Governor: Budget plan won't fund the full fiscal year

By Bethany Jaeger
Gov. Pat Quinn started using his unprecedented discretion to spread around about $3.4 billion largely to prevent drastic cuts to human services, followed by health care, education and public safety programs. At the same time, he continued to outline general areas of state operations that will get cut by $1 billion total. However, he said the reductions won’t free up enough money to satisfy such spending needs as financial aid for needy college students and health care liabilities for state employees and retirees.

During a Chicago news conference Friday afternoon, the governor’s office said the revised operating budget also does nothing to address the exceptionally high $3.9 billion backlog in unpaid bills. As a result, Quinn said he will continue to urge lawmakers to consider a temporary income tax increase to get through the rest of this fiscal year when they return to the Capitol in October.


Quinn said the roughly $26.1 billion spending plan would run out of money before the fiscal year ends next June. “We are aware of the fact that we are going to come up short this fiscal year.”

The General Assembly approved the spending plan July 15, giving the governor wide discretion in spending lump sums for each state agency. Legislators also approved a $3.4 billion short-term borrowing plan to make the state’s contribution into the public employee pension system, freeing up that same amount to put towards state operations. Of that, $2.2 billion is dedicated to community-based human services, while another $1.2 billion is up to the governor to divvy out. The plan also charged the governor with cutting an additional $1 billion.

Quinn said on Friday that he decided to spread the cuts out in a way that would maximize federal matching funds, as well as federal stimulus dollars. And he said he chose to fund health-related initiatives that focus on disease prevention and that could reduce demand for more expensive services later, including home health programs that allow senior citizens to remain in their homes rather than be sent to more expensive nursing homes.

The general areas of reductions have not changed since announced last month. The administration still plans to cut $185 million from state operations. The administration already sent out layoff notices earlier this month. Some employees will lose their jobs. Others will fill vacancies. Lawmakers and executive branch workers also will have to take one furlough day a month. The administration wants unionized employees to consider such concessions, but that would require the unions to open their active contracts that provide for annual pay raises.

“Do we really need the pay raise for union employees in the coming fiscal year, given all the things that have happened in this fiscal year?” Quinn said. “That’s $125 million. If the union said, ‘Well, we’ll take a pay freeze. We understand that we don’t want to, but we’re going to do that,’ then they can help save a lot of jobs.”

The idea is strongly opposed by the American Federation of State, County and Municipal Employees Council 31, the largest public employee union. Officials have met with the administration to bargain over the impact of layoffs, but they have not negotiated whether unionized employees will take furlough days, according to Anders Lindall, Council 31 spokesman.

“Should the administration make a proposal, we’re obligated to listen and prepared to do so,” he said in an e-mail. “But the height of this terrible recession is the worst possible time to reduce services to Illinois residents, whether by furlough or layoff of the frontline employees who make those services happen.”

Jerry Stermer, Quinn’s chief of staff, said frontline employees such as Department of Corrections officers will not be subject to furlough days because they would be replaced by fellow workers who would be paid for overtime. Stermer said the administration within the week would release more details about which employees would have to take unpaid days off.

Other general areas of spending reductions include grants to local agencies and governments, which would be reduced by $250 million.

Even after the cuts, the administration contends that Medicaid funding will fall $600 million short of the need, and financial aid for low-income college students will be reduced by $225 million.

“Some legislators screamed to the heavens, ‘Cut, cut, cut,’” Quinn said. “We have cut. We have cut from here to Kingdom Come. I don’t like college scholarships being cut $225 million. That’s our future.”

On the other hand, the administration does plan to put more money toward some education programs, human services and other public health and safety initiatives.

As part of the $3.4 billion borrowing scheme, Quinn must dedicate $2.2 billion to human services. Here’s how he said he would spend it:
- $1.4 billion for grants to programs that serve people with developmental disabilities, drug and alcohol addictions and mental health needs.
- $342 million for Department on Aging community care program, aimed at keeping seniors in their homes.
- $272 million for the Department of Children and Family Services for court-ordered services.
- $27 million for community adult education and GED services.
- $18 million for Chicago-area mass transit subsidies and free rides for seniors and people with disabilities.

