January 17th, 2011
I would like to update you on the work of the General Assembly in Springfield during the fall and winter “veto session.” The State of Illinois is facing a severe financial crisis which has caused suffering throughout the state. Social service agencies that serve the elderly and people with disabilities are facing closure, schools are threatening drastic teacher layoffs and large class sizes, and the prison system started implementing early release programs.
The double dose of the great recession – lower tax revenues and higher expenses – and a scheduled multi-billion dollar pension payment ramp-up (set in law in 1995) have created an insurmountable hole in the state’s budget. Despite $3 billion in budget cuts (10%) this past year, the State’s deficit is projected to exceed $6 billion, with more than $8 billion in past-due bills.
To address this crisis, the General Assembly is taking measures to reduce expenditures, increase fiscal accountability, and increase revenues. As your Representative, I have made solving this state’s fiscal crisis one of my top priorities. With the changes we passed last week, I believe we will be able to pay all past-due bills, end deficit spending, restore our good credit rating, and end the games of chicken over “doomsdays” and shutdowns. Following are the recent changes that the General Assembly has made to get the State back on solid ground:
Budget Cuts
· Illinois has reduced state spending by 10.5% (almost $3 billion annually) in the past 2 years. These cuts will stand.
· Illinois has reduced the number of state employees to the lowest level in the country, 36% lower than the national average.
· The General Assembly passed Medicaid reforms that will reduce spending by $744 million over 5 years.
· To address years of underfunding the pension system and a spiraling liability, the General Assembly last Spring passed Pension system reforms that will save $75 billion over the next 35 years.
· Illinois Representatives and Senators cut their own pay and per diem allowances last year.
Fiscal Accountability
· The General Assembly passed a first-of-its kind law that holds government accountable for performance and increases public participation in the budget process.
· That law stops automatic renewal of multi-million dollar insider contracts without competitive bidding.
· We created the first spending caps in State history, limiting any spending increase to 2% each year. Because of automatic debt payment increases and statutory ramp-ups for the pension system, this will require $800 million in new cuts this year
· If the state exceeds the spending caps, the temporary tax increase is halted and the rate automatically reverts to 3%.
New Revenues
· The financial rescue package will help balance the budget through the economic downturn, cut and limit spending, and allow the state to pay its enormous backlog of unpaid bills. The package includes the following:
· A temporary individual income tax increase from 3% to 5%. In 5 years, the rate will automatically reduce to 3.75%. The rate becomes a permanent 3.25% after 14 years.
· A temporary corporate tax rate increase from 4.8% to 7%. In 5 years, the rate will automatically reduce to 6.4%. The rate becomes a permanent 4.9% after 14 years.
This was one of the toughest decisions I have ever made. Yet, after spending the past 8 months meeting with budget and economic experts and members of our community, I feel the measure was necessary to protect our priorities – our teachers and students, caring for our seniors and people with disabilities, safety of our families and neighbors, and a speedy economic recovery. It is easy to engage in platitudes and make false promises about solving our fiscal crisis without finding new revenue – in fact, that is exactly what got us into this mess. But it is only easy in the short term – until we have to face the reality of past mistakes.
This is the beginning of a long process toward fiscal recovery. I am working hard to create new economic development opportunities, particularly in innovative science and “green energy” fields that will use our community’s strong intellectual capital to lead a new innovation economy in the region.
During the spring, the General Assembly will be looking at additional cuts as we continue to work to balance the budget. I hope we can work together on these and other areas to ensure that we do what is necessary to right the ship, while protecting our priorities and values. I will continue to keep you informed on our progress.
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