Illinois House Speaker Michael Madigan, D-Chicago, forms budget panel to review the governor’s fiscal 2016 budget proposal as chamber prepares to craft its version.

CHICAGO - House Speaker Michael Madigan is taking aim at Illinois Gov. Bruce Rauner's proposed $32 billion fiscal 2016 budget with the formation of a special oversight panel that will "closely examine" Rauner's spending cuts.

The rookie Republican governor's proposal to close what his administration estimates is a $6.6 billion budget gap with cuts and pension reforms without any new tax revenues hasn't gone done well with Democrats who control the General Assembly. Democrats want a mix of cuts and revenue hikes to avert too deep an impact on services.

Some of the harshest comments have come from Senate President John Cullerton of Chicago, while Madigan, also of Chicago, has been more temperate in his remarks. The creation of the oversight panel marked something of a shift in that position.

"Governor Rauner has talked about cutting non-essential state spending for a number of months. In light of recent budget actions, and as we prepare to craft the next state budget, it's important to have an in-depth discussion about what the governor believes is non-essential," Madigan said.

House Majority Leader Barbara Flynn Currie, D-Chicago, and Assistant Majority Leader John Bradley, D-Marion, will lead the panel that will include the chairmen of the five House appropriations committees. Madigan said he has invited House Republicans to name members to the panel.

"The Legislature has a monumental task ahead in crafting a responsible and realistic budget, and it's imperative we have a clear understanding of the governor's methods and his math," Currie said in Madigan's statement.

She targeted Rauner's proposals to claim more than $2 billion in pension savings from pension reforms that have to be debated as well as $700 million in health care savings. "We can't draft a budget with magic money that does not exist," she added.

The budget review panel will meet for the first time Tuesday. In a statement Rauner's administration said he stands he remains "committed to fixing Illinois' fiscal crisis through the turnaround agenda and restructuring state government" and "looks forward to working with the legislature to find a bipartisan solution that puts Illinois on the road to becoming the most competitive state in the country."

The state's budget deficit is whittled away with $2.9 billion in savings from employee benefit reforms from pension cuts and group healthcare cuts, a $1.3 billion cut in subsidies to local governments, $1.2 billion in provider rate reductions, and $200 million in operating efficiencies. Additional savings are carved out by shifting some to healthcare exchanges and cuts in earmarks, according to the budget.

The budget anticipates that income rates will remain at their current level following the partial expiration of the 2011 tax hike on Jan. 1. Rauner did leave the door open to raising new revenue, but only if government reforms are adopted.

Illinois has the lowest ratings of any state at the A-minus level, with negative outlooks across the board due to budget and pension pressures. The state is carrying a $4 billion to $5 billion bill backlog that could skyrocket in coming years. Illinois is saddled with $111 billion of unfunded pension liabilities in a system just 39% funded, and a court struck down a 2013 overhaul of pension benefits on state constitutional grounds with an appeal pending before the state's high court.

Also this week, the state began restoring funding cuts to hundreds of school districts that lost funding in a round of cuts that helped close a $1.6 billion shortfall in the current budget that runs through June 30. The budget fix agreed to by lawmakers and Rauner drew $1.3 billion from various non-general fund accounts and cut spending by about 2.25 %.

The legislation provided $97 million to offset some school funding cuts for districts facing too difficult a financial burden to absorb the reduction. Chicago Public Schools will receive $33 million. More than 250 districts won't receive any compensation.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.