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Old 02-14-2018, 11:17 AM
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Mary Pat Campbell
Join Date: Nov 2003
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Here's what Illinois needs to avoid utter collapse
Important as this year's state budget is, it's a sideshow compared to the epic production we need—a multiyear, credible plan that would make Illinois competitive again.

The emphasis is on "credible" because the jig is up. Gov. Bruce Rauner, who will present his fiscal 2019 budget tomorrow, can talk all he wants about job growth during his term. Democrats can forever blame our problems on the earlier budget impasse they pin on Rauner. Others can keep quibbling about the numbers and denying even that Illinois is losing its population and tax base.

But they're asking Illinoisans to ignore what they see and hear with their own eyes and ears. A genuinely historic collapse is proceeding unchecked. All levels of government most everywhere in the state are in extraordinary trouble, and it's worsening. Not everybody knows that, but enough do to ensure that population, employment and investments will continue to disappear, feeding the collapse.

There's no immediate way to break that cycle, but a full solution needn't be immediate. Moving is a decision that takes years to make and execute. Investments are forward-looking. A credible five- or seven-year plan would be enough to cause many to say, "OK, I can stick it out through that." Some may even look forward to catching the bottom in a place with all the assets it needs to boom.

Nothing remotely close to such a plan is being discussed in this election. Rauner seems to have given up on all but a few of what initially were over 40 items in his Turnaround Agenda. Democrats offer nothing concrete except a progressive tax increase and, even there, provide no numbers.

The entire state seems to have tied a bow around the biggest of all our problems—pensions—and set it aside for now. Reform proposals being discussed just piddle around the edges. Their impact is exaggerated, speculative and unverified.

A credible five- or seven-year plan would have to be drastic and comprehensive. It would have to encompass local fiscal issues because our crisis is consolidated and driven heavily by formulas that share funding. Unquestionably, that means a plan should include authorization for municipal bankruptcy if needed. On that, ask this simple question: What possible scenario is there that returns us to financial stability that doesn't include cutting outstanding debt? Nobody will answer that because there is none. Only bankruptcy can cut debt equitably.

Beyond that, pretty much every reform ever proposed, implemented as quickly as possible, would have to be included in a credible plan.

But there's no chance the General Assembly would ever authorize such a plan, right? Rauner would certainly say that and he'd be correct. Fine. But then be honest. Say, "Either you give me a new Legislature that will do this or it's hopeless." That would be a big step toward restoring his credibility.

It's probably still naive to think a credible long-term plan could ever be passed into law. But isn't it also naive to pretend one isn't essential? Is it too much to ask for that point to be made?

And even if one were passed into law, there's a darn good case to be made that it's too late—that the numbers and problems are insurmountable. Maybe congressional authorization for state bankruptcy is inevitable. That doesn't mean that nothing matters. Instead, think of a plan as disaster mitigation, and maybe the first draft of a bankruptcy plan.

If all this seems harsh, it's because the prevailing formula just isn't working, which is "Don't scare the children." Instead we need credible, straight talk. Get on with it.

Mark Glennon is executive editor and founder of Wirepoints, a news aggregation, research and commentary firm.

Even Without A Budget, Illinois Spends And Spends
Gov. Bruce Rauner is scheduled to unveil his fourth budget proposal Wednesday in a speech to the General Assembly.

Illinois lawmakers have only enacted budgets for one of the three years he’s been in office.

That led to service cuts and some layoffs, but the state didn’t collapse. For most people, life went on as normal.

So we asked Statehouse reporter Brian Mackey: Does it really matter if Illinois has a budget?

The short answer is: Yes.

Without a budget, taxpayers don’t get a say in how Illinois spends money. But they still have to pay for it.

That was not always obvious. Back in summer 2015, when the budget stalemate began, most people thought state government would be paralyzed.

News report montage:
“Illinois is going to run out of money 26 hours from now.”
“The state will be without the authority to spend new money for at least a week."
“No one can be paid until the Republican governor and the Democrat(ic) majority in the legislature reach a budget deal.”

Except ... that’s not at all what happened.

Illinois government would go for more than two years without enacting a real budget.

But not having a budget is not the same thing as not spending money.

And spend Illinois did.

In the arid language of state bond disclosure documents, it's called “Spending in Absence of a Budget.”

And today we’re going to break that down and add it up.

There are four categories of this kind of spending:

The first is called debt service and statutory transfers — that includes paying off the state’s bond holders.

Altogether, that adds up to nearly $4.5 billion — all without a budget.

