Regional News

Budget Impasse in Illinois

CHICAGO - The Illinois House began voting on its own version of a state operating budget yesterday, although few lawmakers held out hope they would resolve their differences in time to pass a final spending plan, approve a capital budget, and vote on such other major proposals as a $16 billion pension bond before their scheduled adjournment next week.

The General Assembly also has on its crowded plate legislation establishing a new hospital assessment program to leverage additional federal Medicaid dollars, new ethics rules, and a restructuring of the Metropolitan Pier and Exposition Authority's debt. Lawmakers also have a $750 million hole to plug in the current fiscal 2008 budget that runs through June 30.

If no agreement is reached on an operating budget by May 31, a three-fifths majority in both chambers would be needed to win approval - compared to the simple majority required before that date. Bond proposals always require the super-majority vote. Democrats hold a supermajority in the Senate but not in the House, so Republican support would be needed.

While the House began voting on its version of an operating budget yesterday, the Senate is expected to soon begin debate on its own proposal. Neither is expected to include the significant increase in spending proposed by Gov. Rod Blagojevich in his $49 billion budget. The governor, a Democrat, has proposed $1.9 billion in new spending on health care and education. The House plan is expected to include some new spending, with the Senate holding the line on increases. The governor has proposed eliminating the current deficit by draining $500 million in surplus revenues from various non-general fund accounts and closing corporate tax loopholes to cover the rest.

On the capital spending front, several lawmakers praised the efforts of former Republican House Speaker Dennis Hastert and former Democratic congressman Glenn Poshard, who unveiled a proposed $31 billion capital program Tuesday, but the positive comments were offset by skepticism that lawmakers could reach an agreement by next week.

Blagojevich asked Hastert and Poshard earlier this year to craft a plan that could win legislative support. Their multi-year spending plan is $6 billion more than previously proposed. The state would finance its share with $7 billion of the $10 billion a proposed partial privatization of the state lottery is expected to generate. Another $550 million of the state share would come from new annual revenues from a proposed expansion of gaming.

"Whether it be an Olympic bid for Chicago or a bridge over the Mississippi, I am absolutely convinced that this state cannot wait a single day longer for a capital construction bill," Poshard said in a statement.

The state would use the $550 million to repay general obligation borrowing, although no figures were immediately available on the level of new borrowing proposed under the program. The proposal also includes provisions designed to appease legislative concerns that the governor would tap capital dollars to fund his pet projects.

Support is strong for some sort of capital program after four years without new capital dollars, but votes on expanded gaming and a full lottery privatization have fallen short in the past. "I'm skeptical that anything will happen until the fall veto session. In addition to agreeing to a way to pay for such an ambitious proposal, there needs to be a uniform review process," said state Sen. Jeffrey Schoenberg, D-Evanston.

The governor's proposal to borrow $16 billion using general obligation bonds to help bring down the state's $42 billion unfunded pension liability and bring the funded ratio up to 75% from 62% has some support. But others remain skeptical as to whether the state could repeat the success of its $10 billion 2003 deal; which captured a low interest rate and was invested with strong returns. "It's still a work in progress," one lawmaker said. "But I expect it will be on the table in final budget negotiations."

Schoenberg was optimistic that legislation he is sponsoring to replace an expiring hospital assessment program will pass before the end of next week. He said the final plan is still subject to negotiation, but it's expected to run for five years and generate an additional $600 million annually for hospitals and between $130 million and $260 million annually for other qualified health care expenses.

Under the expiring program, the state levies a tax on hospitals based on their patient volume levels and uses those funds to leverage additional Medicaid matching dollars. The plan must be approved by the Federal Centers for Medicare and Medicaid. The state has leveraged about $1.8 billion in additional funds under the expiring three year program and another $430 million under a one-year predecessor program.

Also looming is a vote on an ethics reform package. The bipartisan reforms would ban individuals or companies that hold or are bidding on a state contract worth at least $50,000 from making campaign contributions to any elected officials with control over the contract for two years.

The authority that manages Chicago's convention center is also hoping for passage of legislation that would allow it to restructure a portion of its $2.1 billion debt portfolio. The changes would enable it to avoid using a state sale-tax backup to cover debt service obligations, as tourism taxes are expected to fall short this year.

The legislation would allow MPEA to extend the final maturity of its debt by six years to 2048, raise its debt ceiling by $350 million to $2.5 billion, and increase the pledged level of sales taxes in the later years of the debt service schedule to $350 million from $275 million.

The General Assembly is winding down as a verdict is expected any day in the federal corruption trial of Blagojevich's former fundraiser Antoin Rezko on charges he used his influence with the governor to trade jobs and state investment business to enrich himself and Blagojevich's campaign coffers. The governor has not been formally charged with any wrongdoing.



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