Fiscal watchdog slams 'unrealistic' cuts in proposed Illinois budget

[May 08, 2015]  CHICAGO, May 7 (Reuters) - Illinois Governor Bruce Rauner's proposed budget contains at least $3.25 billion of unrealistic spending cuts that could further harm the state's already shaky finances, a government finance watchdog group said on Thursday.

The Chicago-based Civic Federation said while the $31.5 billion fiscal 2016 general funds spending plan unveiled by the Republican governor in February does not call for borrowing for operating expenses, it includes measures aimed at plugging a $6.2 billion budget hole that face formidable hurdles.

"While the governor's recommendations may close the budget gap on paper, the Civic Federation cannot support spending reductions that are either unrealistic or inconsistent with reasonable long-term financial goals for the state," Laurence Msall, the group's president, said in a statement.

Rauner's budget banks on $2.2 billion in savings from new pension reforms that, even if passed by the Democratic-controlled Legislature, would likely be challenged in court by unions, according to the Civic Federation's analysis.  (link)

Unions would have to agree to another $655 million in savings from employee health insurance through collective bargaining, and a $400 million cut to Medicaid requires federal approval, the analysis added.

The Civic Federation, a respected, nonpartisan group of business and professional leaders established in 1894, issues research and recommendations on government finance aimed at protecting taxpayers and reducing wasteful spending. Last week, Chicago Mayor Rahm Emanuel unveiled debt reforms at a Civic Federation meeting.

The federation also took issue with Rauner's plan to cut $634 million in state funding to local governments, noting that many are also facing fiscal pressures. The group recommended spending restraints and revenue, including a broadening of the tax base, to address Illinois' sagging finances.

Illinois has a chronic structural budget deficit, as well as the lowest credit ratings and worst-funded pension system among the 50 states. Rauner has said reforms, such as right-to-work zones, a local property tax freeze, and legislative term limits, must precede new revenue.

"The structural reform addressed in the governor's Turnaround Agenda will help free up resources to tackle our $6 billion deficit," Rauner's office said in a statement Thursday. "New revenue cannot be discussed until we address the underlying structural issues that have landed us here in the first place."

On Wednesday, Rauner's plan to slash healthcare spending failed to get a single affirmative vote in the Illinois House. (Reporting by Karen Pierog; Editing by Matthew Lewis)

[© 2015 Thomson Reuters. All rights reserved.]

Copyright 2015 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.