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The sad thing is most of these people will be re-elected this fall.
$7 billion windfall can't stave off pension crisis, health care cuts and slashes in service — all being tackled this week
By Monique Garcia, Chicago Tribune reporter
May 28, 2012
Sixteen months ago, Democrats pushed through the largest income tax increase in Illinois history, an unpopular decision that was billed as a crucial step to put state government on the road to financial recovery.
Yet last week lawmakers made deep cuts in health care for the poor, and this week they face tough votes to raise the cigarette tax, strip away public worker pension benefits and slice spending on social services. Despite all that, the giant pile of unpaid bills that has loomed over state government for years is expected to keep growing.
So why didn't the roughly $7 billion more a year the state is collecting from that income tax hike fix Illinois' money problems?
Pension payments continue to increase dramatically each year. The same is true for health care costs as more people seek coverage during a down economy. And that stack of bills keeps rolling over from one year to the next partly because lawmakers declined to go along with Gov.Pat Quinn'srequest to use some of the income tax windfall to borrow to pay it off.
The rising costs have created what Quinn calls a "squeeze" on the rest of the state budget. Which means lawmakers head into the final days before Thursday's scheduled adjournment preparing to anger public employee unions, educators, mental health advocates and other groups that rely on tax money to provide services.
They're difficult moves to make in any year, not to mention one in which every House and Senate seat is on the November ballot. The governor acknowledges the drastic cutbacks are a lot to ask on the heels of a 67 percent increase in the personal income tax rate but says the sacrifices are necessary to protect the future of Illinois.
"Our state is at a crossroads," Quinn said at a recent speech before the City Club of Chicago. "I have to do the things that are necessary to make Illinois a better state, a better economy. We've done some hard things, and we'll continue to push our shoulder to the wheel because we have to do that if we're going to be strong in the 21st century."
Republican Sen. Matt Murphy of Palatine put the blame on years of overspending by Democrats who have controlled the Capitol since 2003. Murphy said years of skipped pension payments and expanding Medicaid eligibility dug a budget hole so deep that the tax increase couldn't fill it.
"The chickens are coming home to roost," Murphy said. "So now we have very tough, painful decisions to make even after the largest tax increase in state history. And that's frankly because of a lack of fiscal discipline for the last decade in this Capitol."
Quinn aides are quick to note that Democrats alone didn't create the pension problem. They point to a 1995 pension law passed under Republican Gov. Jim Edgar. Billed as a way to stabilize the pension system and get it 90 percent funded by 2045, the law backloaded pension payments so that they were minimal in early years but increased over time.
The state now finds itself in the midst of those years with increased pension costs. Quinn budget director Jerry Stermer calls the payment plan "fiscal suicide." He notes the state's required contribution has nearly tripled: going from $1.71 billion in the 2008 budget year to $5.09 billion in the budget year that starts July 1. Meanwhile, the retirement system's $83 billion unfunded liability continues to grow because of early retirement incentives, pension sweeteners and skipped payments orchestrated by Democrats and Republican.
"The truth is lawmakers have shortchanged the pensions for decades," said Kelly Kraft, spokeswoman for Quinn's budget office. "This is why we face such a challenge today."
Similar mismanagement of the Medicaid program has led it to the brink of collapse, including years of not setting aside enough money as costs continued to grow. Then-Gov. Rod Blagojevich embarked on large expansions of health coverage, and little was done to control costs that Stermer said rose on average 6 percent a year.
Those health care cost increases are untenable when the state is expected to bring in at best 2 percent more next year, Stermer said. Add nearly $2 billion in Medicaid bills that lawmakers put off paying last year, and it's created a situation in which Quinn said the health care program is drowning "under an ocean of debt."
Last week, the General Assembly voted to cut $1.6 billion in Medicaid spending. The House also approved a $1-a-pack cigarette tax increase that the Senate is expected to approve as soon as Monday.
Even if Medicaid cuts and pension reforms are put in place, the state's unpaid bills are expected to total $8.5 billion come June 30. The new state budget isn't expected to shave much off that tab. The pile of bills was an estimated $8 billion when the income tax hike was approved.
Stermer said the governor was forced to "draw a line in the sand" to keep the mountain of debt from growing to a point where the state is so consumed in paying off old bills that it can't pay for anything else. The persisting backlog means more cuts are likely on the horizon for years to come, particularly if portions of the income tax increase are allowed to expire beginning in 2015 as the law requires. Lawmakers could extend the tax hike or make it permanent, an issue that's expected to dominate the 2014 governor's campaign.
Quinn has proposed borrowing money to pay off the backlog, a move he calls a "restructuring" of the state's debt. He argues Illinois can borrow money at a lower rate on Wall Street than what it costs in penalties for failing to pay service providers on time, while at the same time ensuring that businesses stay open and add to the tax rolls.
The plan has had little support in Springfield, with opponents arguing the state's penchant for borrowing to make ends meet helped cause the current money mess. They don't trust the governor will follow through on cuts if he suddenly gets more money.
Meanwhile, Quinn is hoping to use the backing of numerous business and public interest groups to help pressure lawmakers into passing major pension reforms. But the House under Speaker Michael Madigan does not appear inclined to approve key portions of Quinn's plan that would require employees to pay more toward retirement and retire later in life.
Among the groups that supports Quinn's Medicaid and pension plans is the Civic Federation of Chicago, a nonpartisan budget watchdog that has for years called on the state to cut spending.
Civic Federation President Laurence Msall said Illinois long has operated as an "insolvent sovereign" where leaders refused to cut spending when the national economic crisis hit. Msall said lawmakers used "financial gimmickry" to make it appear they passed balanced budgets, while in reality there was not enough money to pay for everyday programs.
The state's credit rating suffered, and this yearMoody's Investors Servicedowngraded Illinois to the worst in the nation. Without action, Msall said the rating could get even worse, meaning it would cost the state even more to borrow money to pay for things like road and school construction.
The credit situation is another reason Quinn said lawmakers can't put off tough choices until after the November election, when the political pressure will be less.
"There is frankly a 'deny, delay, don't act lobby' in Springfield," Quinn said. "We cannot take this moment in history and squander it."
While flexible on how to put the reforms in place, Quinn has indicated he has no plans to back down until the job is done.
"I don't see the governor interested in a 'just enough to go home' scenario," Stermer said. "The governor is prepared to stay the summer on this one."
_________________ Frank Coztansa wrote: conns7901 wrote: Not over yet. Yes it is. CDOM wrote: When this is all over, which is not going to be for a while, Trump will be re-elected President.
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