The remaining $1.2 billion is slated to be split among programs related to health, education, disease prevention and public transportation. Some examples include:
- $300 million for Medicaid.
- $700 million for group health insurance for state employees and retirees.
- $85 million for early childhood education (brining it up to about 90 percent of last year’s funding levels). See our July 21 blog for background.
- $11 million for bilingual education (bringing it up to about 90 percent of what they were operating at before).
- $17 million for HIV/AIDS community-based programs (“pretty much full strength” funding levels compared with last year).
- $9 million for breast and cervical cancer screening programs.
- $13 million for Amtrak.

Stermer said while the new spending plan authorizes $26 billion in spending from the general revenue fund, it falls $1.4 billion short of funding services at last year’s levels and does nothing to address the $3.9 billion backlog of unpaid bills.

The cuts that are being implemented now may not be the last, he said. “We may have to make additional cuts as time goes on if we cannot make resolution with the General Assembly as to the unmet needs.”

He referred to the administration’s belief that an income tax increase will be necessary to get through the rest of the fiscal year.

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12-month budget deal within reach

By Bethany Jaeger, with Jamey Dunn contributing
The top four legislative leaders and the governor have a general agreement to work toward a full 12-month budget, as opposed to a partial-year budget that would last only five months, without raising income taxes.

But even with a general agreement, the state still is likely to face a deficit that the legislature would have to address this fall or winter, possibly during its annual fall “veto” session. The size of that deficit, however, is still unknown or, at least, debatable. The governor’s most recent estimate is a $9.2 billion gap in revenues versus spending.

The leaders met twice with the governor Tuesday. Senate Minority Leader Christine Radogno said after the second meeting that while the state would still have a massive backlog of unpaid bills, the revenue outlook could improve with activity from the federal stimulus package, the statewide construction program enacted Monday and other longer-term reforms to Medicaid and pension liabilities sought by Republicans. “So we have to wait and see how the reforms and how the stimulus elements come together, and that may improve our revenue position,” she said. “I don’t know that. But I do know, as of tonight, we should avoid having a meltdown in state government.”

Not all were so sure. “They’re close," said Rep. Art Turner, a Chicago Democrat, "but … close counts in horseshoes. This is politics. We still haven’t gotten there, yet.”

The new fiscal year started July 1. Layoff notices to state employees went out July 7. Numerous human services providers that get state funding have reduced programs and laid off their own employees because their shoestring budgets can’t survive without knowing when they would receive their next state payments.

The general agreement among legislative leaders includes enacting a 12-month budget that relies on revenue from refinancing state debt (Senate Bill 1609, which already was enacted), sweeping dedicated funds (SB 1433) and borrowing more money. The short-term borrowing scheme has changed from its original version. Instead of floating $2.2 billion in bonds, the state would float $3.6 billion. The governor also would still have to cut an additional $1 billion in spending. The legislature would give him wide discretion to cut as he saw fit.

The short-term borrowing would help the state make its $4 billion payment into the public employee pension system this fiscal year. Borrowing would free up money that would be used to prevent severe cuts to community-based services. While numbers vary, one estimate by a House Democrat is that the new budget deal could result in service providers receiving about a 13 percent cut, as opposed to a 50 percent cut, as previously approved. The governor vetoed that measure (SB 1197).

Human services

So instead of the so-called 50 percent budget for human services, providers would get about 87 percent of what they received in state support last fiscal year.

“We’re getting very close to what [the governor] was looking for,” said House Minority Leader Tom Cross. But, he added, the situation has been painted as more severe than it needed to be. “I think the approach a month ago was to attempt to scare legislators into a tax increase. I didn’t think that was a good approach,” Cross said. “I think at the end of the day, [cuts to human services] will not be nearly as severely as the governor portrayed six weeks ago.”

