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Budget advice to Blagojevich: 'Be straight with us'

Posted February 13, 2008 10:00 pm

Doug Finke

Come clean on the budget. Don't start new programs.

A week before Gov. Rod Blagojevich delivers his state government spending plan for the next fiscal year, some officials are offering unsolicited advice on what he should do.

It comes on the heels of a series of bad financial reports saying state revenues could fall $600 million short this year, that investment income is dropping along with the stock market, and that the state is unprepared for a recession that may already be gripping the country.

"He needs to be straight with us," Comptroller Dan Hynes said Wednesday. "He needs to give a true reflection of where state finances are. How do you ask people to make tough decisions and deal with a problem you are not even admitting exists?"

Rep. Gary Hannig of Litchfield, the House Democrats' budget guru, offered his own assessment.

"If I were asked, I would suggest he put together a budget that reflects the money we have in hand," Hannig said. "That means we don't do any new programs to speak of. We try to get our spending down to the point we can pay the bills we owe."

The problem, Hynes said in a recent report, is that the state's budget isn't balanced and hasn't been for some time. State law allows certain bills, primarily for Medicaid, to be pushed from one fiscal year to the next. In the 2003 budget year, those bills stood at $1.8 billion, the report said. At the end of the last budget year June 30, they stood at $3.3 billion.

"Each and every year, the governor has made his budget presentation and declared that the deficit has been eliminated," Hynes said. "Each and every year, that has proven to be untrue when the final numbers come out. There's a multi-billion structural deficit."

That's only for Medicaid. The state also owes billions to public pension systems because - in a practice in existence long before Blagojevich took office - money to fully fund the pensions has been diverted for other expenses.

Since Blagojevich took office in 2003, Hynes said, tax collections for the state's general account have increased $5.6 billion, or an average of $1.4 billion a year.

"We were not investing some of this in paying down liabilities," Hynes told the editorial board of The State Journal-Register. "We were putting it all toward new programs and more money for education. It's hard to argue against that.

Everybody wants that, but there's a consequence if the economy slows down."

With the Illinois and national economies faltering, early predictions are the state will not come close to seeing the same kind of growth for its next budget.

"Are we ready for the economic recession we appear to be in? The answer is no, we are not," Hynes said. "While we have made some investments in education and health care, we did not shore up our fiscal foundation to prepare for this economic downturn."

Blagojevich spokeswoman Rebecca Rausch said the administration doesn't believe the deficit is as bad as portrayed by Hynes, in part because Medicaid costs are not just borne by the state. Federal reimbursements pay part of the bill.

She also said the administration isn't hiding anything.

"We're making it very clear we face a deficit. We're up front about that," Rausch said.

The administration says the current budget has a $750 million hole because lawmakers were overly optimistic about tax collections. As he has in the past, Blagojevich is urging the legislature to end some business tax breaks and allow the administration to tap into restricted state funds to plug the gap. Lawmakers allowed fund transfers in previous years, but did not authorize them in the current budget. Ending business tax breaks hasn't gotten much support in the General Assembly.

Hannig thinks the current shortfall can be weathered without ending tax breaks or raiding funds.

"The budget doesn't require that (Blagojevich) spend all of that money," Hannig said.

Rausch said the administration has already "slowed down spending as a whole" by not filling vacancies, restricting travel and through other measures.

Political writer Bernard Schoenburg contributed to this report. Doug Finke can be reached at (217) 788-1527.

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