Illinois’ fiscal reality is bleak, said Kelly Kraft, the governor’s budget spokeswoman.

“These projections clearly demonstrate that action must be taken to control not only Medicaid costs but also (pension) costs or all other areas of government will continue to be squeezed,” Kraft said in a statement.

Quinn on Tuesday released his three-year budget projection in which Illinois in fiscal 2013 is expected to spend $33.7 billion, about $1.5 billion more than this year. By fiscal 2015, Illinois’ expenditures will reach $34.2 billion, or $2 billion more than the current budget.

The governor’s fiscal outline is part of the state’s Budgeting for Results initiative. Lawmakers created this process in 2011 to force the governor to craft a realistic budget within the financial means of the state.

The majority of the additional spending will be on public employee pensions.

Quinn’s own numbers project an $818 million deficit by 2015, even after holding spending flat on Medicaid, elementary and high school funding, and state government services.

Illinois’ pension payment jumps $1.1 billion in fiscal 2013, from $4.2 billion this year to $5.3 billion. By 2015, Illinois will be making an annual pension payment of $5.9 billion.

Republican State Treasurer Dan Rutherford said the state cannot afford a nearly $6 billion pension payment.

“If we don’t respond to the spending increases built into the governor’s budget for public pensions, Illinois is going to face a major cliff,” said Rutherford.

The treasurer said lawmakers are going to have to lower the pension costs for current state employees, despite the stance by Illinois Senate President John Cullerton’s office that legislation to alter current pension benefits is unconstitutional.

“Go and take the constitutional fight,” Rutherford said. “If it has to be litigated all the way to the Illinois Supreme Court, then so be it.”

State Rep. Frank Mautino, D-Spring Valley, who is the Democratic budgeteer in the House, said he doesn’t think lawmakers will go that route this year.

“We’re starting to see some savings, because pension costs are already going down,” Mautino said. “The big savings come in 2018. That’s when you’ll have more people in the new system than the old system.”

Lawmakers created a two-tiered pension system in 2010. Any state employee hired after Jan 1, 2011, has to work until they are 67 to collect a full pension, five years later than state workers on the job in 2010.

Mautino said the only place lawmakers can find immediate savings is in Illinois’ Medicaid system.

“There are some people who are getting benefits now that might not be getting benefits next year,” said Mautino, who would not speculate on how many recipients would be dropped from the Medicaid rolls.

House Republican budgeteer state Rep. David Harris, R-Arlington Heights, said he expects Medicaid costs to grow at nearly 8 percent a year for the next few years. Illinois is slated to spend $7 billion on Medicaid in the current state budget, about a fifth of the $33.2 billion spending plan.

“The Medicaid system is going to have to recognize that the dollars from Springfield are not going to be there like they were in the past,” Harris said.

Harris and his fellow Republicans have said Illinois could save billions of dollars by “trimming” people from Medicaid.

Kraft said the governor proposed a Medicaid rate cut last year, but lawmakers and Medicaid providers “did not have an appetite” for that. Instead providers and legislators opted to delay payments.

Mautino said that’s not an option next year.

“The state is going to have to find another $700 million for rising Medicaid costs, and you have about $1.5 billion unpaid bills that will have to be addressed in next year’s budget,” Mautino said. “The spring session will be all about trimming Medicaid costs.”

Benjamin Yount, Illinois Statehouse News

(Springfield, IL) –

Personal income tax revenue jumped by 68 percent for last month when compared with the same time in 2010, almost mirroring the personal income tax increase of 67 percent approved in January, according to a report issued by the Legislature’s Commission on Government Accountability and Forecasting, or COGFA, this week.

Overall, the state’s revenue jumped from $1.9 billion in August 2010 to $2.2 billion last month, an increase of 13 percent.

However, focusing on the month-to-month numbers won’t give an accurate picture of the state’s fiscal health, said Jim Muschinske, COGFA’s revenue manager and author of the August revenue report that outlines Illinois’ finances.

“I’ve been doing this for more than 20 years, and I don’t get excited over one month. There is just too much that happens on a month-by-month basis,” Muschinske said.

For example, income tax receipts from July through December, or the first half of fiscal 2012, might show big gains compared to last year. But those increases are only because of the income tax increase, and not because the state’s workforce or economy is doing better, according to the COGFA report.

