CHICAGO — Moving to reshape the state’s budget office after eight months in office, Illinois Gov. Pat Quinn appointed his senior fiscal adviser David Vaught to the state’s top fiscal post this week amid dire warnings from the comptroller that Illinois faces a cash-flow crisis with $3 billion in unpaid bills.
Vaught will replace Ginger Ostro as director of the Governor’s Office of Management and Budget. She worked in the GOMB for six years before former Gov. Rod Blagojevich appointed her director in 2007.
Ostro was named a senior policy adviser to the Illinois Student Assistance Commission.
Vaught is an attorney and financial analyst who is a senior adviser on legislative, fiscal and economic development to Quinn. Vaught previously was a managing director and principal at Mitchell, Vaught & Taylor Inc., an investment advisory firm.
Quinn and Vaught are longtime associates whose connection dates back to their work on Gov. Dan Walker’s campaign in the 1973 election. Vaught also worked for Quinn while he was state treasurer between 1991 and 1995. Vaught is a West Point graduate who served in the U.S. Army’s 82nd Airborne Division as a field artillery officer.
“David Vaught brings a wealth of accomplishments to his new position as budget chief,” Quinn said. “Also, I look forward to benefiting from Ginger Ostro’s expertise at ISAC and want to express my thanks for her fine work at GOMB.”
Lawmakers threw Blagojevich out of office in January after his arrest on federal corruption charges, but Quinn left his predecessor’s finance team in place as he sought approval for a fiscal 2010 budget with an income tax increase to help close a $12 billion deficit.
The General Assembly rejected the tax hike, instead balancing the budget through $2 billion in spending cuts and one-time measures that include borrowing $3.4 billion to cover the state’s pension payment, $2 billion in debt restructuring, and pushing the payment of $3.8 billion of fiscal 2009 bills off to fiscal 2010. The recession’s impact on revenues and the state’s reliance on one-time budgeting measures contributed to a string of ratings downgrades over the last year.
“I am eager to take on Illinois’ unprecedented budgetary challenge and am confident that we can emerge a stronger and more resilient state,” Vaught said in a statement.
A public finance source described him as an effective negotiator who works well with the General Assembly’s Democratic majority.
State Comptroller Daniel Hynes, who is running against Quinn for the Democratic nomination for governor next year, yesterday issued a stinging review of Illinois’ fiscal situation for the first quarter of fiscal 2010 and offered a grim assessment for the remainder of the year in his office’s quarterly report.
The state closed out the quarter with $3 billion in bills, the highest level ever for the first three months of its fiscal year. The number is all the more startling because Illinois issued $2.25 billion in cash-flow certificates in May and August to ease the size of its payments in arrears. Payment delays to state vendors are at 61 business days, up from 42 a year ago.
“This is a crisis unmatched historically, and the downward spiral is accelerating,” Hynes said at a news conference. “By any quantifiable measure — the bills outstanding, the payment delays, and overall borrowing — the fiscal situation has never been worse, especially so early in the fiscal year, and there’s no end in sight.”
Hynes laid the blame for the state’s fiscal position on dwindling corporate and personal income taxes and sales tax collections and the state’s decision to push off payment of a record level of bills incurred in fiscal 2009 to fiscal 2010.
The comptroller charges that the governor has so far failed to come up with a plan to dig the state out of its hole. Hynes has proposed additional spending cuts and a graduated income tax increase on higher earners. The governor is expected to resurrect his proposal for a general income tax increase, but not until the 2010 legislative session, after the February primary.
Quinn’s office responded with a statement, saying: “Gov. Quinn has been honest and forthright with the people of Illinois about the state’s financial woes. More important, he has been a strong and decisive leader, making tough but fair choices, while fighting for his comprehensive plan to ease the state’s financial burdens and pay vendors in a timely manner.”
The Legislature’s Commission on Government Forecasting and Accountability recently released its assessment of the first quarter that showed revenues were down about $629 million, although federal funds helped lower the shortfall to $340 million. Personal income tax collections fell $251 million, sales taxes were down $244 million and corporate income taxes were off $113 million.
Illinois’ GOs are rated AA-minus with a negative outlook by Standard & Poor’s, A by Fitch Ratings, and A1 on negative watch by Moody’s Investors Service.
