Illinois Governor Pat Quinn delivered his mandated budget address today in Springfield – a somber, sobering message to the public and the Illinois Statehouse. The speech was primarily a challenge to the General Assembly to enact comprehensive pension reform which Quinn referenced to as a “tough pill to swallow.” The pension reform issue is the pension obligation Quinn stated was growing at $17 million a day, which triggers higher debt payments for the state and huge backlogs in unpaid bills. In Quinn’s own words, “today, our budget is being squeezed more than ever. And that will continue until we put a stop to it.”
Quinn’s budget proposal is a $35.6 billion State Fiscal Year 2014 spending plan that would start June 1, 2013, which would be 3-percent more than the current fiscal year. Although it does not include fee or tax increases, it only provides funding preservation for early childhood education, the Monetary Assistance Program (MAP) scholarship program for low-income college students, support for veterans and violence prevention programs.
The balance of the budget Quinn has crafted is dedicated to pension reform and paying overdue bills, with annual pension payments totaling $6 billion that would account for 19 percent of general revenue funds and $96.8 billion in unfunded pension liabilities and $7.8 in overdue bills that some projections estimate could reach $21.7 billion in five years. The pension/expenditure/bill reduction strategies would include:
• Maintaining the early childhood education and MAP scholarship funding to only reduce education overall by $400 million;
• $900 million in health care cost savings, over three years, through a tentative agreement with the American Federation of State, County and Municipal Employees Council 31 union, garnered from current and retired union members contributing to their health insurance premiums;
• Using the funds from a pension obligation that will expire in 2020 to off-set $1billion annually in unfunded pension fund liability;
• Suspend the current 3-percent cost of living adjustment for pension recipients receiving substantial benefits until the overall pension system is more balanced;
• Create a “Bill Payment Trust Fund” that would capture $445 million in year in revenue from suspending corporate tax loopholes that would impact Illinois companies that utilize foreign dividend, federal production activities and non-combination rule in their tax filings;
• A 5-percent reduction in the office budgets for constitutional officers and the General Assembly; and
• A “carrot” that any enhancement to gaming should be dedicated to education funding and include teacher pensions to get his approval.
The deliberations on the budget will probably be contentious as always. As a starter, the Illinois House Revenue Committee is working with a budget that would be $500 million less than the governor’s.
It should be noted that Governor Quinn opened his address with remarks about the passing of Dawn Clark Netsch. In her career, she served for 18 years in the Illinois Senate, was the Comptroller of the State of Illinois (and first woman to hold state-wide elective office) and the first female to be the Illinois Democratic Party’s nominee for the Office of the Governor.
Although she may have lost her gubernatorial run for governor on a campaign that included a plan to raise taxes, most who encountered her would say she was a social liberal and a fiscal conservative, or better yet – a fiscal realist. To agree on a budget to start paying off its financial obligations, it seemed that when Governor Quinn stated, “the most important thing we can do to repair Illinois’ finances right now is to reform our public pension systems”, it could be interpreted that he was hoping the Illinois Statehouse could channel Netsch for a strong dose of “fiscal reality” this session.
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