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July 27, 2012
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Updated Analysis of FY13 State Budget

UPDATE: A memo sent to the CMAP Board on August 2, 2012, includes further in-depth analysis of the FY2013 State Budget.

Shortly before the end of Fiscal Year 2012, Governor Quinn signed the FY13 state budget into law. The FY13 general funds budget totals $33.7 billion, up slightly from the $33.6 billion enacted in FY12. It is approximately $57 million less than the budget adopted by the General Assembly because the governor exercised his line-item and reduction veto powers on three bills. With those savings, Governor Quinn restored some funding for education and children and family services programs that had been cut by the General Assembly in the spring session. Overall, the approved budget reduces discretionary spending, partly pays down the backlog of old bills, and consolidates over 50 state facilities -- including closure of four of the state's 51 prisons, three of its nine mental health facilities, and two of its eight juvenile detention centers.

FY 2013 General Funds Budget

(in billions) Enacted July 1, 2012

Contributions to retirement systems

$ 5.2

Medicaid

$ 6.9

Other includes transfers out, debt service, inter-fund borrowing, reappropriations*

$ 5.2

Discretionary Budget

$ 16.4

  • $ 6.5
  • $ 1.2
  • $ 1.9
  • $ 5.1
  • $ 1.7

Total

$ 33.7

* Line item vetoed SB2332 (Capital re-appropriations, vetoed funding for Illinois Finance Authority Loans to Fire Departments, Fire Protection Districts and Non-Profit Ambulance Services).

** Reduction Vetoed SB2409 (Consolidation of Centralia Animal Disease Center functions into Galesburg Animal Disease Center under the Department of Agriculture).

*** Line Item and Reduction Vetoed SB2474 Appropriation Reductions for prisons and juvenile justice centers).


Talks regarding the budget and major spending areas overshadowed most other legislative issues discussed during the spring session. Governor Quinn and the General Assembly were able to agree on restructuring some of the state's Medicaid program. Nonetheless, efforts by the governor and leadership in both chambers to achieve large-scale pension reform fell short. The state's ballooning pension obligations will be the subject of many more discussions and legislative initiatives as they increasingly inhibit the state's ability to spend in other areas. According to a recent Pew Center on the States report, The Widening Gap, Illinois has consistently failed to pay its full annual pension contribution. In fact, Illinois pension systems were only 45-percent funded in 2010 – the lowest percentage in the nation -- with a gap of over $76 billion for all five pension systems. The state's retiree healthcare is only funded at one percent -- a $43 billion gap. The state's difficulties are compounded by decreasing revenues. Another Pew report, The Local Squeeze, points out that most states, including Illinois, are still suffering from decreased revenue. With high levels of unemployment in the state, individual income taxes collected have not yet climbed to pre-recession levels.

The governor's and General Assembly's reforms of the state's Medicaid system propose to eliminate the program's $2.7 billion funding gap. According to Civic Federationanalysis, reforms include increasing revenues through a hike in the State's cigarette tax and a new hospital assessment program. The proposals would also cut expenditures by reducing programs and by changing the reimbursement for healthcare providers (except doctors). These changes resolve a portion of its major expenditures, but without pension reforms, the State will have to continue deep cuts to all of its programs, including core services like public safety and education.

CMAP closely monitors budget developments because the Chicago region's ability to implement GO TO 2040 is significantly shaped by decisions at the state level. While the Illinois budget's largest spending areas are health and human services and education, the State also plays a significant role in maintaining the transportation system, promoting economic development, and preserving natural resources. All of these programs are jeopardized by the massive and increasing annual required contributions to the pension systems. These contributions are required by state statute in order to pay down unfunded liabilities, but their growth is crowding out other programs in the State's overall budget.

CMAP also monitored the development of two state agency budgets: the Illinois Department of Transportation (IDOT) and the Department of Natural Resources (IDNR). IDOT was appropriated $2.73 billion (SB 2474), up slightly from $2.67 billion in FY2012. Of this overall appropriation, approximately 22.2 percent are motor fuel tax revenues that are transferred directly to local governments. An additional 24.1 percent of IDOT's budget flows directly to public transit agencies like the RTA through the Public Transportation and Downstate Public Transportation funds, which derive from state sales tax and other general revenues. Approximately 50 percent of IDOT's budget comes from the Road Fund, which is used for activities like road construction and IDOT operations. The Road Fund itself has state and federal funding sources -- 54 percent of its revenue is federal, 11 percent comes from the state's Motor Fuel Tax, while 35 percent comes from vehicle registrations, operator licenses, and other earnings. Included in IDOT's appropriations is $6 million from the Road Fund for metropolitan planning and research purposes; last year, CMAP was allocated $3.5 million from this line item. Appropriations to IDOT are important for CMAP and its partners to understand because of their impact on current and future mobility decisions in the region.

IDNR's $230 million budget (SB 2409) was reduced by 13.5 percent from the previous year. Reductions will touch a variety of important programs in the region including land acquisition for open space and recreational facilities, watershed protection through soil and water grants, and the urban fish stocking programs. The effects of these funding decisions will be long-lasting, as planning activities like greenways and trails, flood and drought, water allocation, water supply, and dam safety will be further downscaled.

During the course of the session, IDNR, legislators and other stakeholders sought to pass legislation that would have provided dedicated, sustainable funding for IDNR. A state park entrance fee bill, HB 5789(which stalled in committee), would have allowed the Department to establish and manage entrance and parking fees at state parks. The IDNR Sustainability Package, SB 1566passed the House but did not pass the Senate with enough votes after the May 31 deadline. A recent Policy Updatedescribes these legislative efforts and delves further into the impact of funding decreases on implementation of GO TO 2040's recommendations to improve communities' livability through the preservation of natural resources and land conservation. SB 1566 would have provided supplemental revenues generated by broad-based user and permit fees. The bill proposed various increases to existing fees and established new fees for certain permits and programs.

Though the budget has been enacted, a complex set of pension issues remains unresolved. At the close of the session, many stakeholders expected that leaders would reconvene during the summer break on pension reform. At a scheduled special session in mid-August, the House may take up the pension reform bill HB 1447passed by the Senate in the spring session. CMAP encourages Governor Quinn and the General Assembly to find long-term solutions for improving the State's fiscal condition, which must be stable for our region to maintain public services and move forward with infrastructure investments.


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