Both Republican leaders and Senate President John Cullerton added that state employees and service providers now need reassurance that they’ll still get paid. “Unfortunately, some people come to believe that they’re going to be shut down, that their not-for-profit agencies are not going to be able to operate,” Cullerton said. “And that’s been unfortunate because that was never the case, never had to be the case.”

Under the new version of a budget deal, about $2.2 billion of the short-term borrowing scheme would benefit human services. Quinn would be able to decide how to spend the additional $1.3 billion that the legislature is expected to add to the borrowing scheme Wednesday.

Income tax update

An income tax increase temporarily is off the table. Quinn recently said he would delay his campaign for a tax increase until the fall or winter. Fewer votes would be needed in January. And some legislators have requested the governor “tone down the rhetoric” for the next few months, which would allow them to find out whether they face serious opponents in the 2010 elections before being called to vote on a tax increase.

But the idea of a tax hike still has support, particularly among Senate Democrats. “It’s not dead,” said Sen. Terry Link, a Waukegan Democrat. “It may be on pause, but it’s definitely not dead.” Sooner or later, he added, state government will have to have a “revenue infusion” to keep operating.

Cullerton gave a sneak peak into his campaign for a tax increase when he seeks support from Republicans. He said if the legislature had approved an income tax increase this year, the state could have used the revenue to pay its backlogged bills rather than borrowing money to do so. “That would be a conservative, responsible response to a fiscal crisis,” he said. “That’s what our income tax increase could be characterized as.”

After spending most of the day in closed-door meetings, some legislators headed to the Major League Baseball All Star baseball game in St. Louis, where President Barack Obama was scheduled to toss the ceremonial opening pitch.

The legislative leaders are scheduled to meet again at 11 a.m. Wednesday. And they expect to take action on parts of the budget deal as early as Wednesday afternoon.

AFSCME lawsuit

If things fall into place tomorrow, then some groups of state workers would be paid up to a few days late. In an attempt to ensure that state workers continue to get paid if things fall apart and a budget is not in place, the American Federation of State, County and Municipal Employees Council 31 filed a lawsuit today in St. Clair County.

The union made a similar move in 2007 when the legislature failed to produce a budget by the end of the fiscal year. AFSCME spokesman Anders Lindall said, “Unfortunately, we’re in the same boat.” The lawsuit would apply to all state employees.

“The fundamental legal principles are the same for any state employee,” Lindall said. “If you work, you are entitled to be paid in full and on time for that work.” He added that if lawmakers can agree on a budget in the next few days, the suit would not be necessary.

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Layoff notices go out

By Bethany Jaeger
Gov. Pat Quinn said about 2,600 layoffs are needed to help reduce state spending by $1 billion. At the same time he outlined the cuts in Chicago Tuesday, Quinn also vetoed another portion of the state budget. He said the General Assembly sent him a spending plan that “just spends too much money.”

“I think the best way to operate with the budget that I was given by the General Assembly a week ago is to veto it in its entirety because it doesn't cut spending as it should,” he said in a Chicago news conference. He later added: “We're not playing tennis here. We're playing with people's lives.”

Quinn vetoed House Bill 2145, which authorized $3.8 billion in spending on state operations, because it didn't follow the principle of shared sacrifice, he said. “There were too many instances of entities getting the same budget they did the year before or a very modest reduction, where others are taking very painful cuts. I don't believe that that's fair, and I don't think the people, the taxpayers of Illinois think that's fair.”

Of his $1 billion in cuts, he proposed 12 furlough days, or unpaid days off, for all state employees, including unionized workers and those in the executive and legislative branches. The 2,600 layoffs would spread across all state agencies. He said the furlough days would save about $108 million. Without them, he would seek an additional 2,500 layoffs.