The state also got a one-time shot of $73 million relating to the selling of a permit for and opening of the state’s 10th riverboat casino this summer in Des Plaines.

Higher revenue for August flowed in despite the state collecting less money from the federal government. The end of the federal stimulus package and the state’s extension on paying its social service vendors caused a decline of federal funding by $264 million, or 66 percent less, to $135 million last month compared with $399 million last August.

For the entire fiscal year, the state will lose about $1 billion in federal funding, Muschinske said. Under the federal stimulus, for every $2 the state spent on Medicaid, the federal government kicked in $1.20. But that extra 20 cents has been phased out, along with the strings attached to it.

“What happened under the stimulus plan was that the federal government said ‘we’ll give you the higher matching rates, but in order to qualify, you are going to have to pay (social service) providers in 30 days. That’s far quicker that we’ve ever paid before,” Muschinske said.

“Now that the match is gone, part of the way to manage our resources was the decision to allow approximately $1 billion in bills to be pushed back and the payment cycled moved to more historic levels” of 60 to 90 days, he said.

The state now has overdue bills from social service providers, schools and others totaling $3.8 billion, said Brad Hahn, spokesman for the state Comptroller Judy Baar Topinka’s Office.

Legislators, when crafting the $33-billion operating budget for the state, said that any extra revenue would go toward paying off the state’s backlog of bills.

However, Gov. Pat Quinn has said the budget sent to him doesn’t contain enough spending to operate at least 12 state agencies through the end of the fiscal year.

Andrew Thomason, Illinois Statehouse News

“The budget is an on-going process,” said Quinn. “We have to work on it 365 days of the fiscal year.”

Quinn, who introduced a nearly $36 billion budget, said he is not happy with the $33.4 billion spending plan that Illinois lawmakers sent him, and he wants more spending in education and human services.

But while Quinn can shift around money in the budget, he cannot order more spending, said state Rep. Sara Feigenholtz, D-Chicago.

“The governor has some limitations when he is acting on the budget,” said Feigenholtz. ”He cannot add. He can only (order) line-item reductions.”

But Feigenholtz, who helped write the human services portion of the state budget, said Quinn “should come back to the Legislature to ask us for more” money this fall. And Quinn agreed.

“There may be some legislators that want to revisit certain areas (of the budget),” said Quinn. “I think it’s really imperative that legislators not say, ‘We did something in the spring,’ and that’s the last word.”

State Rep. Will Davis, D-Crestwood, who crafted the education portion of the state budget, agreed with Quinn that more needs to be done, and said he hopes the governor acts.

Quinn “needs to think about the people that supported him in the last election, as well as those who support his efforts in the Legislature. And if he still has lump sum dollars available, that’s where he needs to spend the money,” Davis said.

But Republicans remain skeptical of any attempt to spend more.

State Sen. Matt Murphy, R-Paletine, said that if Illinois is ever going to roll back this year’s 67-percent personal income tax increases, then the state needs to start living within its means.

“If Gov. Quinn and the Democrats cannot make the tough choices on spending now, after a tax increase, how will they be able to make those tough choices down the road?” asked Murphy.

Feigenholtz said all lawmakers want to keep that promise, but the state needs to provide services.

Davis said the tweaking of the 2012 state budget is going to affect how lawmakers craft the 2013 state budget.

“I’m going to be less concerned about bi-partisanship,” said Davis. “I’m going to be more concerned about making sure that I provide the resources to the programs that are important to people across the state.”

Benjamin Yount, Illinois Statehouse News

Comptroller Judy Baar Topinka said the state is racing to maximize a federal Medicaid match that expires at the end of the month. Illinois is getting 57 cents on the dollar for qualifying Medicaid bills that it pays this month. Starting in July, that rate falls back to the normal 50 cents on the dollar.

Maximizing the $365 million, Topinka said, should allow her to pay $1.85 billion in Medicaid bills by June 30. She estimates Illinois could receive an extra $90 million to $100 million from the federal government.

“The Medicaid match did not solve all of our problems, but is sure as heck helped,” said Topinka. “And come the 30th of June, we lose that help, and we’ll be out there on our own.”

The Medicaid match not only ensured Illinois a better return on health-care costs, but along with the federal stimulus, doctors, hospitals and long-term care centers were paid within 30 days. State Sen. Jeff Schoenberg, D-Evanston, said that starting in July, those payments will take three months or longer to pay.

