May 26, 2010

As the May 31 deadline to move legislation with a simple majority vote approaches, the Illinois House has taken action on a number of budget measures.

Notably the House sent to the governor the planned state budget and advanced a controversial pension bonding measure that would allow the state to borrow up to $4 billion to cover next year’s payments to Illinois’ state-financed retirement systems. The pension borrowing measure, Senate Bill 3514, had failed previously in the House, and its future in the Senate is uncertain.

The state budget is contained in House Bill 859, which had previously passed the Senate. The measure will increase state spending by $1 billion over the previous year, spending about $6 billion more than the state will take in. Rather than reduce spending, majority Democrats plan to borrow the money through a variety of gimmicks, including the pension borrowing, raiding special accounts and borrowing against the state’s share of tobacco settlement funds. In addition, more than $6 billion in bills from the current fiscal year will still be left unpaid.

Most Republicans opposed the pension borrowing plan, pointing out that Illinois has borrowed extensively in the last seven years, and any additional borrowing is fiscally irresponsible. Rating agencies have already warned the state that Illinois’ credit rating is likely to drop soon to match California’s worst-in-the-nation rating. Opponents also point out that the proposed plan will be much more costly to taxpayers than a borrowing plan that was adopted last year, because payments are structured to initially cover only interest and then skyrocket in later years.

The House also advanced tax amnesty legislation (SB 377) that would allow people who owe back-taxes to repay their obligations without penalty. The program could generate around $250 million. House GOP lawmakers noted that they had advanced this proposal last year, but were shot down by their Democrat colleagues.

Another bill (SB 3660) would give Gov. Pat Quinn more discretionary authority on how to spend state revenue. Proponents claim it could result in as much as $300 million in savings, but others are skeptical, pointing out that Quinn promised to shave $1 billion from spending last year, but failed to do so. The legislation would also allow the state to take out a loan against money that it is slotted to receive from a national tobacco settlement, which could produce $1.2 billion. That move is controversial because the state already uses money from the tobacco settlement to fund other state programs.

Additionally, SB 3660 allows Quinn to divert money—around $1 billion—from restricted state funds. The Blagojevich administration often swept state funds to subsidize general state spending. Though the legislation mandates the money be replaced with interest, some lawmakers are skeptical it will be repaid.

A number of other proposals were rejected, including one that would have required state retirees to pay premiums for their health care coverage on a sliding scale basis. Proposals to cut education funding likewise failed to advance, and so did others that would have cut salaries by 25 percent for one year for lawmakers, statewide officials, department directors and assistant directors, board and commissions chairs, court of claims judges and the executive inspector general.  

The House will continue to meet this week, and the Senate reconvenes on Wednesday afternoon at 4 p.m. Senate Committees are expected to begin meeting on Thursday, at which time Senate lawmakers will consider the budget measures advanced by the House.

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