More Rancor in Illinois

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CHICAGO – With just days left in the legislative session, Illinois Democrats and Republicans remained dug in, offering little sign that a compromise to end the nearly year old budget standoff was near.

Republican minority leaders did emerge from a leaders meeting with Gov. Bruce Rauner expressing renewed hope of a compromise, saying Democratic leaders expressed a commitment to ramping up negotiations among several budget working groups. "The Democratic leaders now share our sense of urgency of brining this impasse to a close," said Minority House Leader, Rep. Jim Durkin, R-Western Springs. Democratic leaders did not comment after the meeting.

The political discord had taken a turn for the worse Wednesday when House Speaker Michael Madigan, D-Chicago, bypassed ongoing bipartisan budget discussions to push through a fiscal 2017 spending plan that Rauner and fellow GOP members slammed as phony and catastrophic.

The budget plan passed 63-to-53 Wednesday. Amid complaints from Republicans over the lack of a verification of the vote, the House recast their vote Thursday and the plan again passed. It now heads to the Democrat-controlled Senate. While the House and Senate passed a budget last year that was vetoed by Rauner, with the exception of school district funding, the fate of the House plan this year is uncertain and no action was anticipated Thursday. Republicans went on the attack as the general outline of Madigan's plan circulated early Wednesday. The administration warned that the spending plan would require a boost in income tax rates to 5.5% from 3.75%.

"The House Democrats are proposing a budget that is as much as $7 billion out of balance…It is by far the phoniest phony budget in recent Illinois history — and that's saying something," the administration said, vowing a veto if it makes it to Rauner's desk.

Comptroller Leslie Geissler Munger, a Republican who was tapped by Rauner for the post, warned the package would drive the state's bill backlog up to more than $15 billion from its current $7 billion and result in eight- to-nine-month payment delays. "The consequences of implementing this proposed budget would be catastrophic to those who are already suffering from the state's continued fiscal mismanagement," she said.

Rauner made his first comments on the plan after a budget roundtable discussion with business leaders Thursday.

Rauner declined to directly answer whether the plan, including additional education aid, would face a veto. He offered a more measured criticism of the plan, shying away from the harsher tone he has taken in the past on Madigan, and said he remains hopeful a compromise can still be reached.

"For me, I realize that there is some sort of massively, massively out of balance spending plan passed last night….It's not realistic, it's not honest, there's no way to pay for that spending level," he said.

"I'm just focused on encouraging the working groups to continue their work in a good faith way to get compromise," he said. Without naming Madigan, he suggested a compromise could emerge if rank-and-file members defy their leaders.

Rauner was scheduled to meet with leaders later Thursday, a day when attention at the capitol was focused on school funding. Chicago Public Schools chief executive officer Forrest Claypool was leading a protest on school funding and Senate President John Cullerton, D-Chicago, outlined a revised school funding formula bill that would benefit poorer districts like CPS. The package boosts spending by about $650 million, including $200 million for CPS pensions.

Madigan's fiscal 2017 budget plan advanced as the state nears the June 30 close of fiscal 2016 without a budget for either fiscal 2016 or 2017. The General Assembly is in the final stretch of the spring legislative session which ends Tuesday.

After that date, it will take a three-fifths supermajority, instead of the simple majority now required, to pass a fiscal 2016 and 2017 budget. Democrats hold 71 seats in the 118-member House, the bare minimum to meet the supermajority requirement, but as Wednesday's budget vote demonstrated, Madigan cannot rely on every member of his caucus.

Rauner had in recent days maintained his position that several budget and reform working groups would reach a "grand bargain" laying out a compromise on spending cuts, tax hikes, pension reforms, and Rauner's turnaround agenda items.

Rauner has refused to go along with tax hikes unless Democrats pass his measures that include local government union curbs and worker's compensation and tort reforms and term limits. Democrats have balked at the initiatives they believe as being too favorable to business.

Hanging in the balance is the state's credit rating, already the lowest among states, and the financial health of public colleges and universities that have received only a portion of their state aid and the human services network. Social service providers have received no payments without an appropriation.

About 90% of spending including debt service and pension contributions continues unabated under continuing appropriations and court orders; spending is on pace to exceed the estimated $32 billion of revenue by $4 billion to $5 billion.

Senate Bill 2048's sponsor, Rep. Barbara Flynn Curie, D-Chicago, said the spending plan was being offered as an insurance policy given the wobbly prospects for a compromise spending plan with just days left in the session.

"We still don't have a budget for the current fiscal year," she said. "I am appalled at the prospect that we would leave this legislature this spring session without providing stable funding for the operations of state government."

Currie called it "unconscionable" to leave human services unfunded and other Democrats attacked the GOP's refusal to pass a budget on its own, instead using it as leverage to push through Rauner's agenda items.

"This is absolutely the biggest joke that I've witnessed in my 18 years in Springfield," House Minority Leader Jim Durkin, R-Western Springs, said of the plan's rapid movement onto the House floor without a formal committee vetting.

The House quickly adjourned after the budget vote. At a news conference, Republicans came out swinging.

"We just debated a $40 billion spending plan the Democrats jammed down our throats two hours ago," said Rep. Ron Sandack, R-Downers Grove. "This sets a terrible tone for the parties to try to accomplish something in a meaningful, collaborative, professional manner."

The House plan authorizes nearly $14 billion in general fund spending and all-fund spending of more than $47 billion. The plan, however, does not reflect current general fund appropriations that are being paid under consent agreements. The Rauner administration said the budget brings total general fund spending to $39 billion while the state expects only $32 billion of revenue.

Currie said the funding levels are similar to what the House proposed last year with an increase allocated for K-12 education. Rauner's own proposed fiscal 2017 budget proposal was dismissed by Democrats for being $3.5 billion to $4 billion in the red.

The package provides an additional $700 million in education grant funding to benefit high-poverty districts of which the distressed Chicago Public Schools would be a big winner, receiving about $300 million in additional funding to help close a $1 billion deficit. The plan provides CPS with another $100 million toward pension payments.

"While we recognize that we are far from solving all of the challenges at CPS, we see today's actions as an important first step and look forward to working closely with Chicago legislators to minimize the impacts of the budget crisis in the classroom and to our CPS students," Mayor Rahm Emanuel said in a statement after the vote.

The current situation mirrors last year's events when Democrats pushed through a $36 billion spending plan that Rauner vetoed with the exception of school funding. What has changed is a deepening of the acrimony between Democrats and Republicans.

The intensified hostilities don't bode well for a bipartisan agreement on additional CPS funding or the fate of Emanuel's proposed re-amortization of the city's public safety pension contributions. The bill, which would shave $220 million off the city's 2016 public safety contribution, is sitting on Rauner's desk. Rauner has said he dislikes it but would sign as part of a grand budget/pension compromise that now seems further elusive.

The longer the impasse drags on, the more likely it won't be resolved until at least after the November election, many believe, because lawmakers will likely increasingly grow concerned about supporting any tax increases.

The state has suffered credit erosion over the last year and faces more unless it makes strides in tackling its budget and pension ills. Fitch Ratings dropped its rating one notch to BBB-plus and assigned a stable outlook over the last year while Moody's Investors Service lowered its rating to Baa1 with a negative outlook. Standard & Poor's rates the state A-minus with a negative outlook. The state's 10-year GO paper has been trading at a 180 basis point spread to the Municipal Market Data's top-rated benchmark.

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