Gov. Pat Quinn Makes Tough Choices to Boldly Address Fiscal Crisis

From the Office of Governor Pat Quinn

SPRINGFIELD – March 18, 2009. Governor Pat Quinn on Wednesday presented a $53 billion budget plan for fiscal year 2010 that will end an era of fiscal irresponsibility and mismanagement, and help struggling families during the worst financial crisis in Illinois’ history.

“Illinois is staggering to pay an $11.5 billion deficit and has a mountain of unpaid bills,” Governor Quinn said in his speech to the 96th General Assembly. “Illinois’ economy is falling. Unemployment is rising, and our people are hurting. To be direct and honest – our state is facing the greatest crisis of modern times.”

The plan closes the budget gap of $4.3 billion for fiscal year 2009 and $7.3 billion for fiscal year 2010. The current recession, which is even deeper than economists predicted, has driven down revenues to unprecedented low levels, while demand on state services such as health care is increasing during such difficult times.

Governor Quinn’s budget plan contains $1.3 billion in cuts and uses a combination of fiscal tools to create the best possible way to solve the state’s short-term deficits without sacrificing long-term priorities. It calls for making tough choices, while maintaining a commitment to protect families.

Without action, state revenues would drop to fiscal year 2004 levels, leaving the state without proper funding for its core services such as health care, education and public safety.

The budget is framed around three core principles: Reform, Responsibility and Recovery. Among the highlights:

Reform

Sales tax holiday – For 10 days in August, the state will have a back-to-school sales tax holiday that will make life easier for families with children. Qualifying items would include clothing and footwear for $100 or less, per item, as well as school supplies.

Sales taxes are regressive, requiring low- and middle-class families to pay a larger share of their income in tax than the wealthiest families. Lost revenue, estimated at $40 million, would be recouped by lowering the retailer’s discount rate on sales tax to .75 percent.

Pension uniformity – The state currently has five public employee retirement systems operating with no uniformity. They each have different contribution levels, provisions for early retirement, different retirement age requirements, and offering differing death and disability requirements. Governor Quinn’s budget proposes a uniform state retirement system for all new hires in which the pension system. This system would make new provisions to the benefit formula, employee contribution rates, and link the retirement age to Social Security.

Tax equity – By increasing the individual income tax personal exemption from $2,000 to $6,000 and the income tax rate by 1.5 percentage points to 4.5 percent for individuals, Governor Quinn’s proposal would help families who are struggling to make ends meet and are substantially burdened by the state income tax. This means a family of four making $24,000 annually would pay no income tax in Illinois. Currently, that same family pays $480 in state taxes. In total, five million Illinoisans will pay the same or less than before.

The plan also calls for increasing the income tax rate by 2.4 percentage points for corporations.

It is estimated that these increases will generate an additional $2.8 billion in individual income tax receipts in fiscal year 2010, and $350 million in corporate income tax receipts.

If the General Assembly passes the income tax changes, total net individual income tax deposited into the general fund is forecast at $11.8 billion and $350 million in general fund corporate income tax receipts.

Cost cutting – The governor’s budget includes various cuts, reductions, and belt-tightening measures to help close the budget gap by $1.3 billion. Examples include: across-the-board two percent reductions in grant programs, excluding health care and education programs ($80 million); consolidating leases ($6 million); consolidating Historic Preservation Agency into Department of Natural Resources, and two labor boards ($2.3 million); and increasing health care contributions from state employees and retirees ($200 million). The budget also requires state employees to take four unpaid furlough days, excluding workers who provide direct patient care of public safety ($36 million).

Taxpayer Action Board – This newly created panel will identify and make recommendations to cut waste, improve efficiency and bring new approaches to difficult fiscal issues.

Responsibility

While the Governor plans to close the budget gap, he remains committed to education, reducing the Medicaid cycle, and increasing health care services for veterans. Governor Quinn’s budget:

• Fully opens the 80-bed expansion at LaSalle Veterans’ Home, and funds a $50 million ($17 million), 200-bed Chicago veterans’ home;
• Provides $1 million to food pantries across Illinois, ensuring that struggling families have access to nutritious food;
• Utilizes federal recovery funds to ensure health care providers are paid on time. For years, the state has delayed health care payments to balance the budget on the backs of providers. The federal American Recovery & Reinvestment Act gives Illinois $2.9 billion over three years to pay down the payment cycle from over 90 days to 30 days, ensuring that providers are paid on time;
• Funds an increase of $174 million for K-12 education and $40 million for higher education in fiscal year 2010; and
• Holds the line on the gas tax.

Recovery

Governor Quinn proposes to put people to work through Illinois Jobs Now!, a $26 billion jobs plan that will support 340,000 thousand jobs, while fixing the state’s aging roads and bridges, builds new schools, improving mass transit, creating “green” jobs, and maximizing the federal recovery money Illinois receives from the federal American Relief & Recovery Act of 2009.

Illinois Jobs Now! roads and bridges projects will be funded through by modest increases in the motor vehicle registration fee, driver’s license fees, and, in part, money from the Road Fund. Mass transit improvement will be funded by an increase in vehicle transfer fees.

The long overdue jobs plan – the first in over a decade – will invest:

• $14 billion in roads and bridges
• $5 billion for public transit
• $4 billion for schools, including higher education
• $2 billion environmental/energy/technology
• $1 billion for economic development

Governor Quinn’s plan strikes a critical balance between meeting short and long-term needs – it is a courageous plan that mitigates the recession’s impact now while also helping the economy recover for the long-term.

To view the fiscal year 2010 budget, visit www.budget.illinois.gov.