“When (the Medicaid match) goes away this month, so does the 30-day payment cycle,” said Schoenberg.

Schoenberg is quick to point out that hospitals asked for a longer wait between payments, rather than a payment cut. The 2012 state budget keeps Medicaid rates the same, but extends the payment cycle to more than 100 days.

State Rep. Patti Bellock, R-Hinsdale, said Illinois used a similar move two years ago to pay even more Medicaid bills, but paying down the backlog of bills is not solving Illinois’ problem.

“What worries me is the amount of money we’re still spending on Medicare,” said Bellock.

Bellock said until Illinois tightens Medicaid eligibility and moves people to managed care, the bills will keep growing.

Other bills have been piling up, said Topinka, who added that more than 120,000 unpaid bills are sitting in the Comptroller’s Office. Topinka said the other people who do business with the state, from providing food for prisons to social service providers, have been waiting for months for a check.

“The minute we push someone up to the front of the line, somebody else is going to the back of the line,” said Topinka. “There are only so many pieces of the pie I can distribute before I run out.”

Topinka said Illinois now owes $3.9 billion to people who do business with the state. She estimates that by the end of December, Illinois could owe between $6 billion and $7 billion.

Benjamin Yount, Illinois Statehouse News

Child Care Association of Illinois President Margaret Berglind

(Springfield, IL) – The Illinois General Assembly concluded its spring session and adjourned for the summer late last night, but the Illinois House refused to concur with the additional spending recommendations for next year’s Illinois budget made over the weekend by the Illinois Senate.

“Those budget add-ons would have meant more than $400 million in additional appropriations for Human Services agencies,” said Child Care Association of Illinois President Margaret Berglind.

Instead, the House appointed a Conference Committee to work on the bill, but the Senate, however, declined to do so before adjourning.

During concluding remarks, Senate President John Cullerton (D-Chicago) noted that the Senate could be called back into session before the regular veto session in October.

“The House version of the budget is now the final appropriated budget,” said Berglind.

The total budget of $33.2 billion that the legislature sent to Governor Pat Quinn is about $2 billion less that the Governor’s proposed budget. Although total spending is a bit higher than last year’s levels in most areas, the cost of the state pension payments will be covered within this budget and not funded separately as in some previous years.

“We do not have word whether the Governor plans to approve the budget as passed by the General Assembly, veto it in full or provide any line item vetoes,” said Berglind. “He cannot add any new expenditure or increase any lines—he can only reduce line items or veto the budget in total.”

The General Assembly also extended the lapse period for bills unpaid before June 30, 2011 until December 31, just as it did for this fiscal year.

“Invoices will still need to be submitted by the state agency deadlines, which is probably in August,” said Berglind. “But the state will have extra months to pay the invoice before penalties kick in, for those overdue bills subject to penalties.”

The current estimate of the bill backlog is approximately $4 billion.

“Overall, the DCFS budget fares well considering the cuts that could have been made,” said Berglind. “DHS and DJJ, however, contain many areas of concern, and will pose problems for provider agencies as well as for our DCFS clients who use those services.”

The state education budget also contains some specific lines of concern, including an overall reduction to school districts in general state aid, which will place additional budget pressures on districts, Berglind noted.

“The governor has been clear … that while we put our fiscal house in order, we must continue to protect core priorities,” said Kelly Kraft, Quinn’s budget spokeswoman.

Quinn is “reviewing” the budget’s impact on Illinois human services and schools statewide, Kraft said, which were among those items lawmakers trimmed to reduce spending from Quinn’s $36 billion to $33.2 billion.

House Democratic budget architect Frank Mautino, D-Spring Valley, said the new spending priorities include Illinois’ $4 billion pension payment.

The budget “for the first time doesn’t hide the true costs of state government by taking the pensions off budget,” said Mautino. “We’re making all of our pension payments, which for the past three years we’ve had to borrow” to fund.

State Sen. Donne Trotter, D-Chicago, said lawmakers are spending as much as Illinois is expected to take in from taxpayers.

“This is a revenue-driven budget … versus a program-driven budget, which we’ve had in the past where we created programs and then tried to find money,” Trotter said.

