CHICAGO — Rushing to wrap up work by an adjournment deadline of midnight, Illinois lawmakers Tuesday passed a massive gambling expansion that includes a Chicago casino after their weekend adoption of a $33.2 billion operating budget for fiscal 2012 that leaves billions of dollars in unpaid bills.
The General Assembly’s actions on key budgetary and gambling issues clash with the positions of Gov. Pat Quinn. Lawmakers over the weekend adopted an operating budget that is about $2 billion below the plan submitted by Quinn, and lawmakers rejected Quinn’s plea to borrow to cover the state’s bills.
After dropping an $8.75 billion bonding proposal to “restructure” the state’s overdue payments, Quinn backed a bill sponsored by Sen. John Sullivan, D-Rushville, to issue $6.2 billion of debt with a seven-year debt service schedule.
The plan failed to muster even a majority vote in the Senate over the weekend. Democrats hold a majority in both houses, but a three-fifths vote is needed for bonding authority. Several Senate Democrats joined Republicans in voting against the plan. Quinn is a Democrat.
The General Assembly was expected before adjourning to approve an extension in the state’s lapse period — which extends into the new fiscal year the ability to pay off bills from the previous year — to Dec. 31 from Aug. 31. It took similar action last year.
“This is not new spending. This is giving [the governor] more time to pay the bills,” said Senate President John Cullerton, D-Chicago.
State budget office spokeswoman Kelly Kraft said the governor and his staff are reviewing the various budget bills passed by lawmakers, and Quinn remains behind some form of debt issuance to pay down bills.
“The governor has been clear since he proposed the budget in February that while we put our fiscal house in order, we must continue to protect core priorities that will benefit the state now and in the future,” Kraft said in a statement. “Debt restructuring is a critical component to stabilizing the state’s budget and ensuring our continued economic recovery.”
The operating budget that will go to Quinn could still grow by about $430 million. The Senate adopted a budget that mirrored the House version, but it then tacked on an additional $430 million for education and social services. The House had not voted on the additional spending by Tuesday afternoon.
The state started 2011 facing an estimated $15 billion deficit, but an income tax increase approved earlier this year cut that number nearly in half, as it will generate $6 billion to $7 billion annually in new revenue. Still, Illinois is on pace to end the current fiscal year on June 30 owing $8 billion in bills, according to the comptroller, and those bills are not accounted for in the fiscal 2012 budget approved by lawmakers.
Illinois and state-based issuers have paid higher interest rates to borrow due to the state’s budgetary and liquidity woes, though market concerns over the state’s credit have eased somewhat since passage of the income tax increase. After a series of downgrades, Illinois general obligation bonds are rated A1 by Moody’s Investors Service, A-plus by Standard & Poor’s, and A by Fitch Ratings.
Supporters of a massive expansion of state gambling pushed the estimated $1.5 billion in up-front licensing fees it would generate as a means for helping ease the bill backlog. The licensing fees would pay down debt while about $500 million in annual revenue would go to education and public works spending, according to its lead sponsor, Rep. Lou Lang, D-Skokie.
The Senate’s Tuesday passage of the legislation in a 30-to-27 vote followed the House’s adoption of it Monday. The package licenses five new casinos, including a first-ever Chicago land-based casino. Whether Quinn will sign the legislation is unclear. He has said he would review any revenue-generating and jobs-creating ideas, but he has endorsed only a limited expansion of gambling.
Under the package in HB 744, crafted to please multiple state factions in order to win passage, five new casinos would be built in Chicago, Danville, Rockford, Park City, and a site that has not yet been selected. Horseracing tracks could add slot machines at their facilities, and slots also could be operated at Chicago’s O’Hare International and Midway airports. Harness racing could be held at the state fairground up to nine months a year, with slots operated during that time.
New Chicago Mayor Rahm Emanuel, who faces an estimated $600-$700 million deficit next year, lobbied lawmakers to approve the package. “A Chicago casino will spur local economic growth and provide jobs to Chicagoans, both needed to get our city moving again,” he said in a statement.
Pension reforms aimed at easing the cost and mammoth size of the state’s unfunded obligations had appeared headed for bipartisan approval but over the weekend they stalled amid union opposition.
Under the proposal, employees would receive all of their accrued benefits. Going forward, the state would offer a three-tiered system under which current employees could pay more to keep their current pension benefits, keep more of their salary in exchange for reduced benefits, or shift to a defined contribution 401(k)-like investment plan.
In addition to affecting state workers, the package in SB 512 would cover university employees, teachers, and most Chicago and Cook County employees. Police and firefighters in Chicago and downstate were excluded.
Unions argued that the changes violate state constitutional protections afforded to pensions, which cannot be impaired or diminished. House and business backers believe the reforms pass legal muster because they don’t affect accrued benefits.
Backers said they would bring a revised package up during the General Assembly’s annual fall veto session. “Our goal is to enact reforms to our pension systems that provide a long-term solution for both those who are members of the pension systems and those who fund them,” said a joint statement from House Speaker Michael Madigan, House Republican Leader Tom Cross, and Tyrone Fahner, president of the Civic Committee of the Commercial Club of Chicago.
The state owes $4.6 billion in pension payments in fiscal 2012, but that figure is expected to grow to as much as $20 billion by 2045 under the current funding schedule adopted in 1995. Backers of the reforms said the changes could cut the $20 billion to about $12 billion. Illinois holds the distinction among states of having the retirement plan with the lowest-funded ratio, 45.4%, with $75.7 billion of unfunded liabilities.
A separate measure, Senate Bill 175, that would have raised retiree health care contributions was also put on hold. Originally, backers sought to limit the impact of increased payments to retirees with larger pensions, but as written, the legislation would also affect those with lower pensions.
Illinois has an actuarially based unfunded liability for other post-employment non-retirement benefits of $27.1 billion. The annual required contribution to fully fund the liability in 2009 was $1.8 billion, but the state contributed just $604 million.
