December 29, 2011
In 2011 the IIFS blog provided weekly context, information and perspective on key fiscal issues in the State of Illinois. Posts in 2011 focused on analysis of FY2012 Illinois budget negotiations, analysis of the ongoing Illinois pension crisis and timely research on other fiscal issues impacting the State of Illinois. The following is a selection of the year’s posts.
Analysis of FY2012 Illinois Budget Negotiations
The IIFS blog opened the year by examining the implications of a bill that was passed in the last hours of the 96th General Assembly to temporarily increase personal income tax rates from 3% to 5% and corporate income tax rates from 4.8% to 7% (or 9.5% including the Personal Property Replacement Tax). The increase was intended to reduce the FY2011 operating budget shortfall and allow the State to pay off part of its $6.5 billion backlog of unpaid bills.
An operating shortfall and backlog of unpaid bills continued to plague the State’s FY2012 budget. Governor Pat Quinn issued his FY2012 budget proposal on February 16 and IIFS examined it in this post on February 17.
Governor Quinn’s FY2012 budget proposal relied on borrowing to help pay down the State’s backlog of unpaid bills and business income tax refunds. The Governor’s proposal, described in this post, would have created a new type of borrowing for the State called General Obligation Restructuring Bonds that would total $8.75 billion and be repaid over the next 15 years. This proposal ultimately failed to gain sufficient support in the legislature.
Due primarily to a massive borrowing plan and a proposed General Funds operating shortfall of $2.4 billion, the Civic Federation opposed the Governor’s proposed budget in this report. Despite opposing the overall budget proposal, the Federation supported the Governor’s plan to pay the State’s FY2012 contributions to the pension funds out of the operating budget for the first time since FY2009.
On May 31, 2011, an operating budget for FY2012 passed in both chambers of the legislature in the final hours of its regular session. As outlined in this post from June 3, the General Funds budget totaled $33.2 billion, $2.2 billion less than the $35.4 billion in total General Funds expenditures proposed by the Governor.
In response to funding shortfalls for certain agencies in the budget passed by the General Assembly, Governor Quinn proposed closing seven state facilities and laying off more than 1,900 employees. The General Assembly ultimately approved supplemental appropriations to stop the facility closures and the layoffs in the veto session. The IIFS blog discussed the contentious debate surrounding this proposal.
Two additional budget measures were passed when the General Assembly reconvened on June 22: a reauthorization of the State’s ongoing $31-billion capital program and an additional interfund borrowing authorization to pay down Medicaid bills.
In amendatory vetoes to the FY2012 budget, Governor Quinn reduced the appropriations passed by the General Assembly by $376.4 million. The Governor also indicated the State was cancelling pay raises for 30,000 union workers at 14 agencies. As described in a July 21 post, an independent arbiter ruled that cancelling pay raises would violate union contracts.
The IIFS blog monitored developments in the General Assembly’s veto session, convened October 25 through October 27 and November 5 through November 8, with an additional day added to the session on November 29. IIFS summarized results of the veto session in this blog post from December 2.
The General Assembly reconvened in December and passed a package of tax incentives that failed to advance earlier in the veto session. The first of the two tax cut bills included in the package was signed by the Governor on December 16. The bill includes a change in the estate tax, specific tax incentives for CME Group and Sears Corporation and other business tax credits.
Continued IIFS Analysis of the Illinois Pension Crisis
The IIFS blog continued its ongoing analysis and commentary on the State of Illinois’ severe pension crisis. As previously noted, the Governor’s FY2012 budget proposed paying for the State’s annual contributions to the pension funds out of the operating budget for the first time in two years. In FY2010 and FY2011, the state issued pension obligation bonds (POBs) to make its pension payments.
Two posts examined the projected rise in state pension contributions and costs.
The IIFS blog also offered commentary on pension reform proposals throughout the year including Illinois Senate President John Cullerton’s proposal that school districts begin contributing a larger share of the employer contribution to the Teacher’s Retirement System of the State of Illinois as well as legislative proposals to move away from traditional pension plans in favor of defined contribution or 401(k)-style plans. Additional analysis focused on laws passed in nine other states to reduce automatic annual increases in pension benefits for current retirees.
What Would it Mean to Shift More Illinois Teacher Pension Costs to School Districts? (3/17)
States Consider Shift from Traditional Pension Plans (10/20)
States Reduce Automatic Annual Pension Increases for Retirees (12/22)
Timely Research on Fiscal Issues Impacting the State of Illinois
The IIFS blog continues to be a source for timely research on a variety of fiscal issues impacting the State of Illinois. Posts in 2011 addressed legislatively required transfers, the tax amnesty program, the State’s capital budget and state employee health insurance, as well as rulings by the Illinois Department of Revenue denying property tax exemptions to three hospitals.
Legislatively Required Transfers: Another Use of State General Operating Funds (4/7)
Tax Amnesty Program Update: Payments Up but New Revenue Low (4/14)
Investments in Transportation Dominate State Capital Spending (5/10)
State Retiree Health Insurance Reform Stalls in General Assembly (6/9)
Court Likely to Decide Dispute Over State Employee Health Insurance (7/28)
State Challenges Hospitals on Charity Care (8/18)
The IIFS blog also provided perspective on the State of Illinois’ fiscal difficulties with information on developments in other states from the Pew Center on the States.
Please continue to follow the Civic Federation and IIFS blogs in 2012 for analysis of fiscal developments across Illinois. You can also subscribe to both blogs via RSS feeds compatible with Microsoft Outlook and most web browsers.