SPRINGFIELD | Gov. Pat Quinn is preparing to deliver a proposed state budget that calls for deep spending cuts, including slashing $400 million in education, with the undertone of his planned speech to lawmakers Wednesday being how their inaction in solving the state's pension crisis is constricting spending across the board.
The Chicago Democrat and his aides are straining to find good news to deliver to lawmakers, noting that increased revenues will translate into an effort to pay down $2 billion in unpaid bills. They also said Tuesday that a tentative contract agreement between the state and its largest employee union will save the state $900 million in health care costs.
The governor has frequently said the first thing he and legislators must take on is the $96.7 billion deficit in the state's five pension systems. On Tuesday, new budget projections showed that trying to catch up with that hole will cost Illinois nearly $7 billion — or 19 percent of the state's general revenue fund. In education, for example, the pension obligation jumped from $4.1 billion in last year's budget to $5 billion, leaving $400 million less for education.
"We have a series of reductions that the governor does not want to do," Quinn's budget chief, Jerry Stermer told reporters at a budget briefing late Tuesday. "These are outside his vision of where we ought to be. These reductions are a direction result of no action on pensions."
Illinois has the worst pension problem of any state in the nation and attempts at reform have repeatedly failed, despite hard deadlines from Quinn. Several proposals are currently on the table.
Stermer and other budget officials characterized the budget as taking the "corrective approach," meaning Quinn's administration said the budget called for paying down roughly $2 billion toward the state's backlog of bills, which currently tops more than $9 billion.
Stermer said that over the years, budget officials have resorted to "gimmickry" including not fully appropriating money for programs but not making a true cut, which contributed to the backlog.
The budget for the 2014 fiscal year calls for paying off the backlog of Medicaid and Department of Aging bills and nearly $200 million of overdue payments for the Department of Human Services by the end of the fiscal year.
The bottom line spending in several agencies remained flat, including economic development and public safety.
The full details of the proposed $62.4 billion spending plan won't be available, however, until Quinn's address at noon on Wednesday. And while his administration said the governor will not call for tax increases or fee hikes, they left open the possibility of closing tax loopholes.
Earlier in the day, budget officials touted savings from a recent agreement with the state's largest union.
Quinn's administration and the American Federation of State, County and Municipal Employees Council 31 reached a tentative agreement last week for a three-year contract after negotiating for 15 months. The proposal requires state workers to pay more toward health care and requires retirees to pay health insurance premiums for the first time.
That will add up to a projected $900 million in savings over the three years of the agreement, which still requires a union vote. Neither Quinn's administration nor the union has released many details, but a memo to AFSCME members this week outlined a schedule of insurance premiums to be paid by retirees.
Last year, Quinn signed a law requiring longtime retirees to pay health care premiums for the first time; previously, those who had spent 20 years working for the state didn't have to pay health insurance premiums in retirement. But lawsuits challenging the law are still pending into court.
"There's unprecedented health care savings in this budget. It's fair to the workers, it's fair to the tax payers of Illinois," said Jack Lavin, Quinn's chief of staff.
Illinois lawmakers expect Quinn to focus on the pension crisis Wednesday when laying out his state spending proposal for the coming year.
But Rep. Frank Mautino of Spring Valley, who is the House Democrats' budget negotiator, says revenues should increase by $1.3 billion because of healthier tax receipts. While that is hardly a windfall in a state that also is holding onto $9 billion in overdue bills, the state has been able to absorb increases in pension obligations and Medicaid payments while paying down bills in recent years.
"With the economy and the predictions of the revenues going up, it will be difficult, but I don't know that it will be a doomsday scenario," Mautino said.
Republicans recognize the difficulty that the pension problem poses and are looking for a bold statement on how to fix the pension mess — the state's paramount financial problem.
Senate GOP budget negotiator Matt Murphy of Palatine says he's seeking "gubernatorial leadership" and a "concrete plan." Quinn has said the "best vehicle" for pension reform is dual-approach legislation introduced by Senate President John Cullerton, D-Chicago, but Murphy said the governor needs to do more.
"There are a lot of different plans out there ... and we need to zero in on what the bill is going to be and you need some leadership from the second floor to get there," Murphy said, referring to the location of the governor's office in the Capitol.
Murphy wants to know what the cost of that agreement will be, particularly because it includes a promise by Quinn to pay wage increases promised in 2011 on which he later reneged.