Tuesday, November 22, 2011
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$1 billion more needed for FY13 budget

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[November 22, 2011]  SPRINGFIELD -- Every new dollar Illinois brings in next year is likely going to public employee pensions.

Gov. Pat Quinn's budget planners are counting on Illinois' economy to grow about 3 percent next year, generating roughly $1 billion in new tax revenues. Illinois' operating budget, which was $33.2 billion this year, is expected to be just slightly more than $34 billion next year.

But the state's pension costs alone are expected to grow by $1 billion. A report released last week from the state's retirement systems said Illinois' pension payment will jump from $4.9 billion in the current budget to $5.9 billion for fiscal 2013.

Illinois' Medicaid costs also are expected to grow next year. Lawmakers earmarked nearly $7 billion for Medicaid in the 2012 state budget. Legislators will be asked for $490 million more in 2013.

Quinn's budget director, David Vaught, said in May that $1 billion in overall growth is "not outlandish." Vaught said that $1 billion in growth could either come from growing the state's economy or just growing the tax base.

Vaught added in May that as long as Illinois' unemployment rate continued to decline, the state could grow the economy and pay its bills.

"This is why jobs are so important," Vaught said at the time.

But unemployment skyrocketed after May. The most recent unemployment report, for October, shows the jobless rate at 10 percent in Illinois. The national rate is 9 percent.

Greg Rivara, spokesman for the Department of Employment Security, said that while the unemployment rate did tick up, Illinois has added thousands of jobs during 2011.

"Illinois has added 64,800 jobs so far this year and 108,100 jobs since January 2010, when job growth returned to Illinois after 23 consecutive months of declines," Rivara said Monday.

But the benefit of those new jobs is not yet being seen. The October report from the Illinois Department of Revenue shows tax growth for the state is still tied to January's income tax increase. In other words, the state is collecting more taxes, but only because the tax rate went up.

The October report also shows that state revenues are slightly behind expectations at this point.

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Kelly Kraft, Gov. Quinn's budget spokeswoman, said the administration will sit down for a status check next month.

"The governor's Council of Economic Advisors will be meeting in December to assess whether FY12 revenue projections continue to stay on target," Kraft said. "We will also asses the economic outlook for FY13."

Kraft is quick to say that FY13 revenues will be used to pay the $1 billion in increased pension contributions.

But Collin Hitt, a senior policy adviser with the Illinois Policy Institute, said Kraft and Quinn’s budget team need to find a lot more than just $1 billion before next June. The policy institute is a nonprofit free market think tank.

"Lawmakers are going to have to add $4 billion to the 2013 budget that was not included in the current spending plan," Hitt said.

He is quick to point to the $1 billion in added pension costs and the $490 million for Medicaid programs. But he also points out the backlog of unpaid Medicaid bills.

"Illinois is going to need $3 billion next year to keep the backlog of unpaid bills from growing," said Hitt.

Illinois Comptroller Judy Baar Topinka's office reports a current backlog of $3.5 billion. The Civic Foundation, a Chicago-based nonpartisan policy watchdog organization, said that backlog will grow to an $8 billion deficit by the end of the current budget in June 2012.

[Illinois Statehouse News; By BENJAMIN YOUNT]

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