CHICAGO — Bruce Rauner took over the Illinois governor's office Monday, vowing to fix the state's bleak finances through shared sacrifice, bolster its competitive edge for business, improve education, and to end "business as usual."
In his inaugural address, Rauner directed state agency heads to freeze non-essential spending and review all contracts signed since November 1. Rauner, a wealthy businessman and political novice, will reduce his salary to $1 and decline benefits.
During the speech that followed his swearing in as the 42nd governor, Rauner touched on campaign themes — including the need to improve the economic climate for businesses and end practices he labeled as corrupt while shoring up the state's fiscal foundation.
He offered no new details into how he would accomplish the pressing tasks or whether he would seek an extension of higher income tax rates that dropped Jan. 1 when he unveils a fiscal 2016 budget next month.
Rauner, the first Republican governor in 12 years, faces a veto-proof Democratic majority in the General Assembly, and he tried to reach across the aisle.
Rauner did not lay blame for the state's fiscal mess solely at the feet of Democratic administrations and he renewed his call for structural change and warned of sacrifices to come. Outgoing Gov. Pat Quinn, who lost to Rauner in the November contest, did not attend the inauguration.
"Our government has spent more than we could afford; borrowed money and called it revenue. Rather than responsibly budgeting the money we had, we implemented programs we couldn't afford," Rauner said. "We have an opportunity to accomplish something historic: to fix years of busted budgets and broken government; to forge a path toward long-term prosperity and a brighter future; to make Illinois the kind of state others aspire to become, a national leader in job growth and education quality.
"To achieve that will require sacrifice. Sacrifice by all of us — politicians and interests groups, business and labor, those who pay for government and those who depend on government's services," he said.
Rauner takes the helm of a state facing a sea of red ink. Shrinking income tax revenue, following the expiry of higher rates Jan. 1, will fail to keep pace with rising pension and health insurance costs. Even the current budget is out of whack with an estimated $700 million shortfall.
The state budget office's latest three-year forecast warns that the state's backlog of unpaid bills, expected to be $4.1 billion at the close of fiscal 2015, could grow to $9.9 billion in fiscal 2016, $15.7 billion in fiscal 2017, and reach $21.3 billion at the close of fiscal 2018. At the same time, a general funds deficit of $180 million this year will rise to more than $5 billion in the coming years.
Illinois' reputation, credit rating, and borrowing costs are at stake. It's already the lowest rated state at the A-minus level with negative outlooks from Fitch Ratings, Moody's Investors Service, and Standard & Poor's. The state pays interest rate penalties to borrow with current spreads on its 10-year general obligation paper trading at 140 basis points over the Municipal Market Data's benchmark for top-rated municipals.
Looming later in the year is the possibility that the state will fall back to square one in dealing with its pension crisis.
The state is saddled with $111 billion of unfunded liabilities and a funded ratio of just 39%.
Legislation spearheaded by Quinn in 2013 to overhaul the system was overturned by a state court judge. The Illinois Supreme Court will decide the legislation's fate with arguments being heard in March.
Ahead of the inaugural, Rauner rolled out key fiscal and development appointments and nominations over the weekend. Rauner drew from the ranks of state Republican lawmakers, staffers of U.S. Sen. Mark Kirk, R-Ill., former Indiana Gov. Mitch Daniels, and the business sector.
Tim Nuding will head up the Governor's Office of Management and Budget, the administration's top fiscal post. Rauner relied on Nuding for financial advice during the transition.
Nuding is well known in Springfield, having worked for the Senate Republican staff for 25 years, with the first 16 years spent working on state fiscal issues through the Senate Appropriations Committee, both as a budget analyst and as the director of the Senate Appropriations staff. He has since served as chief of staff to Senate Minority Leader Christine Radogno.
"Tim's experience working in the legislature has given him a unique perspective and understanding of the budget problems facing Illinois," Rauner said in a statement. "He is widely respected in the state capitol and has established a solid network of relationships with executive agency staff, stakeholders and key legislators and legislative staff from both political parties."
No announcement has been made on the state's debt management position. John Sinsheimer currently holds the title of capital markets director and serves at the pleasure of the governor.
Sinsheimer was a veteran of both private and public sector financial management positions when he took the post in October 2009, steering the state through the rocky terrain of heavy borrowing to support a $31 billion capital program amid steep credit deterioration.
Sinsheimer had previously served for three years as chief financial officer at Illinois Student Assistance Commission. He reports directly to the governor while his predecessors reported to the cabinet level post of director of the Office of Management and Budget.
Rauner nominated Randy Blankenhorn for secretary of the Illinois Department of Transportation.
Blankenhorn is the executive director of the Chicago Metropolitan Agency for Planning. The agency plays a central role in transportation, land use, housing and economic development in the region by holding the purse strings on some forms of federal aid. Blankenhorn returns to familiar territory, having previously spent two decades at IDOT.
Blankenhorn has led CMAP since it was established by the General Assembly in 2006.
Blankenhorn's selection raises questions over the fate of the new governor's support for the proposed Illiana corridor toll road.
Quinn was a staunch supporter, along with Indiana officials, on the more than $1 billion project that is expected to be funded through public private partnerships. CMAP staff recommended against inclusion of the project in the long term plan for the region known as GO TO 2040 and Blankenhorn was critical of IDOT forecasts and projections used in its assessment. A related policy committee that also holds sway over the GO TO 2040 plan voted recently to keep the project in the blueprint.