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Students complete a math assignment in Jamie Walker’s first-grade class in Northwest Elementary School, La Salle. As a result of state educational funding cuts in recent years, Walker has seen her class size increase while classroom aides decreased. Gov. Pat Quinn will announce his budget proposal for the next year Wednesday.
NewsTribune photo/Amanda Whitlock
By Matthew Baker NewsTribune Reporter and The Associated Press
In a year when numerous local school districts have cut programs or are considering such options, state funding for education and other services remains uncertain. The governor’s budget proposal this week may shed some light on future funding for public programs. “We’ve got things moving in the right direction, but it’s still going to be a year where we’re going to be looking at more cuts,” State Rep. Frank Mautino (D-Spring Valley) said. As Gov. Pat Quinn prepares to deliver his latest budget proposal, there’s no overstating the ugliness of Illinois’ financial condition. Outside analysts in recent months have used phrases like “a deep hole,” a “downspin” and “not fiscally sustainable” to describe it. The New York bond houses have given Illinois the worst credit rating of any state in the nation. The grim outlook persists despite recent efforts to improve it, from a 67 percent state income tax hike passed in the waning hours of the legislative session two years ago to last year’s $1.6 billion in Medicaid cuts. When Quinn presents his latest plan on Wednesday, he’ll have few good options. His office already has projected a cut of about $400 million to education and cuts to public safety and economic development. “We expect the governor is going to have a very difficult time,” said Laurence Msall, president of the Civic Federation, a Chicago-based watchdog group that analyzes and makes recommendations on fiscal issues. Although the state House hasn’t finalized its own budget proposal yet, Mautino said he hopes a plan can be developed to at least keep education funding at last year’s level, which was pro-rated at about 89 percent. State Sen. Sue Rezin (R-Morris) said she expects Quinn to discuss cuts that are “going to be brutal.” Even if the state manages to keep educational funding at the 2012 levels, La Salle Elementary superintendent Dan Marenda said it is tantamount to a cut as school costs increase. With state funding on the decline, some area schools have talked about reducing salary costs by allowing the positions of retiring teachers to go unfilled, which would result in increased class sizes. “It’s very hard just because there’s not enough room in the classroom,” said Jamie Walker, a Northwest Elementary first-grade teacher. In the past she has taught about 18 students in her classroom. This year that number has been around 23. Aside from space running short in her classroom, Walker has seen the number of paraprofessional aides in her classroom drop because of budgetary concerns over the past couple years, making it more difficult to give each student individualized attention. Walker said she used to spend some time reading with each student every morning and now she’s lucky to get to half of the small groups in her class daily. Northwest principal Karen Steindorf said studies have shown the value of small class sizes is greatest in the first few grade levels. With funding concerns such as these, Rezin can understand why school superintendents in her district are interested in a one-cent sales tax increase for school facilities. For such a plan to be effective, she said supporters will need to show that if sales tax is allowed to increase than property taxes will decrease, as happened in Iowa, which previously initiated a similar tax increase to benefit schools. If there’s a ray of hope, Mautino said Quinn will likely show on Wednesday that state revenues are climbing. Mautino expects the new budget will be based on expected revenues of about $35.3 billion, an increase of about $1.3 billion more than last year. Unfortunately, those increased revenues will quickly be eaten up by a few spending areas, in particular. Mautino said expenses for the state’s pension systems are expected to increase by about $900 million this year and Medicaid costs by about $441 million. “In just those two items the amount of money that we’re going to see increased over last year will be used,” he said. Additionally, he said state employee healthcare payments are up about $350 million. It begs the question: How did the state get here? And why is it so bad? Here’s a look at some of the factors contributing to the budget mess, and some of the key issues lawmakers will have to sort out in coming months: Pension crisis No single factor will constrain Quinn more than the state’s pension crisis. Lawmakers have been going around and around on the worst-in-the-nation problem for years without a solution, and nothing has done more damage to the state’s finances. Because lawmakers skipped or shorted payments to public-employee retirement funds for decades, the accounts are now about $97 billion short of what’s needed