Gov. Rod Blagojevich on Wednesday unveiled a $52.4 billion spending blueprint for the next budget year that counts on increasing taxes and fees on business, finding buyers for state property and diverting money earmarked for roads and other special purposes to prevent wholesale cuts in school, medical and social service spending.
“This is a budget that puts the taxpayers’ money where it belongs,” said the new Democratic governor in a 94-minute speech presenting his first state budget plan to lawmakers. “Instead of funding waste, patronage and inefficiency, this budget funds education, health care and public safety.”
Republicans greeted his plan with skepticism while Democrats, who control the legislature, were more supportive in public but less than enthusiastic behind the scenes.
State Treasurer Judy Baar Topinka, the GOP state chairwoman, likened the heavy reliance on sales of state assets to “burning your furniture to keep warm.”
House Speaker Michael Madigan of Chicago, who runs the Illinois Democratic Party, praised the governor’s speech but cautioned that his message of constraint ran counter to the natural instincts of fellow Democrats who “come to this building to grow the government.” In a television interview, Madigan added, “They don’t come here to cut back on programs.”
Just two hours after concluding his presentation, Blagojevich acknowledged he had several other revenue-raising options “waiting in the wings” if lawmakers reject his initial proposal. And the governor opened the door to expanded gambling in the state if legislators don’t support his call for higher taxes on the state’s existing casinos. He opposed expansion of gambling during his campaign last fall.
In addition, the governor indicated that the menu of more than 100 fees he wants to increase was a work in progress. Blagojevich had promised that no “consumer” fees, such as those to buy fishing licenses, would be increased. But he was chagrined to find out that an increase in boat registration fees was buried in the list. “No, I’m not for that,” he said.
Overall, Blagojevich’s plan for the state’s budget year that begins July 1 would spend about $350 million less than what the state budgeted for the current fiscal year. The governor’s plans rely heavily on a series of one-time revenue sources to balance the budget, ranging from the sale of the unused casino license once thought headed for a Rosemont riverboat to the sale of $10 billion in bonds to shore up pension systems and battle a record budget deficit.
In addition to seeking new revenue from business, his budget puts several state buildings including the James R. Thompson Center in Chicago and the state Toll Highway Authority headquarters in Downers Grove on the block. It also dramatically boosts taxes on casinos, cuts funding for universities while raising it for elementary and high schools, slashes the take-home pay of some 11,000 non-unionized state workers by 4 percent, and seeks to raise money through the lottery or auction of low-digit vehicle license plates.
Lawmakers set the table for Blagojevich’s proposal a week ago when they approved the pension-bond debt plan, which would quickly free up $2 billion in cash toward what the governor estimates is a $5 billion budget deficit plaguing the state through the middle of next year. The rest of the proceeds from the bond sale would be invested.
Throughout his exhaustively detailed address, Blagojevich touched on themes from his campaign, saying his budget plan reflected “fundamental changes that the people of Illinois demanded last November” at the voting booth. As he did in the days before his budget speech, he promised to veto any attempts by lawmakers to raise state income or sales taxes to balance Illinois’ spending plan.
Blagojevich contended that the budget crisis was precipitated by skyrocketing health-care costs, the nation’s financial downturn, an economy still shifting from manufacturing to services, and “mismanagement” and “shady accounting.” The governor vowed that with the help of lawmakers, he would balance the budget and “regain the trust and the confidence of the people.”
Republicans, responding to the first budget message by a Democratic governor in 26 years, questioned what they said was Blagojevich’s overreliance on one-time revenues to get the state through the next budget year.
“Once we saw the budget, we realized this is a smoke-and-mirrors budget, truly a smoke-and-mirrors on one-time revenue,” said Senate Republican leader Frank Watson of Greenville.
Topinka ridiculed the spending plan as a “what-if budget” because it relied on a variety of fiscal contingencies that may not come to pass in the coming months.
Madigan was largely noncommittal on details of Blagojevich’s plan. But Rep. Gary Hannig (D-Litchfield), the Democratic point person on budget issues in the House, spoke in more glowing terms. “I think we can generally work with what the governor has proposed,” said Hannig. “It’s something a lot of us can accept almost in its entirety.”
That would be virtually unprecedented. Budget presentations by Illinois governors traditionally are only a starting point for lengthy and political charged negotiations with lawmakers, and the spending plan often is significantly reshaped before winning final legislative approval.
Pressure for change could rise
With so many special interests faced with cuts to their pet programs this year, the pressure for change could be especially acute in the coming weeks.