The list of cuts proposed by the governor also would include:

• $150 million - Moving Medicaid patients to managed care health plans so they have medical "homes" and reducing IllinoisCares Rx, a prescription drug program started by former Gov. Rod Blagojevich.
• $250 million - Reducing grants to local agencies, local governments and programs by 10 percent across most state agencies, except the Department of Veterans' Affairs.
• $175 million - Maintaining last year's funding levels for education, while preserving the investment needed to secure all federal stimulus dollars.
• $125 million - Laying off about 1,000 Department of Corrections employees and possibly closing some prisons (he previously mentioned letting non-violent criminal offenders out of jail early).
• $100 million - Requiring all state agencies to reserve some spending for an even rainier day.
• $25 million - Reducing spending in other state offices and departments not under the governor's control.

“We're all in this together,” Quinn said. “So whether you're the governor of Illinois or a member of the legislature or somewhere in the state bureaucracy, we have to cut costs, cut costs, cut costs.”

But a large chunk of the governor's cuts would require negotiations with public employee unions, which would mean reopening active labor contracts to implement furlough days and to reconsider pay raises scheduled for this year. Quinn said those raises account for about $125 million.

Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees Council 31, said yesterday, “We have a duty to listen to anything that the administration proposes, and we've indicated a willingness to do that.” However, he added, furloughs have the same effect of service cuts, and layoffs could result in more expensive overtime pay.

Furloughs are the “least painful way of going,” Quinn said. “We want to limit layoffs wherever possible. That's why the use of the furlough can help preserve jobs on the state.” Despite furloughs, he added the state would still have to lay off about 2,600 workers and that Illinois only has as many employees today as it did in 1973. The roughly 58,000 workers is one of the nation's lowest ratios of state employees per state resident. “But having said that," Quinn said, "we still have to do these very difficult cuts because we simply don't have the money.”

The dramatic cuts are nothing new to many legislators. The governor has been making similar warnings since the spring legislative session. However, some Republican lawmakers said they're still waiting for the governor to act on other types of reforms before they'll consider a tax increase, which Quinn maintains is the other major way to avoid such deep budget cuts.

For instance, Rep. Franco Coladipietro, a Blooomingdale Republican, said the governor and the General Assembly need to address initiatives that affect not just this year's budget, but budgets several years down the road. He cited job growth, as well as more significant ethics and public employee pension reforms. “Passing a tax increase right now with making no changes to the structural budget process in Illinois only puts us in a position where we'll be in the same exact position three years from now,” he said. “And it doesn't change anything.”

Coladipietro was one suburban Chicago legislator at a closed-door meeting with the governor yesterday. Quinn also previously met with female legislators. He said he plans to meet with downstate legislators in Springfield later this week, and he's scheduled to meet Monday with legislative leaders in the Executive Mansion.

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Procurement, ethics, employee reforms sail to Senate

By Bethany Jaeger
The House overwhelmingly approved three measures to shield state contracts from political influence, to shine a light on the secretive process of investigating ethical violations and to “fumigate” the state of political appointees of former Govs. George Ryan and Rod Blagojevich.

The measures, all sponsored by House Speaker Michael Madigan, now head to the Senate, where more government reforms are expected to be debated tomorrow.



Madigan focused on procurement, employee ethics and political appointees. They received near-unanimous support. Republican Rep. Bill Black of Danville said, “These bills are some of the most important bills we’ve discussed in a long, long time.”

Procurement, SB 51
The speaker’s proposal would not go as far as preferred by Gov. Pat Quinn’s Illinois Reform Commission when changing the way the state purchases products and services. But Madigan’s goal mirrors that of the commission’s. “This was designed to shut the door on misuse of procurement and to isolate the procurement process and the procurement people from undue influence, especially from the office of the governor,” Madigan said on the House floor.

