board. Budget negotiators need to work out funding levels for community colleges.

The main sticking point in the overall budget appears to be with the House Democrats, who want to increase spending for human services. But Hannig said the House tomorrow likely will present two more substantial portions of a budget that would represent an agreement between the chambers.

The House sent two smaller, less-controversial portions of the budget (here and here) to the governor this afternoon. They would fund such agencies as the Capital Development Board, the Illinois Commerce Commission and the Illinois Workers’ Compensation Commission at mostly current levels.

“It’s more likely that we would take up the rest of the budget perhaps tomorrow,” Hannig said. That leaves tens of billions in spending still under negotiation.

Whether the final budget will be balanced is up to debate.

Rep. Renee Kosel, a New Lenox Republican, said this year’s budget process has made it impossible to know whether the Democrats’ plan carries a deficit. “I can’t tell you whether it’s a flat budget or whether it’s a balanced budget because we don’t have all the pieces,” she said. She added that increased education funding is necessary because of increases in enrollment.

Over in the Senate, Democrats showed a rare sense of solidarity as they approved two ways to plug a projected $500 million hole in the budget.

They had to scurry around the floor to ensure all their ducks were in a row to approve a $16 billion borrowing plan. They did. The plan would pump money into the increasingly expensive pension systems for public employees. They later approved a mechanism that would allow the governor to sweep about $500 million out of special dedicated funds, which would help put more money toward education and leverage up to $530 million in new federal matching funds.

All Republicans voted against the plans. That’s a sign that the pension deal faces a severe challenge in the House, where some Republicans would have to support it for the plan to pass. Quote Hannig: “It’s hard for me to see how you can find 71 votes out here. I have advised the Senate of the difficulty that they will face in the House.”

Senate Democrats defended the pension bonding proposal as a way to refinance $42 billion of debt at a lower interest rate, saving the state about $55 billion in the long run. It also would free up $500 million that otherwise would have been earmarked for the state’s contribution to the five pension systems next fiscal year.

Republicans dismissed the bonding scheme as risky for two reasons. Current market conditions can’t guarantee generous returns on investments, and the governor and the legislature can’t be trusted as they continue to fudge with the payment schedule set in the 1990s.

“This is more about budget relief than it is about fixing the pensions,” said Sen. Christine Radogno, a Lemont Republican.

Senate Minority Leader Frank Watson likened the plan to an “Enron borrowing scheme.”

The so-called fund sweeps legislation would not only leverage federal funds and free up existing state dollars, but it also would be restricted by federal rules on how they could be spent, said Sen. Jeff Schoenberg, an Evanston Democrat sponsoring the measure. He said the federal rules address the concern that the legislature relinquishes too much power to the executive branch.

Nearly 30 funds also would be prohibited from being swept. They include funds for veterans’ homes, teachers’ health insurance and public transportation needs, as well as a motor cycle riders’ safety training fund that landed in court last year.

The House would need a regular majority to approve fund sweeps, meaning Republican votes would not be needed if all Democrats were on board.

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A, B, C, D, E, F, G

Gov. Rod Blagojevich’s health care plan emerged in Plan D today (we wrote about Plan C last fall). But the administration may have to develop Plans E, F and G before his desired expansions become law.

The health care plan was repeatedly denied as an executive order and even challenged in federal court, but it reappeared in the legislature and received Senate approval along partisan lines Thursday. Democrats voted “yes,” and the package includes incentives for House Democrats to support the expansions by including money for projects in their districts that the governor vetoed out of last year’s budget. But the one-time funding sources and the increased spending is likely to stall in the House, to put it nicely.

Senate Democrats announced the package would offer $530 million for member initiatives, but they would rely on so-called fund sweeps. This and previous administrations have skimmed “surplus” money from dedicated funds for such services as controlling pollution and preventing youth drug abuse. Those funds accumulate money through licensing fees and a variety of sources that are supposed to pay for the costs of regulating and operating those services (see background on fund sweeps here). The Senate package would declare some special funds off limits. They’re listed here and here.

Skeptics argue that giving the governor a $530 million “blank check” has no guarantee he actually would distribute the money for projects in their districts.

Senate Republicans renounced the plan for expanding health care when the state already is behind in reimbursing Medicaid providers and faces a budget deficit this year.

Senate Minority Leader Frank Watson of Greenville added that not all the families eligible for the program need a state subsidy. “When someone’s making $85,000 a year, a family of four, don’t they have some personal responsibilities to take care of themselves and provide for their family? Does the government have to do everything for them?” he said. “I can understand why this is a program for those in need. It’s a wonderful program, the Medicaid program, for people who are in need. But I don’t think somebody making $85,000 is necessarily someone in need.”

The sponsor, Sen. Terry Link, a Waukegan Democrat, disagreed. He said families making $85,000 can have little disposable income after paying astronomical health care costs each month. Offering state-sponsored health insurance to them could save money, he said. “If you don’t think we’re paying for it right now for the uninsured, you are. You’re paying it in premiums in your own [health insurance]. This is something that we have to do.”

State funding for the program, however, would be in jeopardy every year. Initial costs are estimated to be $43 million, but Senate Republicans estimated the cost of the program once fully implanted could reach $300 million. And there’s no dedicated funding source, argued Sen. Chris Lauzen, an Aurora Republican. But once lawmakers approve a health care program, it’d be politically difficult to cut funding in later years. So, as Link said, legislators would have to prioritize and cut where possible every single year.

Some Senate Democrats commented that the entire package was bad for the state, but they voted in support of it anyway. It is an election year, after all, and playing along now could help them negotiate for things they want in next year’s budget, which starts July 1.

To recap, the governor’s health care expansions would do the following:

• Young adults up to age 19 who have chronic illnesses would qualify for All Kids benefits regardless of income or citizenship status.
• Under the existing FamilyCare program, families that live in Illinois, that have been uninsured for at least a year and that fall at or below 200 percent of the federal poverty level would qualify for state-sponsored health insurance. They would pay a monthly premium based on income.
• And all uninsured women could receive benefits under the existing Illinois Breast and Cervical Cancer Screening and Treatment program.

In summary: The plan has little chance in the House, so it’ll be interesting to see what else the governor will do to push his health care expansions into law. He’s still got 22 letters left in the alphabet.

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