Next are continuing appropriations — automatic pension payments and funding for the courts and General Assembly. That’s another almost $3.5 billion — again, all without a budget.

Next are the things everyone did agree to spend money on — mainly schools — for another $11 billion dollars.

Finally, there was spending ordered by the courts. With state employees being told to show up to work, a trial judge said they had to be paid. And federal courts mandated spending on certain social services, adding up to $12.4 billion dollars — all without a budget.

When you add it all up — spending for Fiscal Year 2016 totaled $31 billion (not counting another $3 billion the state signed contracts to spend before it had the legal appropriations).

And that was just the first year of the stalemate. The second year, we did it again, and actually increased spending by another $three billion.

Over two years, Illinois spent or obligated $71 billion — all in the absence of a budget.

So not only did we not save money during the impasse — we went deeper in debt.

That’s because the stalemate began not long after an automatic tax cut, leaving a budget deficit of roughly $11 billion dollars over those two years.

The impasse was finally broken last summer, when more than a dozen Republicans turned on Rauner and worked with Democrats to pass a tax increase and a real budget for the first time in two years.

Which brings us up to now.

Rauner has said his budget address will “propose a process to begin to roll back the tax hike that was passed over my veto list summer."

Gov. Rauner says Illinois doesn’t need all that money. But that is not a widely held view.

"Absolutely not," says Steve Andersson, a Republican state representative from Geneva. He was one of the ringleaders of last summer’s revolt against the governor.

“We cut $3 billion out of the budget last year. But to continually find more and more of that, it’s no longer cutting the fat, so to speak, now you’re into the bone and the marrow."

Regardless of what the governor proposes in his budget address — or what legislators come up with on their own — the biggest question about the Illinois budget is not how much will be spent on what programs — it’s whether there will be a budget at all.

Illinois Newsroom is a regional journalism collaborative (RJC) focused on expanding coverage of education, state politics, health, and the environment. The collaborative includes Illinois Public Media in Urbana, NPR Illinois in Springfield, WSIU in Carbondale, WVIK in the Quad Cities, Tri States Public Radio in Macomb, and Harvest Public Media. Funding comes from the stations and a grant from the Corporation for Public Broadcasting (CPB).

State of Illinois Forecast Report
Prepared for the State of Illinois Commission on
Government Forecasting and Accountability

Illinois’ economy is staking out modest gains, and the passage of the first state budget in
more than two years signifies a vital achievement. August 2017 marked the first month since
September 2015 that no Illinois metro area was in recession, according to the Moody’s Analytics
business cycle tracker, which combines employment, factory output, homebuilding and
house prices into a single indicator. While single-family housing is sluggish, with weak construction
activity and subpar price growth, the apartment market is on a tear.

Still, Illinois does not measure up to the rest of the country in most gauges of economic
performance. Employment is increasing more slowly than the Midwest and U.S. averages, the
labor force has fallen to its lowest point in more than 10 years, and the weak job market and
worsening population trends have set personal income back. Several private service industries
are slowly advancing and manufacturing has recouped some jobs, but construction and the
public sector are stuck in the mud. Weaker consumer demand than in other states is generating
less growth in population-dependent industries such as retail and leisure/hospitality.

Longer term, Illinois has a lot of what businesses need to thrive—talent, access to customers
and capital, transportation hubs—but painful fiscal reforms are needed before it can fully
capitalize on these strengths. To be a solid performer longer term, the state must navigate its
fiscal challenges without doing lasting damage to its business climate. The state’s demographics
present it with another challenge, as an aging population coupled with a trend toward fewer
workers hampers job and income gains, which are forecast to be below average over the extended
forecast horizon.

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Old 02-14-2018, 02:23 PM
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Mary Pat Campbell
Join Date: Nov 2003
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Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
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Fiscal watchdog: Budget address will be just words, must judge actions
With Gov. Bruce Rauner preparing to deliver his budget address in Springfield Wednesday for the coming fiscal 2019 budget, government finance watchdog Truth In Accounting Director of Research Bill Bergman said the address will just be words. The actions thereafter are what’s important.

“Illinois historically has been among the biggest miscreants in, for instance, not delivering revenue ahead of expenses and thereby balancing its budgets in the past,” Bergman said.

That’s the reality when matching up the most recent audited financials of fiscal 2016 with the budget address for that year.

“What happened in that fiscal 2016 results? The total expenses reported for the state of Illinois exceeded total revenue by about $6 billion,” Bergman said, “[That's] a bigger gap than the year before despite the fact that we got the message that we were going to be reducing or eliminate the ‘structural deficit.’

