March 18, 2009—Issue 11

FY 2010 Budget Analysis Edition

Earlier today, the Governor Pat Quinn presented his first Joint State of the State/FY 2010 Budget Address.  With the State facing a two year budget deficit of $11.6 billion, the Governor proposed a budget that includes the following key provisions:

The Operating Budget

·         FY 2009 Budget:  The 2009 budget will end with a $4.3 billion deficit caused by a failure of Revenues of $3 Billion compared to expectations (10% off estimate). The remainder represents increased spending over prior years.

·         The Governor proposed a ten day back to school sales tax holiday in August for clothing items of less than $100 per item and school supplies.

·         Federal Stimulus receipts of $4 Billion will be used to offset the expected deficits over the two year period.

·         Cigarette and Tobacco Products Tax Increase to generate $365 million.

·         Fund sweeps of $450 million are proposed.

·         Although the budget proposes spending reductions of $4.3 billion over the two year period, $2.9 billion represents a reduction in the amount deposited in the state pension funds from the currently required level. The Governor justified the reduction due to the changes he proposed for a new pension benefit structure for new employees.

·         The new pension program would require a later retirement age, a new benefit calculation formula, reduced COLA adjustments, and higher employee contributions. The Governor projects that the changes would reduce the required pension contributions through the year 2045 by $162 billion.

·         Other budget cuts include increased contributions from state employees and retirees for healthcare coverage, furlough days, reductions in grant programs and government operations.

·         The Governor announced the creation of the Taxpayer Action Board to work over the next 60 days to identify further program efficiencies and opportunities to make state government more efficient. The Governor announced that TFI President Tom Johnson will lead the Action Board.

·         Offsetting these cuts is increased spending for Medicaid, Education, and other programs  and a catch up on the backlog of bills owed to medical providers (The stimulus program requires the backlog be reduced to a 30 day payment cycle).

The Capital Budget

The Governor proposed a $26 billion capital program for transportation, school construction, economic development, and state facilities requiring $11 billion of State resources mostly through the sale of bonds. The debt would be serviced by the following increases:

• The tax law changes and the portion of the income tax rate increase attributed to corporations.


• A $20 increase (from $78 to $98) in vehicle registrations.


• A $10 increase (from $10 to $20) in driver’s license fees.


• An increase in vehicle transfer fees.


• $150 million from existing road fund sources.


• 10% of the income tax rate increase historically shared with cities and counties.

The remainder of the financing for the program will primarily come from federal and or local funds.

Following is a link to the Governor’s Budget website:  click here 

And Finally . . .

The Annual TFI Spring Symposium is scheduled for March 24 and 25 in Springfield.  The Symposium will be highlighted with a distinguished group of speakers:  Senate President John Cullerton, Auditor General Bill Holland, House Revenue and Finance Chairman John Bradley, and COGFA Executive Director Dan Long.  Further information regarding the Spring Symposium may be accessed at the following link:  click here.  Further, an on-line registration form may be accessed at this link:  click here.