Quinn Calls for Cuts

Gov. Pat Quinn on Friday outlined his plans for cutting $1 billion from Illinois’ fiscal 2010 budget and warned that the state will remain awash in more than $5 billion of red ink without new revenue from an income tax increase.

The budget agreement reached by lawmakers and the governor last month gave Quinn discretion to cut $1 billion in spending to help balance the budget. He announced cuts to art funding, veterans programs, and health care funding, along with furlough days and the layoffs of more than 400 prison employees.

Even with the cuts, Quinn warned that the state owes $3.9 billion in bills from last year and is in need of more than $1 billion in revenues to fund expected health care costs.

“We’ve done all this, but we have to deal with the fiscal reality that we have a revenue shortfall to pay our bills,” he said at a news conference on Friday.

Quinn pushed for a 50% income tax increase during the General Assembly’s spring session, but the House rejected it. Quinn will push for some form of a tax increase when lawmakers return to work for their annual fall veto session in October.

The final all-funds $54 billion fiscal 2010 operating budget signed by Quinn earlier last month relies heavily on one-time maneuvers, including issuing $3.4 billion of debt to cover most of the state’s $4 billion payment owed to its pension systems. The payment of about $3 billion in bills would be pushed off to the next fiscal year.

Fitch Ratings downgraded the state’s general obligation debt last week two notches to A. Moody’s Investors Service lowered the credit one notch in April to A1. Moody’s recently placed the state — along with $2.1 billion of A1-rated sales tax-backed Build Illinois debt and $2.26 billion of debt issued by the Metropolitan Pier and Exposition Authority — on negative watch. Standard & Poor’s downgraded the state to AA-minus in March.

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