The Governor’s fiscal year 2013 proposal for the State of Illinois operating budget totals $57.4 billion.  Of that amount, $29.9 billion originates from general funds.

When spending items such as debt service payments and other statutory transfers are accounted for, total FY13 general funds spending in this plan reaches $33.8 billion.  This level of general funds spending represents an increase of $50 million over FY12.  Under Governor Quinn’s numbers, in the midst of the largest fiscal crisis this state has ever experienced, he will actually increase overall spending in FY13.

The FY12 budget adopted by the House, which ultimately became the FY12 state budget, contained a spending level of $33.2 billion.  When compared to the level of spending enacted in the House budget, Quinn’s FY13 proposal outpaces the authorized level of FY12 spending by about $550 million.

Program Expansions:

Quinn has proposed expanding some programs in FY13.  Notably, GRF appropriations to the Violence Prevention Authority will increase by $24 million – that’s nearly a 200% increase over FY12.  This agency administers the questionable Neighborhood Recovery Initiative and it appears most, if not all, of this additional funding will be allocated to this program. 

The Governor is also requesting a $32 million GRF increase for K-12 education.  Most of this increase ($20 million) will go to the Early Childhood Block Grant.  Additionally, there is no GRF appropriation for Regional Offices of Education.   Quinn proposes to pay ROEs from the Personal Property Replacement Tax again in FY13.  

Quinn has also proposed a $50 million increase to the Monetary Award Program (MAP) in FY13.

Spending up from FY08:

Despite much talk of rolling back state spending to the fiscal year 2008 level, the Governor’s FY13 GRF spending level represents an increase of $3.4 billion over FY08 state spending of $30.4 billion.

Small Surplus to Pay Bills:

According to the Governor’s Office of Management and Budget, revenues are expected to grow by about $700 million to a level of $33.9 billion in FY13.  Even with this revenue growth Quinn’s plan spends 99.5% of the expected revenue for FY13 and leaves a surplus of only $162 million to pay the state’s backlog of bills.  To put this into perspective, $162 million represents only 1.9% of the current $8.5 billion backlog of bills.

Facility Closures:

The proposed budget would close 14 state facilities and consolidate several more. 

Full Cash Funding for Pensions:

The Governor’s budget calls for full cash funding of State pensions next year, without any more bonding.  The total GRF cost for pensions is $5.1 billion, representing about 15% of total proposed spending.  The State also would contribute another $640 million in other State funds to the State employees’ pension system, and transfer $160 million from the unclaimed property fund to the universities’ system.  Use of the $160 million would require a change in law, a violation of the budgeting for results statute.  The $160 million was not included in the Governor’s 3-year budget projections released in early January. 

The budget also includes $1.5 billion in GRF for payments on pension bonds sold in 2003, 2010 and 2011. These bond payments bring the total FY13 pension costs to $6.6 billion, a $900 million increase over the FY12 total payments of $5.7 billion.  This represents a 16% increase in pension costs from FY12 to FY13.  The systems’ projected future State payments and scheduled bond payments translate to a 35% hike in State pension costs in the next five years.

No Specific Pension Reform Plan:

The Governor’s budget book does not include any proposal to reform pension benefits or funding.  In the Governor’s staff briefing Tuesday night, the Governor’s senior advisor Jerry Stermer said the State’s pension payments have become a “tsunami" overwhelming the State budget, and squeezing out other spending priorities.  Stermer did not lay out a specific reform proposal, but said the Governor’s pension working group is looking at higher contributions from local employers such as school districts and colleges and “possibly” higher contributions from employees.  He pointed out that 78% of the State’s pensions costs are for benefits for employees of school districts and colleges, whose staff are not considered State employees.

Medicaid Monster:

The Administration readily admits the FY13 request of $6.6 billion GRF for the Medicaid program is $2.7 billion short of expected liabilities for the year.  This number could go several hundred million dollars higher. 

If no changes are made to the program for FY13 and the requested appropriation is all that is made available to pay the bills, the State will end FY13 with a $4.5 billion backlog.  A $4.5 billion backlog would result in an average 143 day payment cycle with some providers waiting well in excess of 200 days to be paid.  The Department estimates an enrollment of over 3 million individuals in FY13.  This is 158,000 more than were on the rolls in FY12.

No Bonding to Pay Bills:  

The Governor is apparently no longer seeking bonding to pay down bills.  In early January, the Governor’s plan was to sell $7 billion in long-term “restructuring” bonds to pay off bills; the budget book does not reflect any restructuring bonds.

The Governor’s staff says he now proposes keeping spending $162 million under proposed revenues in FY13 and using that $162 million in excess revenue to pay off backlogged bills.  That will barely make a dent in the stack of bills.  The total State bill backlog at the end of FY12 is expected to be $8.5 billion, including the $5 billion in GRF bills, other vendor bills, and money owed to employee health care providers and to businesses for tax refunds. 

More Capital Bonds Proposed: 

The Governor clearly has not decided to refrain from all new borrowing, though, as he proposes $3 billion in new capital bonding, without a new revenue source.  This represents a 20% increase in our current capital bond debt of $15 billion. His chief of staff, Jack Lavin, said the Governor would like to work with legislators to find a new revenue source for this new bonding.  The large capital plan enacted in 2009 included dedicated new revenues for the $14 billion in bonded projects, funded over 5 to 7 years.

Governor’s staff could not provide any estimate of debt service on this proposed new $3 billion in bonds, nor any breakdown between authorizations for general obligation bonds and Build Illinois bonds (both of which would require a 3/5ths vote in each chamber).  Senate Republican staff estimates that if approved, debt service on these new bonds would peak at about $200 million a year.  Current capital debt service is expected to be $500 million next year from GRF and $330 million from the Road Fund.

Plenty of detail is provided, however, on the Governor’s wish list of $3 billion in new bonded projects, including:

• $1 billion for clean drinking water, wastewater quality and flood control projects;
• $575 million for “21^st Century” universities and community colleges;
• $566 million for “21^st Century” school technology upgrades and $50 million for early childhood construction grants;
• $100 million for health care and accounting technology (part of his “Next Generation!” list of projects);
• $555 million in state facilities (new and repairs); and
• Grants for nursing home capital ($5 million) and DCFS construction grants ($30 million).
• 
  

Governor’s staff also said they would like the General Assembly to authorize all remaining bond authorization needed to complete the multi-year capital program enacted in 2009, though only 39% of the total spending has occurred so far.

The State now has $33 billion in outstanding bonds, including capital bonds, $16 billion in unpaid pension bonds and $1.5 billion in tobacco revenue bonds sold to shore up the FY11 budget.   Adding in $83 billion in unfunded pension liabilities, Illinois now has $116 billion in debt – one of the highest totals owed by any state. The State’s $116 billion in debt translates to over $9,000 owed by every citizen of Illinois.

Road Program:

The total FY13 Road Program will be approximately $1.5 billion or half the size of the FY12 Program.  This is the smallest road program since FY99.

One year ago, IDOT projected the FY13 Road Program at over $2.2 billion.  The $700 million reduction is due to a miscalculation of Road Fund revenues according to the Department.  No additional information is available at this time but it is certain that a mistake of this magnitude will require serious scrutiny.