to fully meet the state’s liabilities. Illinois is now playing catch-up on the payments, but each year the cost continues to grow. In 2008 the payment took up 6 percent of the state’s general funds budget. In the fiscal year that starts July 1, it will be close to $7 billion — more than 16 percent of the general funds budget. Quinn had set a January deadline for lawmakers to fix the problem in hopes of seeing some budget relief. But the options — from raising the retirement age to freezing cost-of-living adjustments and shifting the cost of teacher pensions to local districts — have been politically challenging for lawmakers, who’ve opted instead to let the problem fester. Among the many proposals to address the pension crisis, Mautino said one by state Rep. Jay Hoffman (D-Belleville), in which the state will be held legally liable if they don’t make pension payments and state employees will have to make increased contributions to the pension program, has some good ideas. “Now both sides will be paying what they owe,” Mautino said. Rezin, who is on the state’s pension working group, agreed there are many options being discussed that could achieve the goal of “100 percent funding within 30 years,” but it will take some serious political guts to get them approved. “The problem is that there is not enough votes to get these bills passed at the end of the day,” Rezin said. That means the Democratic governor’s Wednesday budget proposal will account for the full amount the state will owe the pension funds next year. What that does to other areas of the budget, from state parks to prisons or financial aid for college students, could be a powerful motivator for legislators to act — or not. Rezin said by not keeping past spending promises the state is now endangering important services, such as education and assistance for the disabled. “It’s something that’s unacceptable and hopefully people will realize we’re in a crossroads in this state where we need to make difficult decisions in reform,” she said. Deficits and “gimmicks” For years leading up to the recession, Illinois lawmakers balanced the state’s books through “budget gimmicks” that allowed them to spend money they didn’t have, a task force led by former Federal Reserve Chairman Paul Volcker concluded last year. Officials anticipated higher-than-realistic revenues and didn’t account for unpaid bills from current or previous years when approving a new budget. Under Gov. Rod Blagojevich the state also took more than $1 billion from special funds — accounts created for specific purposes, often with their own revenue stream — and used the cash elsewhere, a practice commonly known as a “sweep.” As those practices continued, Illinois accumulated multibillion-dollar deficits and a backlog of unpaid bills. The state has been unable to get caught up, much less get ahead, on what it owes vendors such as social service agencies and health care providers. When the bills are paid, they cost more due to late penalties. So far this fiscal year Illinois has spent $5 billion to pay down bills from prior years, according to Comptroller Judy Baar Topinka. The current backlog is more than $9 billion, and growing. Quinn has said he doesn’t approve of sweeping or borrowing from special funds, so it’s unlikely he’ll call for doing so in the coming budget year. But legislators have eyed the funds in the past, and could do so again. A lagging economic recovery A report prepared by Moody’s analytics in January found that after a promising start to the recovery, Illinois is one of a handful of states in danger of slipping back into recession. The main culprits, Moody’s found, are slow job growth and a soft housing market. Those factors are leading state officials to be conservative when projecting revenues for the coming budget year, Jim Muschinske, revenue manager for the Illinois Commission on Government Forecasting and Accountability, told a House committee last month. The commission predicted the next fiscal year “will be saddled with continued struggles related to employment gains and overall unspectacular economic performance.” Even if the economy takes off, Muschinske said, it took Illinois a long time to get to where it is, and it will take a long time to get out. “Clearly, things are not going to turn around overnight,” Muschinske said. Tax increase Looming over any budget discussion is one date: Jan. 1, 2015. That’s when the individual income tax increase that lawmakers approved in 2011 is set to expire. The increase has generated about $6 billion per year. Quinn’s main focus has been on solving the pension problem, and with him facing re-election in 2014 it would be politically unwise to bring up the subject of extending the tax increase beyond 2015. But at least one legislative leader, Rep. Lou Lang, a Democrat from Skokie and deputy majority leader in the House, already has proposed making the tax hike permanent as a way to deal with the pension crisis, and other lawmakers have talked about it. It remains to be seen whether there will be a significant push for it this year.
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