Bloomberg News

Illinois’s Quinn Proposes $36 Billion Budget Without Tax Boosts

March 06, 2013

Illinois Governor Pat Quinn

Governor Pat Quinn, a Democrat from Illinois, called the budget “the most difficult” he has had to submit. Photographer: Daniel Acker/Bloomberg

Illinois Governor Pat Quinn presented a 2014 budget proposal that reflects the fiscal noose of underfunded pensions strangling education and other programs.

The Democrat blamed lawmakers for failing to address the retirement debt as he proposed a $35.6 billion general-fund budget. The spending plan, which tallies $62.4 billion when all sources of revenue are included, doesn’t propose tax increases. It would be 5.6 percent, or $1.9 billion, larger than the budget he signed in June.

“Our budget is squeezed more than ever and that will continue until we stop it,” Quinn, 64, told lawmakers in Springfield.

As U.S. states show signs of recovering from the 18-month recession that ended in 2009, Illinois lags behind with a $97 billion unfunded pension liability and more than $9 billion in unpaid bills.

Quinn, who has repeatedly urged the Democratic-controlled General Assembly to restructure the retirement system, scolded legislators for their torpor.

“Illinois taxpayers are losing patience with your lack of action,” he said. “It’s time for you to legislate. So take a vote.”

Crisis Tone

While the crisis tone of Quinn’s remarks isn’t new, the fiscal squeeze of the state’s own making is tightening as pension obligations are projected to grow by $900 million in the budget year beginning July 1, Quinn said. That would account for about one in every five dollars from the general fund, meaning less money for schools, health care and public safety, even as tax revenue grows at anticipated levels.

Quinn called the budget “the most difficult” he has had to submit. Saying taxpayers shouldn’t bear the burden of fixing the pensions, the governor called for the suspension of 3 percent annual cost-of-living increases in retirement payments until the system is stabilized. He said those payments are “unsustainable.”

At the same time, the 2011 income-tax increase that brought in about $15 billion over the past two years is set to expire at the end of 2014. And lawmakers’ failure to fix the pension system has led to downgrades in the state’s credit rating.

Illinois postponed a $500 million offer of general- obligation bonds planned for Jan. 30, citing unfavorable market conditions after Standard & Poor’s cut its credit rating to A-, six levels below AAA. The move left Illinois with the lowest grade among states.

Cost Crowd

“The inescapable truth is the enormity of our pension costs continues to crowd out essential services,” Senate President John Cullerton said in a statement.

The Illinois Federation of Teachers criticized Quinn’s budget, saying it sets up a “false choice between pensions or pencils.”

“Springfield lawmakers created the massive pension debt by skipping payments and borrowing more,” the union that represents 103,000 teachers and paraprofessionals said in an e- mailed statement. “We are not to blame, and our students shouldn’t suffer.”

To contact the reporter on this story: Tim Jones in Chicago at tjones58@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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