“We had a significant increase in the actual debt, the unfunded debt, including the unfunded retirement benefits in the pension systems, and the medical care benefit system and borrowing effectively rose significantly,” Bergman said.

The current budget imposed over the governor’s veto last summer appropriated $36 billion. Even with a $5 billion tax increase, the budget was still out of balance. That followed more than two years of lawmakers not passing a full budget.

Bergman said the fiscal 2018 budget, which included that $5 billion income tax increase, dismissed another reality, and that’s continued outmigration.

“Whether or not that tax base will be there next year or the year after that is the uncertainty related to migration trends and is not in our favor,” he said.

Illinois lost more than 33,000 people from 2015 to 2016, following a trend of thousands fleeing the state each year.

Bergman said the state needs more timely audited annual financial reports to help plan for future budget years.

“One step going forward is to do our best to deliver reliable and audited financial statements sooner rather than later in the planning process,” Bergman said. “In addition, going forward, our belief is budget accounting itself needs to be transformed and moved a world away from a largely cash-based accounting into a full accrual accounting of budgeting and calculating costs on an accrual basis as opposed to simple cash calculations.”

That would include all the state’s unfunded pension and retiree healthcare liabilities. TIA has in the past put Illinois' unfunded pension and healthcare liabilities at more than $200 billion.

Rauner has indicated he wants to decrease the income tax to 3 percent over time but said he does plan on increasing funding for education. The speech is at noon Wednesday.

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Old 02-15-2018, 06:33 PM
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Mary Pat Campbell
Join Date: Nov 2003
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Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
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Illinois governor takes aim at pensions, healthcare costs in budget

CHICAGO (Reuters) - Illinois Governor Bruce Rauner proposed a $75 billion fiscal 2019 budget on Wednesday that would be balanced if lawmakers agree to push some big-ticket costs onto local school districts and universities.

FILE PHOTO: Illinois Gov-elect Bruce Rauner speaks to the media after a meeting with U.S. President Barack Obama and other Governor-elects from seven U.S. states at the White House in Washington, DC on December 5, 2014. REUTERS/Larry Downing/File Photo
The budget for the fiscal year starting July 1, which includes $37.6 billion in general fund spending, would save money by phasing out state funding for certain pension costs.

It also seeks to cut $470 million from employee healthcare costs by removing that benefit from collective bargaining with unions. With health coverage and pensions accounting for 25 percent of state spending, the Republican governor said Illinois needs to make changes.

“If we don‘t, our finances will continue to deteriorate, our economy will remain sluggish and our tax burdens will stay high and keep rising,” he said in his fourth budget address to the legislature.

Illinois’ credit ratings have fallen to the lowest level among the states due to a huge $129 billion unfunded pension liability and an unpaid bill backlog that ballooned to more than $16 billion during a budget impasse.

The stalemate, which left Illinois without complete budgets for an unprecedented two straight fiscal years, ended last July when the Democratic-controlled legislature enacted a fiscal 2018 spending plan and $5 billion income tax hike over Rauner’s vetoes.

Democratic Senate President John Cullerton said some of Rauner’s proposed spending cuts face opposition from both Democrats and Republicans.

“We’ve totaled about $1.5 billion in cuts that won’t pass because his own members won’t want to do it,” Cullerton said in a public television interview.

House Republican Leader Jim Durkin applauded Rauner for proposing “a fair, reasonable and balanced budget.”

The budget envisions shifting certain education-related pension costs to schools and universities by 25 percent annually over a four-year period.

The shift would cost school districts $490 million in fiscal 2019, with a $228 million hit to the cash-strapped Chicago Public Schools. The Illinois Association of School Boards said this would revoke the promise of higher funding under a school financing law enacted last year.

“With the new pension burden, hundreds of school districts will be receiving a cut in education funding under the governor’s budget plan,” the group said in a statement.

Universities would incur $206 million in higher pension and healthcare costs, which Rauner’s office said would be offset by a boost in state funding.

Timothy Killeen, president of the University of Illinois System, said while a pension cost shift had been expected, its pace was a concern.

“Four years to me seems to be an awfully rapid shift,” he said.

The office of Illinois’ Democratic comptroller, Susana Mendoza, said the governor’s budget fails to address the current $8.9 billion bill backlog and $950 million in late payment penalties the state owed vendors and service providers as of the end of January.

