Legislative Issues

The Governor’s Bloated Budget Proposal
State Rep. Aaron Schock, 92nd District

Governor Rod Blagojevich recently unveiled his FY 09 budget proposal to legislators and the public. The media widely reported that this year’s proposal was significantly toned down compared to last year’s. However, do not let that fool you into thinking that this year’s proposal is not full of the same gimmicks and taxes as last year’s.

The first portion of his proposal hinges on the Illinois General Assembly approving $750 million to float the remaining portion of the FY 08 budget. Governor Blagojevich hopes to raise this revenue through $500 million worth of fund sweeps and $250 million from closing as-of-yet unidentified “corporate loopholes.” If the General Assembly does not go along with this plan, the Governor’s Budget Office will examine pushing back some spending into FY 09 or simply not pay some of the state’s bills. This continuation of delayed payments to state providers does nothing but hurt the healthcare and other services that citizens throughout the state receive from private providers.

The second proposal the Governor made in his State of the State Address was child and business tax credits totaling $1.2 billion. This plan relies on the securitization of tobacco settlement proceeds. Illinois receives approximately $350 million in tobacco proceeds each year. Under this proposal, approximately $120 million of that would be used for the debt service on $1.2 billion of general obligation bonds.

However, businesses will begin to suffer from this proposal on January 1, 2009, when all employers with more than 10 employees who spend less than four percent of the business’ payroll costs providing health insurance, get hit with a three percent assessment (tax) that will raise $417 million in the first six months of 2009. Once fully annualized, it is estimated to cost Illinois businesses $1 billion each year thereafter.

Finally, we get to the capital program. It’s been over eight years since Illinois has seen capital improvements to its roads, bridges and schools. Governor Blagojevich proposes a $25 billion capital program that relies, again, on the lease of the state lottery to drum up $11 billion ($7 billion of which will start the program and $4 billion of which will go into an interest-earning trust). In addition to the lottery lease, the road fund balance would be used to sell $3.8 billion in general obligation bonds.

Governor Blagojevich’s bloated budget relies on an additional $20 billion of pension bonds. However, it is not even clear at this time if the market will accept this size of a bond sale, or if the pension systems will support it at this time. If these pension bonds are not sold, it will leave a revenue hole of approximately $370 million.

Overall, the result would be to increase the state’s overall structural deficit. At a time when fellow Democratic officials, including Speaker Michael Madigan, Treasurer Alexi Giannoulias and Comptroller Dan Hynes, are all telling him that he must reduce spending and start paying down the state’s debt, the Governor continues to spend like its going out of style. If last year’s session taught us anything, though, it’s that few spend much of their time or energy on making this Governor’s budget wish list a reality. If this year holds to that trend, expect to see his proposals watered down, if not tossed out the window all together by the General Assembly. IBI

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