Ill. Legislature adjourns, leaving big budget hole

Thursday, May 27, 2010

SPRINGFIELD, Ill.-- Illinois legislators ended their spring session Thursday without providing money for state pension systems, a decision that blows a nearly $4 billion hole in a budget already deep in the red.
Democratic leaders said they may return to the Capitol this summer if they can scrape together enough votes to approve a plan to borrow enough money to make the state's annual payment to retirement funds for many state employees.
Gov. Pat Quinn scolded legislators for adjourning without finishing their work.
"Our task is not complete, and there's more that must be accomplished before this session officially ends," the Democratic governor said in a statement.
With lawmakers unwilling to raise taxes or dramatically cut spending, the legislative session produced a budget -- with a $13 billion shortfall -- built on borrowing, unpaid bills and one-time revenue maneuvers. Lawmakers left many key spending decisions to Quinn.
Without further action, the pension payment will be taken from the same pool of money that pays for other state services, including education, prisons and health care.
But that pool already falls far short of covering state costs. The budget that legislators sent to the governor's desk assumes the state will end the year with roughly $6 billion in unpaid bills. Adding the pension payment to those bills would drain another $3.7 billion.
The decision as to how to cover those bills, either through cutting programs or slowing state payments even further, will fall to Quinn and Democratic Comptroller Dan Hynes.
Lawmakers did, however, offer parents some good news: the state won't collect sales taxes on clothing and school supplies in mid-August as part of a back-to-school tax "holiday."
Democrats in the Senate tried late Thursday to gather enough votes to borrow the money but fell short of any Republican support. A plan was narrowly approved by the House this week.
"Without the borrowing, pension payments get in line with everybody else," said House Speaker Michael Madigan, D-Chicago.
"The governor is going to be called upon to exercise a lot of discretion in terms of how he spends the money," Madigan added. "This would be another one of the problems."
Quinn's office said adding nearly $4 billion in costs goes beyond a simple cash-management problem.
"We don't have the funds," said the governor's spokeswoman, Kelly Kraft.
A major state-employees union said taking the pension money out of the state's nearly empty treasury would do "grossly irresponsible" harm to other government programs. Union leaders believe Illinois should borrow money to make the pension payment.
"We believe the plan to borrow ... is the best of a series of bad options," said Anders Lindall, spokesman for the 40,000-member American Federation of State, County and Municipal Employees.
The state contributes money every year to the retirement systems that cover state workers, downstate teachers, university employees and others. The government owes about $3.7 billion to the systems for the budget year that starts July 1.
With the state facing a roughly $13 billion budget shortfall for that fiscal year, Democratic leaders decided the only realistic way to get the pension money was to borrow it, as the state did last year.
The House approved the move Tuesday after two Republicans joined the Democratic majority on the vote.
Supporters said they didn't like borrowing, which would cost about $1 billion in interest, but it was better than skipping the payment altogether, which would cost pension systems roughly $20 billion in lost income and interest.
Senate Democrats said Thursday they had not found any Republicans willing to support the measure, which requires a three-fifths majority to pass. Democrats have a large enough majority to approve it if they were united, but some Democrats oppose borrowing.
Senate President John Cullerton, D-Chicago, said legislators could pass the borrowing plan this summer if Quinn can find some Republican support.
"They voted for it last year. It wasn't a bad idea last year," Cullerton said, suggesting the current opposition is political.
Republicans countered by saying they went along last year on the promise that more substantial budget reforms would be made this year. They said Quinn failed to follow through.
"There is no comprehensive solution. All he wants is to borrow more money now," said Senate Minority Leader Christine Radogno, R-Lemont.
Legislators approved a budget plan, but it doesn't provide enough money to pay the businesses and charities that provide services on behalf of the state. That means day-care centers, health clinics and homes for the disabled would continue waiting months for their checks.
Lawmakers ignored Quinn's call to raise income taxes by one-third. They also set aside a proposal to raise cigarette taxes.
They gave Quinn the authority to borrow about $1 billion from special-purpose funds that are largely supported by user fees. They also allowed the governor to sell the rights to some of the money Illinois has coming to it from a major tobacco lawsuit that could produce a one-time sum of $1.2 billion.
Quinn is also getting broad authority to decide how much money state programs get. Legislators, rather than setting specific spending levels for each program, have approved lump sums that Quinn will divvy up.
"This is not giving the governor extraordinary power. It's giving him a very thankless task," Cullerton said.