Week of May 17th., 2010
After adjourning without a budget resolution on May 7th, many speculated that the Speaker might call the House back into session last week in order to continue work on the budget. However, no session days were scheduled as talks continued between the governor’s office and Speaker Madigan as to which of the various options available for a FY11 budget might receive the sixty votes needed to get the job done. The latest rumor is that session may not happen until the week of May 24th as negotiations seem to be taking longer than expected. Whenever we return, I will do my best to keep you updated as to the progress toward a budget resolution.
As you might know by this time, there are simply no real pleasant solutions to the budget mess that Illinois finds itself in. Years of expanding programs, creating new spending on other new government programs while using one time revenue sources to pay for the expansions plus the poor economy has left us in a situation that will require some very tough choices to be made. It looks as though any solution will include deep cuts in spending and possibly more borrowing. Other proposals include additional fund raids, a $1 per pack cigarette tax increase and perhaps even once again skipping all or part of the pension payment due to the state retirement systems.
It is hard to believe that just months after the General Assembly passed what was thought to be a pension reform bill that the possibility of not making the payment to the pension systems is being considered. But the truth is, one version of a budget bill being floated by the majority party actually skips the payment by suspending the continuing appropriation to the pension systems. The huge unfunded liability to the state pension system is largely the result of the fact that the state has not made the required payments to the systems on several occasions. Recently the Democrats turned to this budget option in 2003 and then again in 2005 and 2006. To be fair, Republicans have also used this tactic during tough budget years when they were in charge. The simple fact is that even with reduced or modernized benefits, the payment to the systems is important or the unfunded liability to these systems increase dramatically and future payments are even higher.
If the payments are not made to the systems, it is possible that the five state retirement systems could have to sell assets in FY11 to make Constitutionally guaranteed payments to annuitants. If asset sales occur under desperate circumstances, the systems will likely have to sell off some of the better assets that are owned. Some of those assets might be earning more than the calculated eight and half percent interest that the systems use as an estimate when calculating unfunded liability. Of course, when others know you have to sell assets, the price often goes down too.
One proposal being floated is to borrow the money due to the systems and make the payment so that asset sales do not have to occur. The estimate is that short term pension obligation bonds could be sold at a cost of a little over four percent. The argument is that we are much better off borrowing (bonding) at around four percent than having the systems sell off assets that earn substantially more than four percent. Of course, the other argument is that more borrowing is not the answer to the problems we face. The fact is though that if the payment is made with general revenue and not borrowing, the cuts that we face will be much deeper.
For months now, Republicans have offered other solutions to help solve our budget problems. In a letter dated March 9th to Governor Quinn, House Republicans offered dozens of alternatives to the governor related to the budget situation. These ideas included fiscal reforms to control spending, ideas on how to create jobs in Illinois and Medicaid reforms. Sometimes I hear from folks who wonder if there have been alternative proposals or if all we do is complain about the budget being offered by the majority party. The fact is that we have a list of two pages of reforms, many in legislative bill form that we have offered. Space in this column does not allow for me to list them all, but I would be happy to e-mail, fax or mail you the entire list.
When we do return to Springfield, there are dozens of other bills that are still on third reading or that have been amended in the Senate and await Concurrence in the House. One of the bills I have been working on that would allow schools to waive future unfunded mandates to the school code is now in the House waiting Concurrence to a Senate Amendment. I am hopeful that we will get to those bills as well when we return.
Remember, once we go past May 31st, any action on the budget will take a super-majority in the House and the Democrats are one vote short of that super-majority. But, very few people think that there will be overtime in June since that would bring to the table all of the reforms that I mentioned earlier. Most people do believe that there will be some type of budget passed by May 31st. If that happens and there is no new revenue, which seems unlikely at this point, look for deep cuts, borrowing, and fund sweeps to be part of the solution.
I do want to thank all of you who have written, called and e-mailed me to encourage me and thank me for my no vote against the Chicago voucher bill. There are those who are very upset that the school choice bill was defeated. I understand the frustration and respect those who believe differently on the issue. Some of the attacks against those who voted no on the voucher bill have been nasty and unwarranted. I am proud to represent a legislative district where folks don’t resort to petty political tactics when they don’t win a vote. I am committed to reforms to improve our public schools and reforms are needed, especially in urban areas like Chicago. But, I firmly believe that all children are important and will work to see reforms that will benefit every child. Thanks again for the huge number of people who have affirmed my no vote on this legislation.
Once we return and there is action on the budget
and other legislation, I will report back to you. In the meantime, I need to
hear from you this week if you have an opinion on the budget or any other issue.
You can reach me at: P.O. Box 125, Hutsonville, IL 62433, call
me at 618-563-4128 or 217-558-1040 or e-mail me at reddyunit1@aol.com. You
can also read more on my web site: www.peopleforeddy.com or and follow
me on Twitter at www.twitter.com/RepEddy and www.tweetillinois.org.