Senate President Emil Jones, a Chicago Democrat, acknowledged the budget proposal will mean lobbyists for riverboat casinos and other special interests will be swarming through the Statehouse trying to fight any higher taxes or new regulatory fees.
“In one sense, this budget will be full employment for lobbyists,” Jones said.
Traditionally Republican-oriented business groups, who backed Blagojevich’s pension-bond plan as an alternative to what they feared could be an end to large-scale tax breaks for manufacturers imposed by majority Democrats, were generally supportive of the spending plan.
Still, they hoped to work with Blagojevich to reduce the impact of the $323 million in smaller-scale tax and fee increases he proposed, including the lifting of current sales-tax exemptions on the purchases of graphic arts equipment and out-of-state natural gas supplies.
The highest-profile one-time revenue sources included selling the tollway headquarters derided by Blagojevich as an extravagant “Taj Mahal” for as much as $33 million and the steel-and-glass Thompson Center for as much as $250 million–although some people have suggested to the administration it could be worth much more.
“There may be a prospective purchaser or two who has an extra $250 million lying around,” Blagojevich said. “If we can save taxpayer dollars, I’d be more than happy to move that operation we have in the [Thompson Center] to an office in some neighborhood somewhere in Chicago.”
Besides the sale of state buildings, another one-time cash infusion would come from the governor’s proposal for a tax amnesty program, which he hoped would raise $40 million. Corporations and individuals behind on their taxes would be allowed to make payments, such as on overdue sales and income taxes, without penalty for a short time.
Blagojevich’s proposals on education centered on his call to boost the guaranteed minimum per pupil funding for public schools by $250 a year. The proposal would boost the current minimum spending level for public funds from $4,560, where it has been frozen for two years.
Overall, the state would give grade and high schools a boost of slightly more than $200 million–one of the few areas to get a substantial increase in the state’s budget.
But higher education would see a $112 million decrease, an 8.2 percent dip. Blagojevich called for restraints on the spiraling tuition costs for Illinois residents and proposed significantly boosting tuition rates for out-of-state residents.
While battling increased spending pressures from Medicaid, state pensions and health insurance for state employees, Blagojevich promised funding for previously announced initiatives that include pooling the purchase of prescription drugs for seniors and public workers to save $120 million; expansion of the state-subsidized Circuit Breaker pharmaceutical program to include more drugs and cover more low-income seniors; and boosting the number of children and parents in the KidCare and FamilyCare health-maintenance programs for low-income families.
Freeze on pork plans may end
Blagojevich said he would lift his freeze on legislative pork-barrel projects awarded under the administration of former Republican Gov. George Ryan, only if they dealt with schools, health care or public safety.
But Blagojevich aides acknowledged earlier this week that their spending blueprint contains a limited amount of money that would be available for new pork-barrel programs–even though the governor had expressly vowed during his campaign to eliminate spending for what legislators refer to as member initiatives.
Blagojevich also said he wants to suspend plans to repair or upgrade many state buildings and defer some road construction. His plans for next budget year also call for diverting to the state’s main checkbook more than $474 million from specially dedicated state funds, including at least $80 million from the state’s road construction fund.
Blagojevich’s budget also would reopen the recently closed Sheridan Correctional Center as a drug treatment facility for inmates. But the governor said he would leave vacant a recently built adult prison at Thomson in northwestern Illinois, along with a new youth prison in Downstate Rushville and an intake facility near the Stateville Correctional Center. Even so, he said he was exploring the possibility of renting the empty cellblocks to the federal government.
Drawing immediate and intense resistance was a Blagojevich proposal for a second consecutive year of increases in state riverboat casino taxes. Blagojevich would increase the state tax to as high as 70 percent for the most lucrative boats, increase rates on other gambling boats, and boost the admissions tax to $5 from $3 for all of them.
Casino industry officials said the higher taxes could hamper the governor’s quest to sell the unused gaming license for a big price. Blagojevich is counting on at least $350 million in revenue for what is the state’s 10th and last casino license.
Mark Falcone, an analyst with Deutsch Bank, which has studied the license’s worth at the the gaming industry’s request, said Blagojevich’s proposal has “permanently impaired” its value–even if the higher taxes aren’t approved by lawmakers.
After his speech, Blagojevich did not slam the door shut to more gambling in Illinois as an alternative to higher taxes, indicating it could be a matter of give-and-take with the legislature.
“I would hope that we can balance the budget without going in that direction,” Blagojevich said. “I’m not advocating expansion of gambling, but this is a process here in Springfield that has to play itself out, and my hope is that I can get all of my budget.”