Credit rating agency officials have said they will be looking for signs of fiscal improvements to prevent Illinois’s credit ratings from sliding into junk.

Statehouse leaders react to Rauner’s budget address, blasting pension cost shift proposal
Critics of Gov. Bruce Rauner’s budget address say the proposal to shift the cost of pensions to school districts and universities will bring about a massive property tax increase.

State Rep. David McSweeney, R-Barrington Hills, said Wednesday’s budget address was the worst proposal to date because it uses the tax increase imposed on taxpayers last year.

“He allegedly opposed the [Speaker Michael] Madigan tax increase but he’s using the revenues,” McSweeney said. “It proves that he was for it.”

Rauner did propose reducing the recent $5 billion tax increase, but only by $1 billion.

Rauner also proposed phasing in over several years the cost of pensions back to local school districts and public universities.

Treasurer Michael Frerichs said the governor’s proposed pension cost shift would bring about the largest property tax increase in state history.

“The governor has talked about cutting income taxes and cutting property taxes, but what I heard [Wednesday] was a budget that spends just about every dollar of the last income tax increase while also shifting burdens to local school districts,” Frerichs said.

McSweeney also criticized the pension cost shift as a “massive property tax increase … and a cut in education spending and no real reform, no real pension reform.”

Governor Rauner's New Budget Proposal - Wirepoints Original
To be fair, no mortal could propose a budget today for Illinois that purports to be balanced unless it contained either suicidally huge tax increases, cuts that voters aren’t prepared to accept or a truckload of baloney.

But, man, there’s so much to question, criticize or presume won’t happen in Governor Rauner’s new budget proposal.

This is not an overview of everything in it. There’s more described in other articles we are linking to (a good one is linked here), but a nice summary of key numbers is copied at the bottom of this piece. These are just the big issues that jump out:

• A four-year phase-in shifting some pension costs to schools will be a key controversy, though it’s had significant bipartisan support in the past. About $490 million in savings is anticipated from that in the coming year, but Rauner also proposed boosting funding for education by $556 million, about $350 million of which is under the new funding formula that was enacted last year. Rauner emphasized that schools will be able to make up the difference in future years through reforms in unfunded mandates that drive up their costs. (That point, by the way, is being ignored by the media and critics.) That’s the right idea but Democrats want to keep those mandates because they’re sacred to public unions.

• How can you give a budget address in Illinois today and not even mention property taxes? That’s where are our crisis is burning white hot and is a humanitarian disaster in many Illinois communities, especially south Cook County. Property taxes are a state issue and not just local because so much controversy surrounds shared revenues and responsibilities, particularly schools. If cost savings from eliminating unfunded mandates don’t materialize, property taxes would spike up.

• It assumes $900 million per year in savings from a pension reform proposal based on the “consideration model,” but unions are certain to challenge that in Illinois courts, where they are batting 1.000 on pensions. It will be in court for years. And nobody has ever backed up savings claims on the consideration model with credible analysis or numbers, so you shouldn’t believe one dollar of savings will actually result from it if it’s upheld. Rauner absurdly called it “comprehensive” pension reform. It’s not.

• It would cut $228 million in pension help that CPS got in last year’s budget that bailed out Chicago, over Rauner’s veto. If he couldn’t get the votes last year how will he this year?

• It assumes savings of $470 million in employee healthcare cost by removing that from collective bargaining. Good idea, but those saving seem speculative, and Democrats and unions probably will be resolute in their opposition.

• It relies on $600 million in inter-fund borrowing and transfers — basically, raids on the piggy bank. It also counts money from sale of the Thompson Center in Chicago that they think will fetch $240 million.

• It would cut the income tax rate by .25%, which would be $917 million. However, that cut is apparently dependent on passage of the pension reform proposal.

In all, the proposed budget supposedly would produce a surplus of $334 million

Democrats, predictably, puked on the budget, with their most hypocritical criticism being that it’s not really balanced. They assume, probably correctly, that Illinois voters don’t know that the current budget they passed over Rauner’s veto, which they said “saved the state,” isn’t balanced, either.

It’s hard to see how we can avoid another protracted budget fight unless one side or the other caves mightily.

Most importantly, keep in mind that all these budget numbers have little to do with whether the state will really balance its books. Budget accounting is phony, as we’ve explained repeatedly. Just in the last then years the state’s net loss, as shown in actual, audited financial statements, totaled over a mind-boggling $120 billion, even though the budgets for each of those years were “balanced.”

The full 554-page budget proposal is linked here.

*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.


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