Februrary 20, 2008

Governor’s Proposed Budget Nothing More Than a Bait and Switch;

Was Governor’s Budget “Plan B”?

 

The Governor’s brief budget address on Wednesday chose to play up his economic stimulus package, which proposed to offer a relatively small number of businesses a 20% tax “credit.”  What the Governor’s speech failed to highlight was that this $300 million “economic boost” to businesses would cost businesses of all sizes $1.5 billion in new taxes.  These new business tax hikes include:

 

In addition to his reliance on businesses to once again shore up a significant portion of the State’s budget, the Governor’s other proposed sources of revenue were also controversial, as they relied heavily on the sale of state assets and accruing long-term debt for short-term needs.  Among the proposed revenue sources is the securitization of the State’s tobacco settlement proceeds in order to fund the Governor’s $1.2 billion one-year economic stimulus package.  While 18 other states have securitized all or part of their tobacco settlement proceeds, the maneuver could be likened to that of a pay day loan: states pay a lot of money in the long run for this type of up-front lump sum cash.  Moreover, the state would have to figure out how to replace those dollars that are currently committed to healthcare programs, such as those programs that benefit children and seniors, as well as Medicaid.

Similarly, the Governor’s other major budgetary goal of getting a multi-billion dollar statewide capital plan in place is contingent on a recycled plan to sell the State Lottery.  This time, the Governor proposes selling off only 80% of the Lottery while the State retains 20% ownership and complete regulation authority.  Investors already nervous in a shaky market would be weary to invest in something over which they have no control.

 

The Governor’s entire State of the State and Budget Address on Wednesday lasted barely more than 20 minutes, only long enough for him to barely skim over these proposals and many crucial details were omitted that would only later be released by the Office of Management and Budget.  Furthermore, the Governor’s staff did not provide legislative staff with a copy of the budget the day prior to the speech, as has been the common practice for years, and many of the proposals presented were those that were previously rejected at some point by the legislature. 

Some have speculated that the budget presented on Wednesday was not the budget with which the administration had intended to go forward.  Documents provided to staff and the general public after the speech still contained some proposals that the administration had already taken off the table.  For instance, the operations budget overview and summary still contained a proposal to increase toll charges for commercial vehicles to use the expanded Illinois Toll Highway System to help fund mass transit capital needs; a proposal from which the administration has backed away.

Regardless of whether the Governor’s proposed budget for FY 2009 was “Plan B” or not, the budget outlined on Wednesday and in the days following the budget address was poorly assembled.  Legislators will most certainly have their work cut out for them over the next several months.

 

For more on the Governor’s budget, please click on the following. . . .

Budget Seeks Early Retirement Package for State Employees

 

One of the provisions included in the Governor’s budget that has gotten little attention thus far is a proposal to offer an early retirement package for state employees.  The Governor’s budget address did highlight his intent to cut administrative spending in all areas except healthcare, education, and public safety by three percent, but little was said about how he would achieve this.  John Filan, the State’s Chief Operating Officer and former Budget Director, later stated that much of these administrative cuts would be achieved by offering an early retirement incentive. 

Early retirement incentives are nothing new and have been offered under the Blagojevich administration before.  While their immediate goal is to reduce healthcare and pension costs to the state, the offering of previous early retirement packages has already significantly reduced state agency headcounts.  Agencies already severely lack resources, particularly human resources, to perform their functions effectively and efficiently.  If another early retirement package is offered as a part of the FY 2009 budget, competent employees could leave the State, resulting in further dysfunction in an already dysfunctional administration.

Legislature May Still Pursue Aggressive Greenhouse Gas Agenda

 

One of the issues that was missing from the Governor’s speech was any discussion surrounding greenhouse gas reduction policies.  The Chamber, along with a number of other groups, have long believed that the Governor would make climate change and more specifically, a carbon tax, a target of his 2008 agenda.  While a $2 billion energy tax on businesses appears to remain off the table for the time being, the Chamber is still continuing to monitor the issue.

In the meantime, it appears as though many of the recommendations made by the Governor’s climate change advisory group may be pursued individually by legislators.  A number of environmentally-focused bills have already emerged and placeholder bills for potential car emission standards legislation are circulating.  The Chamber has been actively talking to legislators about the car emission standards legislation and will continue to monitor this type of legislation.

Next Week: Highlights

Senate Education Committee to Hold Hearing on Income Tax Increase

 

Senate President Jones came out earlier this week saying he would now support an income tax increase.  The Senate had jump-started discussion on an income tax increase several years ago, but the House never reciprocated that discussion until last year when President Jones had already cooled to the idea.  Now it appears that both the House and the Senate are poised to entertain a possible income tax hike.

The Senate Education Committee is scheduled to hear SB 2288 on Wednesday, February 27th at 2:30 in Room 212.  Senator Meeks is the primary sponsor of SB 2288, which unlike previous versions of the income tax hike bill, has removed the more controversial expansion on sales tax.  In the meantime, Speaker Madigan this past Wednesday moved HB 750, which also calls for an income tax increase, as well as an expansion of the sales tax, back to the House Floor on Second Reading.