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Illinois budget woes: State's unpaid bills hit a record $5 billion, and the cries of pain are getting louder

Even so, in an election year, prospects look murky for Gov. Pat Quinn's proposed income tax hike

January 11, 2010

SPRINGFIELD - -- Inmates getting out a month early. University professors facing 10 unpaid days off. Drug addicts not getting treatment.

This is what state government looks like after leaders spent much of the last decade refusing to make the tough choices of a major tax increase or deep spending cuts.

During that time, the state's pile of unpaid bills has grown to a historic high of $5 billion. By most standards, only California is in worse shape. The extra wrinkle this year is that lawmakers and Gov. Pat Quinn signed off on a 12-month budget only the most over-the-moon optimist thought would last that long.

Quinn wanted lawmakers to raise the income tax in October. They said they'd try in the new year. But that's not likely to happen this week when Quinn delivers his State of the State speech. The rationale? Same as it ever was: There's an election coming up.

Now the deepening shortfall is starting to get noticed, and the cries of pain are growing louder.

The state owes local school districts $1 billion. Universities and community colleges are owed $775 million. Municipalities are waiting on $478 million. Some state workers are being asked to pay up front for medical care because their boss isn't paying his bills on time.

"I've never seen anything like this," said Fred Giertz, a University of Illinois professor of economics. "In the past, sometimes there would be cutbacks and austerity and so on, but the state (in prior crises) would pay most of what it promised."

There just is not enough money to pass around.

"Even though it's money on the way, it's not coming fast enough to meet the immediate day-to-day expenses in the classroom," said Sen. Jeff Schoenberg, D- Evanston. "When schools, universities and hospitals have to wait to get paid, the cost of what it takes for them to borrow money increases, and that gets passed along to students, patients and ultimately taxpayers."

The impact of the state budget meltdown has emerged as a major issue in the governor's race. Comptroller Dan Hynes, Quinn's Democratic foe, is ripping the governor for failures on the early prisoner release and for borrowing too much.

Hynes, who has called for his own version of an income tax hike, issued a report last week that said the state "must prepare to confront the most dangerous fiscal conditions in modern history."

David Vaught, Quinn's budget director, defended the governor's efforts and passed the blame around for the state's budget woes.

"If we didn't have a problem, the governor wouldn't have called for a tax increase last year," Vaught said. "We've had a lot of political gridlock in our state for the past four or five years, for many years our spending has been growing faster than the revenues, and now we're in the 'Great Recession.' "

Vaught contends every option must be tapped.

"We have four tools to solve the budget crisis," Vaught said. "We can raise revenues, we can reduce expenditures, we can get more money from the feds ... or we can borrow. We're going to have to use some combination of the four, and I think we'll have to use all of them."

Vaught oversaw nearly $3.5 billion in borrowing last week, with the bulk of the money going to make state pension payments. About $843 million will go into the state's checkbook account, but how it ultimately will be spent is undetermined. The line is long.

The University of Illinois estimated it is owed $436 million. The State Board of Education estimated it owes Chicago Public Schools nearly $100 million for special education and transportation. District officials said the tab could be as high as $200 million when other grants are included. The school system is forced to juggle its accounts to fill the gaps, said Monique Bond, Chicago schools spokeswoman.

Max McGee, the former state schools superintendent who now heads the Illinois Mathematics and Science Academy, said the slow payments mean student education suffers. The Aurora academy must adjust funding to make ends meet and can't buy all of the computer software and science equipment needed to help students get their best education because state checks are lagging, McGee said.

"We've had late state payments before, and we had some shortfalls in special education, but this will be a 911 emergency within the next 12 months -- if it's not already," McGee said.

The recession hasn't helped. The comptroller's office said sales tax revenue has declined $460 million, and personal and corporate income tax revenue is down $415 million. Several hundred million dollars in federal stimulus money doesn't fill enough of the hole.

Even when decisions are made to cut, they don't always come easy. Quinn wanted to wrestle $125 million in concessions, including a pay freeze, from union employees, but that issue is tied up in court as the parties try to negotiate a resolution. Non-union state workers are taking unpaid days off.

By some estimates, the governor that voters elect in November will inherit a deficit of $13.7 billion -- more than twice the $5 billion Rod Blagojevich said he assumed when he took over in 2003. Blagojevich went on to spend billions more without raising taxes to pay for it.

With that election looming, Republicans are more than happy to point out that Democrats have been in charge as the state's finances went into the dumper. Mindful of that, House Speaker Michael Madigan, D-Chicago, hasn't pushed hard to get an unpopular income tax increase approved before the election.

Illinois likely will be battling money woes for years. If lawmakers wait to vote on a tax hike or spending cuts until after the November election, the problem only gets worse.

Tribune reporter Monique Garcia contributed from Chicago.

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