State's revenue will be up, but not enough to avoid big cuts
SPRINGFIELD — Tax revenue to the state will grow by an estimated $720 million next year, lawmakers were told Tuesday, but it won't be nearly enough to avoid big budget cuts.
One budget-cutting certainty, said David Vaught, who is director of Gov. Pat Quinn's Office of Management and Budget, is a reduction in the state's $14 billion Medicaid program.
"The necessary changes in the Medicaid program are going to be quite substantial," Vaught told a special joint meeting of the Senate and House revenue committees Tuesday. "We know that changes are going to need to be made and those are the really big ones that are going to affect a lot of people."
On Wednesday, Quinn is scheduled to address the Legislature and reveal what has been promoted as a grim budget with widespread cuts.
The governor is expected to slash Medicaid spending by at least $2 billion, which would mean a reduction in state spending of a billion dollars, along with a billion-dollar federal government match.
But even the Medicaid cuts and the revenue growth won't stave off more budget cuts, officials have said. For one thing state pension payments will increase by more than a billion dollars, Vaught acknowledged. Further, the state has an estimated $8.5 billion backlog of late payments.
Quinn's administration projected revenue at $33.94 billion for the year beginning July 1. That's up from revenue estimates of $33.4 billion and $33.1 billion for the current fiscal year, made by two different state agencies.
The Legislature's Commission on Government Forecasting and Accountability projects "conservative" growth next year in the state's three major revenue sources: 2.4 percent in the corporate income tax, 2.5 percent in the sales tax, and 3.1 percent in the personal income tax. The personal income tax projection rate is still below the 15-year annual average of 3.4 percent, said Jim Muschinske, COGFA's revenue manager.
The Legislature is expected to write its own budget this year as it did last spring, potentially ignoring Quinn's spending proposals. House Revenue Committee Chairman John Bradley, D-Marion, said his panel would meet again Thursday to discuss revenue and spending estimates for next year.
The current year's budgeting process earned praised Tuesday from J. Fred Giertz, an economist with the University of Illinois' Institute of Government and Public Affairs. Paraphrasing the late basketball coach John Wooden, Giertz said "when you get behind you don't try to catch up instantaneously."
"The idea is to change your pattern and move to a pattern of discipline and catch up over a period of time. You took the first step last year. But there are still many steps to take."
Giertz also said "there is quite a bit of upside potential for next fiscal year" because Illinois' economy has fallen behind the national economy.
"I think the economy is picking up and that there are better days ahead," he said. "I think Illinois is in a situation where we may be doing some catching up. Not just do well as the whole economy does, but do better relative to the rest of the nation. That gives us the potential next year to grow on a relatively weak base this year. There is quite a bit of upside potential, but that's probably something you don't want to build into your budget at this point."