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Thursday, March 10, 2011 06:23 am

Bad news on the budget just keeps coming

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If you thought that Illinois government might get a tiny breather after raising income taxes, think again.

The Illinois House’s new revenue projection for next fiscal year, which begins in July, is $759 million lower than the governor’s. However, the House’s forecast is also $2.2 billion below Gov. Pat Quinn’s projected spending for the coming fiscal year.

Quinn’s proposed budget was whacked last month by Democrats and Republicans alike for its brutal slashing of several human service programs. But even with those Quinn cuts, if the House revenue forecast is used in the final product, they’ll still have to find $2.2 billion in additional spending reductions.

The bad news doesn’t end there. According to some revised numbers issued by the Auditor General this past Friday, next year’s required state pension payment, including debt service, will be $6.2 billion.

Overall, that pension payment next year will eat up all but about a few hundred million dollars of the recently approved state income tax hike.

And there may not be anything that anybody can do about it.

The Senate Democrats released an opinion by their well-regarded chief legal counsel Eric Madiar last week which claimed that pension benefits for current employees are a constitutionally protected contract which cannot be altered.

But could the “contract” with those workers be changed via collective bargaining with government employee unions?

“No,” says Madiar.

As Madiar points out, Illinois’ Public Labor Relations Act does not allow public employee unions to bargain on pension issues. New York’s state law does allow union pension benefit negotiations, Madiar said, adding that New York’s Democratic governor is currently attempting to strike a deal with the unions to roll back pension benefits.

Madiar says his interpretation of current Illinois law is that the pension obligation is an “individual right.” He compared it to the U.S. Constitution’s First Amendment, which he pointed out is not a “pooled” right that can be collectively negotiated away.

Madiar didn’t completely rule out the possibility of a change to the state’s labor relations law to allow unions to bargain away pension benefits on behalf of their members. But he said there would likely also have to be some “acceptance mechanism” by individuals included in the law for it to be constitutionally valid.

It’s also possible, even probable, that if a union did agree to pension givebacks, it could face decertification elections among its various units. Such a move would likely then exempt the newly non-union employees from any new pension agreement.

In other words, if Madiar’s read is correct, then there may be almost nothing that can be done about the state’s pension payment problems.

Meanwhile, back at the ranch, the House’s five appropriations committees will get to work on the new budget this week, using their chamber’s revenue estimates as a spending cap. So far, the Senate has not come up with its own revenue estimate, but it’s expected to be somewhere around the House’s forecast. But the two chambers aren’t even sure as of yet how they intend to reconcile any differences between their revenue forecasts and appropriations levels.

Quite a few Republicans believe the Democrats’ budget exercise is all for show. The Democratic leaders and the governor, the Republicans predict, will eventually cave to pressure from House and Senate members and activists and eventually agree to use the Commission on Government Forecasting and Accountability’s revenue projection, which was $1.7 billion higher than the House’s projection. They could very well be right, but, so far, House Speaker Michael Madigan seems bound and determined to proceed with the lower figure.

And if all that news isn’t bad enough for you, the state has borrowed almost $300 million more from the federal government for its unemployment insurance program just since the beginning of January. The state’s total federal debt is close to $2.7 billion. The debt was interest free until a federal loan program expired Jan. 1. The interest payments are now starting to pile up.

Indiana just enacted a law to pay off its $2 billion in debt by 2019 which resulted in a 21 percent average cut in unemployment checks and a 13 percent tax increase for business. Illinois’ unemployment insurance rate is already one of the highest in the country.

Welcome to Illinois, where the lousy news just never seems to stop. 

Rich Miller publishes Capitol Fax, a daily political newsletter, and thecapitolfaxblog.com.

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