Dems propose major cuts to end budget impasse

Tuesday, May 25, 2010

A group of 10 Democratic state legislators, most from the suburbs, proposed spending cuts meant to "spread the pain" of Illinois' budget crisis even as party leaders prepared for worst-case scenarios.
"When you're in a hole, you have to stop digging that hole," said Highland Park Rep. Karen May. "This is a start. We've spread the pain."
Their plan cuts $300 million from executive agencies, $300 million in elementary and high school education, $100 million in higher education, $200 million in Medicaid and $300 million by canceling and rebidding state contracts for a total of more than $1.2 billion.
State retirees not on Medicare would have to contribute to their state health care, for a savings of $100 million under the proposal.
That would include retired teachers, and May said payments would be on a sliding scale, totaling 15 percent to 25 percent of the premiums. Someone with a premium of $300 a month, or $3,600 a year, could pay $75 a month, or $900 a year. Retirees with at least 20 years of state employment don't pay health-insurance premiums now, although they do pay co-payments.
"As much as we love our retirees, this is tough love," May said. "They need to feel the pain."
However, just last week, Gov. Pat Quinn declined to support such a proposal. His top budget aides told a downstate newspaper it was a tough sell politically and legally because of collective-bargaining agreements.
All the legislators, however, acknowledged the proposed cuts are only the beginning of a multiyear process to address the state's $13 billion deficit, and many added they hoped the cuts would spur other legislators - especially Republicans - to accept an income-tax increase supported by Quinn.
"There is no way to cut our way out of this," said Chicago Rep. Sara Feigenholtz.
But even the tax increases proposed wouldn't raise enough money to erase the $13 billion deficit, giving rise to borrowing as an option. The key sticking point is how, or whether, to make a $3.7 billion payment the state owes to its pension funds.
If it doesn't come up with the money to cover the payment, the state can borrow at 4.5 percent interest to make it. But that plan was rejected earlier this month by the House. Borrowing requires support of 60 percent of lawmakers and so far Republicans in the House have been unwilling to add their votes and the majority Democrats have yet to coalesce behind the idea.
The emergency plan advanced Monday out of a key House committee would simply tell the governor he doesn't have to make the pension payment until he has the money to do so.
That plan requires only a simple majority and, in theory, would be easier to pass. But it socks taxpayers with substantially higher interest charges. The borrowing plan would cost nearly $1 billion in interest over eight years. Skipping the pension payment incurs 8.5 percent interest and by the time the state makes up the shortfall, the interest cost is predicted at as much as $37 billion.
Even the Democrat sponsoring the deferred payment plan said it's not a great option. "But it may turn out by the end of the week to be our only shot," said Chicago state Rep. Barbara Flynn Currie.
She advised colleagues that there will be another vote this week on borrowing. "And I advise you to take me up on that offer."
Education cuts are usually a non-starter at the Capitol, but Aurora Rep. Linda Chapa LaVia attempted to defend $300 million in proposed cuts to K-12 education by insisting the system was overburdened with administrative costs. Northbrook Rep. Elaine Nekritz added that with the state already shirking its bills, the education system would likely be satisfied with less money as long as schools, colleges and universities could be certain it was coming.
"If we don't come up with a realistic budget, and we don't pay our bills, what good is the allocation?" Nekritz said. "I'm not excited about any of these spending reductions," she said, "but this is what's necessary at this time."
Schaumburg Rep. Paul Froehlich suggested cutting the operations for the General Assembly 5 percent - at a savings of $2.5 million. Champaign-Urbana Rep. Naomi Jakobsson said the state's transportation allowance - at 50 cents a mile for driving - could be reduced to a federally suggested figure of 39 cents, at a savings of $6 million annually.
All insisted any and all proposals to cut spending are welcome and an important part of opening up the process. "The system is extremely broken," said Chapa LaVia. "It shouldn't always be decisions made behind closed doors."
Maywood Rep. Karen A. Yarbrough said it was all intended to achieve "a balance that does the least harm to Illinoisans."
They said House Speaker Michael Madigan has pledged to put each of their budget-cut proposals on the floor for a vote this week.