State Rep. David Harris, R-Arlington Heights, said that if Illinois brings in more than $33.2 billion in tax revenue, that extra money will pay for past-due bills.

Though no one is willing to speculate on how much extra money Illinois could see, Senate GOP budget architect Matt Murphy, R-Palatine, said the state will not see anywhere near the $7 billion from this year’s 67-percent personal income tax and 4-percent corporate income tax hike that is propping up the proposed budget. The tax hikes were approved in January and are designed to expire in 2016.

This is “the first step (toward) cementing that tax increase into being permanent, just a few months after the Democrats who passed it promised everyone it’d be temporary,” said Murphy.

Benjamin Yount, Illinois Statehouse News

Child Care Association of Illinois President Margaret Berglind

(Springfield, IL) – May 31, 2011. Yesterday, the Illinois Senate passed the Illinois House version of the Illinois budget for next year that will soon go to Governor Pat Quinn’s desk.

“The House version contained significant budget cuts because it relied on a revenue projection about $2 billion less than the Governor Quinn’s proposed budget,” said Child Care Association of Illinois President Margaret Berglind.

The Senate also approved an additional bill that adds $464 million in appropriations to that budget.

That additional spending would restore $7.9 million to the Illinois Department of Children and Family Services, $13.2 million to Illinois Department of Juvenile Justice, $109 million to the Illinois Department of Human Services and $216 million to the Illinois State Board of Education.

“The House must concur with the Senate’s proposed budget add-ons,” said Berglind. “We do not know as of this morning what the sentiment of the House will be as it reviews this additional spending proposal.”

If the House does not concur with that additional spending, then the House version of the budget stands as the final appropriated FY ’12 budget from the General Assembly, Berglind noted.

The legislature is scheduled to adjourn by midnight, tonight, May 31.

Child Care Association of Illinois President Margaret Berglind

(Springfield, IL) – May 27, 2011. There was little public movement on next year’s Illinois state budget as the Illinois General Assembly worked behind the scenes on most budget decisions this week, according to the Child Care Association of Illinois.

“Other major policy debates took center stage at the state capitol,” said Child Care Association President Margaret Berglind. “Remap, pension reform, workmen’s compensation reform and ComEd rate increases dominated lawmakers’ attention this week.”

Late yesterday, Illinois Senate President John Cullerton (D-Chicago) announced that the Senate Democrats would agree with the House version of the spending portion of the budget, but still disagreed with the lower House revenue projections, according to Berglind.

“The Senate is using the higher Commission on Government Forecasting and Accountability revenue projection,” said Berglind. “The House is forecasting more conservative revenue growth.”

Berglind noted that a major $135 million difference exists between Senate and House budgets regarding general state aid for local school districts.

“Once the school budget is settled, it would appear other parts of the spending plan will be ready for vote,” said Berglind.

According to Cullerton, if the final budget uses the lower House appropriations number but the higher Senate revenue projection, any money that comes in above and beyond the spending plan would be used to pay backlogged bills.

“Senator Cullerton says any extra money would not be used for additional appropriations,” said Berglind. “It will pay overdue bills.”

The General Assembly is scheduled to meet over the weekend. The deadline for the budget is next Tuesday, May 31 at midnight, before a larger, 3/5^th majority vote would be required to pass any budget.

However, if the state borrows the $6.2 billion for its bills, Illinois may have another mountain of debt in a few years.

Democrats are pushing the plan to borrow $6.2 billion in order to pay some of Illinois’ $8.2 billion in past-due bills.

Republicans say lawmakers have to stop borrowing and start cutting spending if Illinois is ever going to pay its bills and live within its means.

Comptroller Judy Baar Topinka, who actually writes the checks for the state’s bills, said spending money now is not the solution.

“The basic restructuring has not been done; the cuts have not been made. The budget has not been brought back in line, which has to be basically flat,” said Topinka.

Topinka said Illinois is still spending more than it is taking in. She did not offer an amount to be cut from the budget, but she did say the $7 billion in revenue from the largest income tax increase in the state’s history, has been committed.

“It will be gone, and in four years it will be gone completely unless the Legislature wants to make it permanent to underpin what again is excessive spending,” said Topinka.

However, Gov. Pat Quinn‘s budget director David Vaught, said the tax increase was never designed to pay the backlog of bills, rather the revenue is to pay for pensions and general spending.