Rather than create one “procurement czar” in a new state procurement agency, as the commission wanted, Madigan proposed hiring a series of independent procurement officials in a "six-level system" of oversight:

• Chief procurement officers would oversee procurement for the Capital Development Board, the Illinois Department of Transportation and higher education. The rest would be placed with the state’s main purchasing arm, Central Management Services.
• Procurement compliance monitors would oversee the procurement process in real time and be able to recommend changes or expose abuses.
• Independent internal auditors would be placed in their respective agencies, reversing a Blagojevich decision to consolidate them all into Central Management Services.
• One executive procurement officer in the governor’s office would advise the governor and the procurement officers. The position would end in January 2011, either when Quinn started his first full term as governor or when a new governor took office.
• The Procurement Policy Board would be strengthened so it could review contracts or bidder information and make recommendations for the chief procurement officers regarding conflicts of interest.

Each procurement officer, compliance monitor and internal auditor would serve a five-year term, pending Senate confirmation. And they couldn’t be fired without a public hearing that determined cause for removal.

The use of sub-contractors would have to be disclosed, CORRECTION: but a provision that would have strengthened the so-called pay-to-play ban so that businesses holding state contracts of $25,000 (instead of the current $50,000) would be banned from donating to the officeholders' political campaign didn't make it into the final version. The $50,000 threshold remains.

“The bill is laced with transparency requirements,” Madigan said. “Our whole intent was two-fold: open up the process — make it more transparent — and insulate the process from undue influence, especially coming out of the governor’s office.”

Employee ethics, SB 54
Blagojevich enacted a law in 2003 that created inspectors to root out corruption or improper political donations from state contractors. But the process of investigating allegations lacked teeth and was cloaked in secrecy, with no way for the general public or legislators to know whether a corruption allegation was investigated or addressed.

“In the past, a lot of this work has been done in the dark,” Madigan said.

So his measure would allow reports of the inspectors to be public record if they found wrongdoing and either suspended or terminated an employee. Some of the information could be blacked out if it would jeopardize an ongoing investigation. And it would change the law so the inspectors could start an investigation based on anonymous tips.

It also would strengthen the so-called revolving door ban to prevent high-ranking officials from accepting jobs with private companies that received significant state contracts from the agency where the official worked. Agencies would have to list all of the employees who would be affected by the ban.

Stricter lobbying regulations would require people who lobby state boards, commissions or retirement boards to register as lobbyists, and all lobbyists would have to abide by stricter disclosure requirements. They’d also pay a higher fee of $1,000, as opposed to the current $350, which is how the state would pay for two inspectors to oversee lobbying activities. Madigan said he would consider reducing the fees for smaller nonprofit lobbying groups down the road.

Employee “fumigation,” SB 1333
At the request of the governor, Madigan reduced his original attempt to force Quinn to fire up to 3,000 employees or commissioners appointed by Ryan or Blagojevich. His measure now would apply to about 750 agency directors and their assistants, who can be hired or fired based on their political affiliations. He also would give the governor 90 days instead of 60 to review each of those employees before they would automatically be terminated.

Also at Quinn’s request “on a very personal level,” Madigan removed a provision that would have fired one of the governor’s longtime friends, John Filan. But that’s with the understanding the Filan would resign as the executive director of the Illinois Finance Authority July 1. “I took the governor at his word,” Madigan said. Filan was Blagojevich’s first-term budget director and former chief operating officer who played an integral role in several of Blagojevich’s controversial budget proposals, including floating $10 billion in pension obligation bonds and skipping $2.3 billion in state contributions in fiscal years ’06 and ’07.

Even without the provision to fire Filan, the bill drew concerns about the separation of powers because the legislature would fire people appointed by the executive branch. “We are, if not blurring those lines, we may actually be crossing those lines,” Black said.

Rep. Will Davis, a Chicago Democrat who voted present on the measure, said: “If [Quinn] wants to fire employees, he should do that and not come to the General Assembly to ask us to do that for him. … It certainly appears like maybe they’re doing him a favor.”

Madigan said the legislature has changed boards and commissions that were appointed by the executive branch before, including when the legislature twice revamped the Illinois State Board of Education and the Health Facilities Planning Board. Madigan added that Quinn “agreed to the bill.”

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New names

In preparing for Gov. Rod Blagojevich’s annual budget address this week, it might help to have a list of new names in state government. You can keep track of personnel changes as well as other newsy “People” items in the print version of our magazine every month. Note that the following information is attributed to the administration.

