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Illinois needs $1 billion more for FY13 budget

November 22, 2011

By Benjamin Yount
Illinois Statehouse News

SPRINGFIELD, Ill. — Every new dollar Illinois brings in next year is likely going to public employee pensions.

Illinois Gov. Pat Quinn’s (D) budget planners are counting on Illinois’ economy to grow by about 3 percent next year, generating roughly $1 billion in new tax revenue. The state’s operating budget, which was $33.2 billion this year, is expected to be just slightly more than $34 billion next year.

But the state’s pensions costs alone are expected to grow by $1 billion. A report released last week from the state’s retirement systems said Illinois’ pension payment will jump from $4.9 billion in the current budget to $5.9 billion for fiscal 2013.

Illinois’ Medicaid costs also are expected to grow next year. Lawmakers earmarked nearly $7 billion in the 2012 state budget. Legislators will be asking for $490 million more in fiscal 2013.

Quinn’s budget director, David Vaught, said in May that $1 billion in overall growth is “not outlandish.” Vaught said that $1 billion could come from growing the state’s economy or just growing the tax base.

Vaught added in May that as long as Illinois’ unemployment rate continued to decline, the state could grow the economy and pay its bills.

This is why jobs are so important,” Vaught said at the time.

But unemployment skyrocketed after May. The most recent unemployment report, for October, shows the jobless rate at 10 percent in Illinois. The national rate is 9 percent.

Greg Rivara, spokesman for the state Department of Employment Security, said while the unemployment rate did tick up, Illinois has added thousands of jobs.

Illinois has added 64,800 jobs so far this year and 108,100 jobs since January 2010, when job growth returned to Illinois after 23 consecutive months of declines,” Rivara said Nov. 21.

But the benefit of those new jobs is not being seen. The October report from the Illinois Department of Revenue shows tax growth for the state is still tied to January’s income tax increase.

In other words, the state is collecting more taxes, but only because the tax rate went up with the personal income tax jumping by 67 percent and corporate income tax by 47 percent.

The October report also shows that state revenue is slightly behind expectations at this point.

Kelly Kraft, Quinn’s budget spokesman, said the administration will conduct a status check next month.

The governor’s Council of Economic Advisers will be meeting in December to assess whether (fiscal 2012) revenue projections continue to stay on target,” Kraft said. “We will also assess the economic outlook for” fiscal 2013.

Kraft is quick to say that the fiscal 2013 revenue will pay for the $1 billion in increased pension contributions.

But Collin Hitt, a senior policy adviser with the Illinois Policy Institute, a nonprofit free-market think tank, said Kraft and the Quinn budget team need to find a lot more than $1 billion before June.

Lawmakers are going to have to add $4 billion to the 2013 budget that was not included in the current spending plan,” Hitt said.

Hitt is quick to point to the $1 billion in added pensions costs and the $490 million for Medicaid programs, further punctuated by the backlog of unpaid Medicaid bills.

Illinois is going to need $3 billion next year to keep the backlog of unpaid bills from growing,” said Hitt.

Comptroller Judy Baar Topinka’s office reports a current backlog of $3.5 billion. The Civic Foundation, a Chicago-based nonpartisan policy watchdog organization, said that backlog will grow to $8 billion by the end of the current budget in June 2012.

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