“What it does is take us down to a normal payment cycle,” said Vaught, who added that even borrowing is not a solution for addressing the backlog of bills.

Quinn and Vaught originally had wanted to borrow $8.7 billion, but the governor’s office now says they are “supporting” the proposal to borrow $6.2 billion.

Vaught estimates Illinois will have to “manage” about $2.5 billion in bills even after borrowing.  After that, Vaught adds, Illinois’ economy is going to have to grow.

“What we gotta do in (fiscal years) 12, 13, and 14 is address these longer-term spending pressures,” said Vaught. “Three percent growth in spending needs to match up to 3 percent growth in revenues to maintain a balanced budget.”

Medicaid spending and pensions, alone, are growing at a much faster pace than 3 percent a year, Vaught said. In fact, Illinois would like to trim Medicaid growth to 6 percent a year, he said, adding that he didn’t have a target for pensions.

That kind of math has state Sen. Dave Luechtefeld, R-Okawville, asking Democrats: “Where’s your plan to say that all of a sudden this borrowing plan is going to work, that this borrowing plan will pay off (our bills)?”

State Sen. John Sullivan, D-Rushville, who is trying to shepherd the borrowing proposal through the General Assembly, said the plan is to craft realistic budgets and pay the state’s bills.

“How it’s different is the fact that we are doing a revenue-generated budget. We’re anticipating what our revenues are and are spending from that basis,” said Sullivan. ”We’re going to have to live within our means.”

But even that anticipated revenue is raising eyebrows. The Civic Federation’s Laurence Msall said the governor’s proposed budget of $35.4 billion is $2.4 billion out of balance. Msall blames “increased appropriations and overestimated revenue.”

The Civic Federation, a nonpartisan organization that researches the quality and cost-effectiveness of government services in Illinois, has been a loud advocate of cutting state spending and avoiding more debt.

A vote on Sullivan’s plan is not known at this time.

Rutherford on Monday said he cannot support adding to Illinois burgeoning debt.

The first-term Republican treasurer released his own report that states Illinois total debt would cost every household in the state $42,000. Rutherford arrived at the number by adding Illinois’ $140 billion in unfunded pension and health-care liabilities, the state’s $45 billion bond debt, and the nearly $8 billion in unpaid bills.

The treasurer said lawmakers must cut spending and live within their means in order for Illinois to pay off the debt.

“You can’t borrow anymore money,” said Rutherford. “And if I need to send letters to the rating companies to tell them the treasurer of Illinois is opposed to any more borrowing, I’ll go ahead and do that.”

Rutherford said alerting national rating agencies and bond houses could make it more expensive for Illinois to borrow. He said hopes that step would give lawmakers pause before asking for a billion dollars.

And while the state’s treasurer can only stop short-term borrowing, lawmakers are maneuvering to pass a measure through the General Assembly that would bypass any authority Rutherford has.

“I don’t have a vote on (the Senate plan),” said Rutherford. “If it’s long term, I can’t stop it.”

State Sen. John Sullivan, D-Rushville, said Republican and Democratic lawmakers must approve any borrowing, and Rutherford’s approach to handling Illinois’ massive pile of unpaid bills bothers him.

“Right now we’re using school districts, universities, private companies and health-care providers — we’re using them as our credit card,” said Sullivan. “They’re carrying that debt for us.”

Sullivan said he agrees with the treasurer that Illinois does not need to take on any new debt, but paying off old bills is taking care of old debt.

Lawrence Msall, president of the Civic Federation in Chicago, said unless Sullivan and other lawmakers cut state spending, all the borrowing in the world won’t erase the backlog.

“By borrowing instead of cutting, lawmakers are ensuring that there will be that much less to spend on schools and health care in the future,” Msall said.

The Civic Federation, which advocates for improvements in government efficiency and tax policy, according to its website, issued a report earlier this month that calls for state lawmakers to trim billions from the state budget.

Msall said that if Illinois could trim $5 billion from Gov. Pat Quinn‘s budget of $35 billion to about $30 billion and grow at a moderate pace, the state would be out of fiscal peril in three years.

Rutherford said he is not trying to issue threats or ultimatums with his anti-borrowing message; rather he wants lawmakers to know he is serious about ending the state’s “borrowing addiction.”

Benjamin Yount, Illinois Statehouse News