Governor candidates vary on approaches to fund state’s needs

Posted 10-15-2006 at DailyHerald.com

Governor candidates vary on approaches  to fund state’s needs

http://www.dailyherald.com/search/searchstory.asp?id=238711

By Eric Krol
Daily Herald Political Writer
Posted Sunday, October 15, 2006

Editor’s note: This is the seventh in a Sunday series of issue stories on the governor’s race. Past installments are available at dailyherald.com

The math on Illinois’ budget situation the next four years isn’t pretty.

State worker pension costs are expected to increase almost $700 million per year, the cost of health care for the poor will increase $275 million per year and debt service to keep all of the state’s borrowing afloat will cost an extra $70 million a year, according to the Illinois comptroller’s office.

Those three categories will eat up about $1 billion a year — around the same amount of extra money the state stands to collect through 2010. That means as the state’s finances now stand, there’s no money to meet spending pressures for schools, roads or public safety.

To address the problem, Republican governor challenger Judy Baar Topinka of Riverside says she’d give Chicago a casino, allow other casinos to expand and wring savings out of the state’s Medicaid program. She’s not ruling out an income or sales tax increase, but calls them a “last resort.”

Democratic Gov. Rod Blagojevich of Chicago isn’t saying how he’ll make the state’s ends meet if he’s elected to a new term, instead pointing to his previous record in achieving what he says is a balanced budget through borrowing, raising business fees and emptying special funds. Blagojevich is ruling out an income or sales tax increase as he did four years ago.

Many budget experts give Topinka credit for providing details, even if they’re not entirely sold on the specifics. Those same folks don’t have much praise for the governor, however.

“I think it’s caused long-term problems for the state,” said Charles N. Wheeler III, professor of public affairs reporting at the University of Illinois at Springfield who has followed the budget for four decades.  “I think it continues to sell the notion that there is a free lunch. That we can continue to spend at this level without having to legitimately raise the revenue to sustain it.”

Green Party candidate Rich Whitney of Carbondale is promising a 67 percent increase in the state income tax for schools with the promise of a 25 percent property tax reduction. He also wants to add services to the state sales tax.

Blagojevich’s record

Blagojevich won election four years ago promising not to raise the state sales or income tax. It’s a promise he’s kept and vows to repeat if re-elected, but critics both question how he kept it the first time and doubt he’ll be able to do it again.

The governor inherited a budget mess from his predecessor George Ryan that he likes to tout as being a record $5 billion shortfall, although Republicans put the figure closer to $2 billion to $3 billion.

To dig out of the hole, Blagojevich raised dozens of business fees, some of which Topinka says she’ll try to roll back. He also took money from hundreds of special-purpose funds earmarked for things like building parks and disciplining doctors. Some of those moves are being challenged in court.

Blagojevich also skipped $2.3æbillion in state worker and teacher pension payments the past two years to bankroll more spending on social programs that he now touts in campaign ads.

A look at state spending shows Blagojevich actually has spent more than predecessor Ryan. Under four years of Ryan, the state’s combined spending from its general checkbook was $89 billion, said Wheeler, citing comptroller records. Under Blagojevich, it’s $97.2 billion, Wheeler added.

The governor also has increased the state’s debt to try to balance the budget. In 2003, he borrowed $10 billion to make state pension payments with the idea that investing part of the proceeds would allow him to make enough money to repay the loan.

Blagojevich argues the state already owed the money as part of its massive pension debt. Now, however, the state doesn’t owe the money to itself — it owes it to the folks who lent Illinois the money, thus increasing the state’s debt.

Has the state budget hole been filled under Blagojevich? A Rockford Register-Star analysis, based on comprehensive annual financial reports published by each state, showed Illinois with a $3 billion deficit at the end of fiscal year 2005, one of only three states with a deficit.

When asked how he’d meet the state’s responsibilities in a second term, Blagojevich responded to a Daily Herald questionnaire by pointing to his first-term record.

“I’ve done it, and will if re-elected continue to do it, without increasing the income or sales tax,” Blagojevich responded.

If Blagojevich follows his first-term plan, that probably means trying to sell state assets and skipping worker pension payments. The governor says he’s not interested in selling the tollway, but he has not said he’d veto such legislation if it reached his desk.

Wheeler warns, “Pretty soon you’re going to run out of these rabbits in the state.”

The governor wants to sell the Illinois Lottery to raise more money for education, but has a $1 billion shortfall after four years. Blagojevich also has flirted with gambling expansion during his first term — floating the ideas of adding the bingo-like game of Keno at bars and restaurants, and allowing existing casinos to expand.

Blagojevich did not offer any further reforms to the state’s under-funded pension system in his questionnaire.

Topinka’s plan

Unlike Blagojevich, Topinka has told voters what she’d do to balance the budget if she’s elected. To the extent that Topinka’s campaign has a theme, getting the state’s finances under control has been it.

The three-term state treasurer wants to raise $1.5 billion a year from a new Chicago casino and generate $1 billion in one-time cash from allowing casinos like Elgin’s Grand Victoria to expand. Various budget reforms would save $5.5 billion, with the bulk of the savings coming from a revamped Medicaid program that would require special federal government permission.

That Medicaid proposal has opened her up to criticism by Blagojevich, who argues she’ll be cutting service to those getting health care from the state.

Wheeler said he’s unsure if Topinka’s plan will be able to sustain the state, but called it more realistic than Blagojevich’s approach.

“She talks about actually holding down the line on some of these things. Restricting the growth on Medicaid. That’s more realistic,” he said. “If you’re not going to raise taxes, it’s more realistic to say you’re going to cut spending.”

When asked how to reform the state worker pension system, Topinka slammed Blagojevich for skipping the pension payments. She also said she would veto legislation that adds new benefits to the system because such “sweeteners” make the pension debt picture worse.

Green Party plan

Third-party candidate Whitney wants to raise the state income tax rate from 3 percent to 5 percent — a 67 percent hike — to pay for more school spending. He’d also add some services to the state sales tax without increasing the overall rate.

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