OFFICE OF MANAGEMENT AND BUDGET
• Kelley Quinn, spokeswoman for the Office of Management and Budget since January, previously worked in Cook County Clerk David Orr’s office. Before that, she was a reporter for a newspaper in upstate New York and a court reporter for the Chicago Daily Law Bulletin. She replaces Justin DeJong, who is now spokesman for the Chicagoland Chamber of Commerce.

GOVERNOR’S PRESS OFFICE
• David Rudduck became a press secretary for the governor after working 17 years in communications, most recently as regional director of communication and government relations for the American Red Cross.

CENTRAL MANAGEMENT SERVICES
• Cybil Rose is spokeswoman for Central Management Services. She has a decade of experience working behind the scenes in local news, including as executive news producer for CLTV News. She relieves Susan Hofer, who was serving double duty as spokeswoman for CMS and for the Department of Financial and Professional Regulation.

COMMUNICATION AND INFORMATION
• Bob Arya became deputy director of the Office of Communication and Information. He previously was a senior adviser to the governor. Before joining the state, he spent 11 years as a news anchor and reporter for Chicagoland’s Television.
• Rikeesha Cannon was spokeswoman of the Department of Human Services and now is senior communications manager of the Office of Communication and Information. She used to be a spokeswoman for the Sargent Shriver National Center on Poverty Law in Chicago. She replaces Chris Herbert.

HEALTHCARE AND FAMILY SERVICES
• Ruth Igoe replaces Amy Rosenband as spokeswoman for the Department of Healthcare and Family Services. Igoe is the former communications director for the Greater Chicago Food Depository.
• Annie Thompson is the new Springfield spokeswoman for the Illinois Department of Healthcare and Family Services. She most recently was a press assistant with the governor’s press office. She replaces Teresa Kurtenbach, who now works in the Department of Commerce and Economic Opportunity.

HUMAN SERVICES
• Marielle Sainvilus switched from a press officer with the governor’s office to a spokeswoman of Department of Human Services and director of the governor’s Multicultural Media Affairs. She replaces Rikeesha Cannon, who moved to the governor’s Office of Information and Communication.

COMMERCE AND ECONOMIC OPPORTUNITY
• Ashley Cross, former spokeswoman for Allstate Insurance Co., joined the state as a spokeswoman of the Department of Commerce and Economic Opportunity in Chicago. She replaces Andrew Ross, who returned to the private sector.
• Marcelyn Love switched from the spokeswoman for the departments of Agriculture and Natural Resources to the Department of Commerce and Economic Opportunity. She replaces Mark Harris, who left to work for the University of Chicago.
• Kim Luckey is policy director. She previously served as director of government affairs for Tew Cardenas LLP and, before that, as a legislative assistant for a member of Congress.
• Teresa Kurtenbach is the northwest regional manager for Opportunity Returns. She previously served as communications manager for the Illinois Department of Healthcare and Family Services.
• Jeff Polsean is the Opportunity Returns regional manager for northern Illinois. He previously served as regional administrator for human capital development for the Illinois Department of Human Services.
• Sam Sandoval is now deputy general counsel. He previously served in the state procurement office for the Department of Revenue.

AGRICULTURE AND NATURAL RESOURCES
• Paris Ervin, former reporter for WICS News Channel 20 in Springfield, is a spokeswoman for the departments of Agriculture and Natural Resources. She replaces Marcelyn Love, who joined the Department of Commerce and Economic Opportunity.

NATURAL HISTORY SURVEY
• Illinois Natural History Survey chief David Thomas will retire February 29.

TREASURER’S OFFICE
• Sara Wojcicki is based in the treasurer’s Statehouse office as deputy communications director for downstate and central Illinois, vacant since Treasurer Alexi Giannoulias took office. Wojcicki was a reporter and anchor for WICS News Channel 20 and most recently covered the Statehouse.

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