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Illinois Issues
Archive2001-Present: Scroll Down or Use Search1975-2001: Click Here

State of the State: What, me worry? The governor is happy with his first budget

Aaron Chambers
WUIS/Illinois Issues

Gov. Rod Blagojevich has on his happy face. Since the General Assembly adjourned for the summer, the governor has been busy applauding his administration for plugging a $5 billion budget hole. After all, he won the Executive Mansion by running against “business as usual” cronyism, wasteful spending and budget talks behind closed doors.

Blagojevich says he’s comfortable with the implementation of his first budget. Instead, his concerns relate to the fiscal year beginning next July. In fact, the governor’s budget office already is predicting a deficit upwards of $2 billion for the next fiscal year.

There’s no question balancing that budget next spring will pose a daunting challenge to the governor and lawmakers. But as the General Assembly convenes this month for the veto session, there is widespread concern about the $53 billion budget for this fiscal year. Specifically, legislative budgeteers worry that revenues will not meet expectations.

Blagojevich’s budget this year depends in part on a host of one-time cash infusions, including the sales of a riverboat license and state properties. That means he and lawmakers will need to find other means of supporting next year’s budget.

In the immediate future, though, it’s not clear whether these revenue mechanisms will perform this year. 

The state hasn’t sold its 10th casino license, for instance. Blagojevich is counting on $350 million from that sale. But the license is tied up in federal bankruptcy court in Chicago and in hearings before the Illinois Gaming Board, which is trying to revoke the license from Emerald Casino Inc.

The state also has not sold the James R. Thompson Center in Chicago, the toll highway headquarters in Downers Grove and some Elgin Mental Health Center property. Blagojevich proposed the sale of these properties, and his budget counts on revenues of $200 million, $30 million and $3 million, respectively.

Nicole Grady, a spokeswoman for the Illinois Department of Central Management Services, which would handle such sales, said in mid-October that agency had not heard of interest in any of the three properties.

Blagojevich is optimistic on all counts, though. He says plenty of opportunity remains. This fiscal year ends in June.

Meanwhile, state tax revenues are lagging. Analysts for Comptroller Dan Hynes report that receipts for sales and income taxes were flat or in decline during the first quarter of this fiscal year compared to the same period last year. Individual income tax receipts were down 2.9 percent, from $1.65 billion to $1.6 billion, they say, while corporate income tax receipts were down 14.1 percent, from $156 million to $134 million, and sales tax receipts were up just 1 percent, from $1.56 billion to $1.58 billion.

“We have not come even close to our projections on revenues for this point in time,” says state Sen. Donne Trotter, a Chicago Democrat and chief budget negotiator for the Senate Democratic caucus. 

Lawmakers may make Blagojevich’s task more difficult. Some have pledged to use the veto session to restore some $190 million in cuts the governor made in the budget approved in the spring. Rep. Gary Hannig, chief budgetnegotiator for the House Democrats, calls this the “biggest danger” facing the governor this month.

“There’s a fair amount of money on the table that he’s used his veto pen to create,” he says. “One of the focuses of the veto session, I think, will be the final disposition of that money.”

The governor isn’t worried. “The only thing that could cause us some concern would be a dramatic downturn in the economy, and the indications are that’s not happening — that the econ-omy little by little is actually turning in the other direction.” 

There are signs the national economy is improving. Last month retailers reported their third straight month of better-than-expected sales. Ed Boss, chief economist at the Illinois Econ-omic and Fiscal Commission, predicts “continued growth” in the Illinois economy. And the importance of economic conditions cannot be overstated. 

The comptroller’s analysts, in the office’s report on the first quarter of the fiscal year, say the performance of the state and national economies will override other factors at issue in the budget. “If a measurable recovery does not occur,” they say, “it is more than likely that the cash flow problems of the past two years will continue and perhaps be exacerbated.”

Still, Hannig and other budgeteers say state government is fortunate, and the governor is “lucky” that Illinois is benefiting from a major cash infusion from the federal government. As part of a federal relief package, Illinois should receive an additional estimated $675 million during this fiscal year — $422 million in flexible grants and at least $253 million in temporarily increased Medicaid reimbursements.

But as the General Assembly convenes this month for the veto session, there is widespread concern about the $53 billion budget for this fiscal year. Specifically, legislative budgeteers worry that revenues will not meet expectations.

“It’s been a cushion and thank goodness we’ve had that cushion because it’s generally been a tight budget year,” Hannig says.

Yet, administration officials maintain their budget does not depend on this unanticipated support. In fact, Becky Carroll, spokeswoman for the governor’s budget office, says that while the state is rolling the money into general spending as it arrives, the administration nonetheless will have on hand a reserve in the amount of the infusion at the end of fiscal year 2004. At that point, she says, officials will negotiate with legislative leaders to determine whether that money will be used in fiscal year 2005 or used for this year’s “rainy day” purposes.

“It’s easy,” she says. “It’s just a matter of managing your cash flow, your revenue and spending. It’s simple to do. Any major corporation or state has the ability to do it if they’re monitoring their spending and revenue.”

Meanwhile, others are mulling ways to generate more cash for the state. During the veto session, lawmakers are expected to vote on a hospital tax increase designed to increase Medicaid reimbursements from the federal government. Sen. Jeff Schoenberg, an Evanston Democrat leading the effort, says the proposal should generate an addition $300 million in federal matching funds for hospital expenses and $150 million for other health care expenses.

A proposal to sell naming rights to state-owned property is also looming. Blagojevich says his administration envisions concession stands in state parks and state buildings. And putting advertising on state vehicles is under consideration, he says.

There is talk, too, about an income tax increase. Doug Whitley, president and chief executive officer of the Illinois State Chamber of Commerce, has said some Illinois businesses would prefer a temporary increase in individual and corporate income taxes to another round of fee hikes. As part of this fiscal year’s budget, the state raised and created a host of fees to generate some $300 million in new revenue annually.

Trotter, a proponent of raising the individual income tax, says it’s not likely to happen this month. And the governor, of course, has pledged not to raise general taxes.

The budget climate is aggravated by grumbling about the administration’s decision not to publish quarterly budget reports. Though the governor’s budget office evidently is not statutorily required to do so, it traditionally publishes quarterly reports on the state’s economy and revenue outlook.

The budget process in Illinois is driven by the governor. Budgeteers say they look to the report for the administration’s assumptions on revenue, federal funds in particular.

The latest edition of the report posted on the budget office’s Web site covers the first quarter of fiscal year 2003 — a full year ago.

Trotter suggests the move is deliberate. “The governor campaigned on a promise of ‘no more business as usual.’ So I guess my interpretation was things would be much more open, with more sunshine, not ‘let’s hide the fact that we have not met our goals,’” he says. “We as elected officials are not on the top of the list of people to trust. Hiding the numbers from people just exacerbates that already negative opinion.” 

But Carroll, the budget office spokeswoman, says budget analysts are busy with other priorities and are not required to produce the report. More important than the report, she says, is that the budget office monitors state revenues “week to week” and works with state agencies to ensure they stay within quarterly expectations for spending.

She says the administration has sufficiently demonstrated that it’s “taking the lid off state government.” It does not publish this weekly report, she says, because, “We don’t have to publish that. This is for our own internal management purposes.” 

 


Aaron Chambers can be reached at statehousebureau@aol.com

Illinois Issues, November 2003

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