CHICAGO - Illinois Gov. Bruce Rauner's proposed budget relies on unrealistic and potentially harmful cuts as well as savings that don't appear achievable, according to a new report from a prominent local budget watchdog.
The Chicago Civic Federation said it opposes Rauner's budget and called on the General Assembly to come up with its own alternative.
"While the governor's recommendations may close the budget gap on paper, the Civic Federation cannot support spending reductions that are either unrealistic or inconsistent with reasonable long-term financial goals for the state," the federation's president, Laurence Msall, said in a statement Thursday.
Rauner's budget would cut deeply to erase a more than $6 billion deficit and also relies on $2.2 billion of savings from pension reforms and $655 million in savings from employee healthcare changes.
Absent a constitutional amendment which would take some time to complete, the pension changes would face a legal challenge before they could be implemented and the healthcare savings represent one-third of current spending and would require a collective bargaining agreement. The administration also has not submitted the pension reforms to the General Assembly in the form of legislation.
"Both the magnitude of the projected savings and the short timeframe for reaching agreement with the state's largest union suggest that the budgeted numbers are unlikely to be realized,"
The Civic Federation previously offered lawmakers what it called a multi-year budget roadmap aimed at stabilizing state finances. It suggests a combination of spending cuts and new revenues to close the budget deficit and eliminate a $5 billion to $6 billion backlog of unpaid bills.
The Rauner administration said it stands by its budgeting and its "turnaround agenda" proposals.
"The structural reform addressed in the governor's turnaround agenda will help free up resources to tackle our $6 billion deficit. New revenue cannot be discussed until we address the underlying structural issues that have landed us here in the first place," a statement read.
Other areas the federation raised concerns over include a $1.5 billion cut to Medicaid that could run afoul of federal rules and a 50% cut of $600 million in the amount of income taxes distributed to local governments.
"This reduction is inadvisable at a time when many municipalities are under severe strain," the report said. "The state's fiscal position will suffer if the finances of the city of Chicago - the state's economic engine - are allowed to deteriorate further."
The group's report did offer some praise for Rauner's quick release of a budget that accurately reflects the urgency of the state's fiscal stress so soon after his election. The group also praised Rauner's budget estimates about the size of the gap and his refusal to use borrowing to paper over the operating deficit.
While well-respected for its independent analysis of local government and state budgets and tax policies, the federation's position on the Republican's governor's first budget is all the more significant because its board is stocked with private sector business representatives. Rauner has sought to portray his budget plan and turnaround agenda as needed to attract and keep business.
The report comes as lawmakers head toward their scheduled adjournment at the end of the month. The legislature's Democratic majority has begun to dig in its heels in opposition to the budget and the House in a vote Wednesday shot down proposed cuts to human services spending.
The state's cash situation has worsened due to the partial expiration in January of a 2011 income tax hike. Rauner's proposed $32 billion budget for the fiscal year beginning July 1 is down $2.1 billion from fiscal 2015 to reflect the drop in income tax collections.
Rauner took his argument to the Chicago Council on Wednesday, warning he wants members' support for some of his initiatives if exchange for support on a city wish list that includes public safety pension reforms, a city-owned casino, and expanded sales tax base.
After the appearance, Rauner released a statement making clear his priorities in the turnaround agenda. They include legislative term limits, a property tax freeze, local control of the ability to create employee empowerment zones, local control of contracting and bargaining in schools and local governments, and local control of competitive bidding on taxpayer-funded construction projects. They also include ethics reforms and reforms to pensions, unemployment and workers compensation insurance.
The proposed budget allocates debt service totaling $3.4 billion on $29.6 billion of principal owed for all outstanding general obligation and sales-tax backed bonds.
Market participants and analysts are watching closely because progress toward improving the state's dismal structural balance --underscored by a $5 billion backlog of unpaid bills — is needed to avert further credit rating deterioration.
The state —saddled with $111 billion of unfunded pension liabilities — is rated at the A-minus level across the board, with negative outlooks from all three rating agencies.
