CHICAGO — A one-time fix to close Illinois' current $1.6 billion budget gap largely by draining $1.3 billion from non-general fund special accounts is headed to the Senate after clearing the House.
"This is a request from our new governor" to address what the administration has estimated is a $1.6 billion shortfall, Democratic House Speaker Michael Madigan of Chicago said on the House floor ahead of the vote Tuesday. "This bill addresses that problem. This is not a perfect bill. It is not a perfect solution . but it responds to the governor's request and it responds to the problem."
The bill also includes $300 million in spending cuts.
The House approved the measure in a bipartisan vote of 69-48 with yes votes from members of both parties, sending the measure to the Senate where members were being polled on support. "The bills are evidence of the progress of our discussions with the House and governor's office as it relates of education, health care and local government funding," said Rikeesha Phelon, a spokeswoman for Senate President John Cullerton, D-Chicago. "Cullerton will be meeting with his caucus to measure support for passage."
The plan, if approved by the Senate, would erase only red ink in the fiscal 2015 budget that was anticipated by lawmakers when they adopted the spending plan last year without extending the 2011 income tax rates. With the November election ahead, the Democratic majorities in the legislature also refused to cut deeply into spending to deal with the loss of several billion in income tax revenue, instead intending to return this year to raise the income tax rates.
Republican Rauner won the November contest, unseating Democrat Pat Quinn, and has so far opposed extending the higher rates that partially expired on Jan. 1.
The state is facing what Rauner's administration has said is a $6.6 billion gap in the budget that begins July 1 and he has proposed plugging that gap through deep spending cuts and savings from pension and healthcare reforms which, if approved, would be subject to a union legal battle.
The legislation that cleared the House Tuesday calls for $1.3 billion in fund sweeps, allowing the state to capture surplus revenues in various non-general fund accounts.
The remainder of the shortfall would be covered by a roughly 2.25% spending cut although healthcare and pensions and some other line items would escape the hit.
The state has relied on either fund sweeps or interfund transfers in the past. Transfers must be repaid, while the sweep does not. The legislation grants Rauner access to $97 million to aid school districts in dealing with the cuts and another $90 million to address other emergency situations that might arise.
Rating agencies and investors are watching closely to see how Illinois solves its budget deficit. It's one of the three big black marks on the state's credit, along with pension obligations and a massive backlog of unpaid bills, that have driven Illinois' ratings to the A-minus level.
Analysts have frowned on the state's reliance on non-recurring revenues to erase red ink, but they are paying more attention to the fiscal 2016 budget and whether the state will begin tackling its structural imbalances.
If approved, the fiscal 2015 budget fix would mark the first cooperative achievement between Rauner and the General Assembly's Democratic majority. The two sides have clashed and traded barbs over the governor's proposed fiscal 2016 spending cuts and attacks on union powers. Rauner initially pressed for more autonomy in fund use to solve the current budget gap.
While negotiations have been ongoing between Rauner aides and legislators for some time, the need for action was growing more urgent as lawmakers are headed into a two-week break.
"This is our opportunity to come together for the good of our state," Rauner's deputy chief of staff Richard Goldberg said during an earlier committee hearing on the legislation.
Childcare assistance and corrections officers' paychecks were in jeopardy without action, said the legislation's sponsor, state Rep. Barbara Flynn Curie, D-Chicago. "We can start planning for fiscal 2016 with essentially a clean slate," Currie said.
It will be harder to achieve bipartisan agreement on the 2016 budget.
Rauner's proposed $32 billion general fund relies on $700 million in healthcare cuts and $2.2 billion in pension savings along with deep cuts to local government aid, transit funding, higher education, and Medicaid.
The proposed budget's heavy reliance on spending restraint "given political and legal challenges, will prove hard to implement in Illinois," Moody's Investors Service said in a recent report.
During recent committee hearings on the proposed budget, social service agencies and local officials have decried the potential funding cuts and Democrats have floated various tax hikes to offset the need their severity.
In a sign of just how deep the political divide is on the budget, Cullerton laid out his opposition in a recent speech before the City Club of Chicago. “His budget hurts middle-class families. Gov. Rauner sees the budget as merely a math problem. I see the people behind those numbers, people struggling to get ahead,” Cullerton said. “I probably could have saved a lot of time and simply told you who’s not hurt in this budget. There’s the wealthy. And then there’s the corporations.”
The Commission of Government Forecasting and Accountability during testimony and in a recent report warned of a $1.3 billion shortfall in the current budget with total revenues expected of $34.1 billion. It expects a $2 billion loss to the general fund in the next budget, leaving the state with $32.1 billion of revenue.