News

BUDGET ANALYSIS: The spending is the easy part for Blagojevich

Posted February 20, 2008 10:00 pm

Doug Finke

Underlying all of the glitz of $300-per-child tax credits for families, a big one-time tax cut for businesses and a massive public works construction program that nearly everyone agrees is badly needed is a basic question:

How's the state going to pay for it?

Gov. Rod Blagojevich, in his sixth combination State of the State and budget address, used a rehash of old ideas - leasing the lottery, imposing a payroll tax on some businesses, selling future revenues for a lump-sum payment - to make it all work.

But by doing that, he may already have doomed many of his proposals.

"I think it could be a tough year," Rep. Gary Hannig of Litchfield, the House Democrats' top budget negotiator, said afterward. "Many of the proposals the governor talked about are things we rejected in the past. I think those are things that are going to be difficult to resurrect."

Leasing the lottery is a prime example. Blagojevich first floated the idea in 2006 as a way to give schools more money. It went nowhere because the extra revenue ran out in four years, and no one knew how to plug the hole.

Last year, Blagojevich again recommended leasing the lottery and using the proceeds to pay down pension debt. The House voted down the idea on a 78-6 vote.

Now, Blagojevich wants to privatize part of the lottery and use the money to help bankroll a $25 billion capital construction program. This year's twist is that state would retain a 20 percent interest in the lottery, giving it some control over how a private vendor would operate it.

The administration said its latest plan also ensures schools would continue to get the $600 million they currently get from lottery proceeds.

"We visited the lottery before. It's not an idea that's new," said Sen. Deanna Demuzio, D-Carlinville, who is against leasing the lottery.

"There's been no appetite in the House for selling the lottery. How he's going to pull that off, I don't know," said Rep. Lou Lang, D-Skokie.

Resurrecting another rejected idea, Blagojevich again suggested a 3 percent payroll tax on businesses with 10 or more employees that do not spend at least 4 percent of their payroll on health insurance for employees. The $417 million the tax would generate would be spent on expanded health-care programs - one of the governor's top priorities.

Blagojevich floated the same idea last year, and it went nowhere, not even among Senate Democrats who've been the most closely aligned with the Democratic governor.

"I haven't seen any shift or change of attitudes about the program," said Sen. John Sullivan, D-Rushville. "What kind of burden is it going to place on small-business owners? Is it going to force them to lay off people or close up shop?"

That's what lawmakers will hear from businesses in their districts, according to Kim Maisch of the National Federation of Independent Business. She said half of all small businesses don't provide health insurance because they can't afford it.

"It (the tax) is really going to hurt small business in the state," Maisch said.

Blagojevich floated the idea of "securitization" of state assets to pay for the tax breaks in his budget. Essentially, the state gives up steady payments from a revenue source in exchange for a lump sum. It, too, is an idea that's been presented before, usually in connection with money the state gets from the national tobacco lawsuit settlement, which now goes to health-care programs.

"We still have the obligation of providing the health care, but now part of the revenue stream that was doing that would be diverted," Hannig said.

Other Blagojevich revenue ideas appear equally shaky.

He wants lawmakers to tap into restricted state funds to balance the current budget, which is at least $750 million out of balance. Lawmakers have reluctantly done that in the past.

He also wants to end some business tax breaks - which he calls loopholes - to generate $140 million. A handful of those were approved last year. But the ones Blagojevich wants closed now, like breaks for canned computer software, have been suggested for years and rejected. There's no indication lawmakers have changed their minds.

One recycled Blagojevich idea that might garner support is issuing $16 billion in bonds and investing the money in state pension systems. Blagojevich narrowly won approval of a $10 billion pension bond issue his first year as governor, and even many skeptics agree it has worked well to help ease Illinois' crushing pension debt.

Doug Finke can be reached at (217) 788-1527.

Article Categories
News