Unbalanced Budget Response Act would allow Rauner to make cuts to balance the budget
Illinois House Bill 3868 would give Gov. Bruce Rauner the authority to trim costs and reorder the state’s spending priorities to balance the budget.
Illinois is drowning in red ink. State and local government retirement debt now totals $267 billion, or $56,000 per Illinois household. The state’s unpaid bill backlog has climbed to nearly $12.5 billion. And the June 2016 six-month stopgap budget provided for $8 billion more in spending than the state collects in tax revenues. Illinois has the worst credit rating in the nation, and was downgraded by Fitch Ratings to two notches above “junk” status in February, in large part due to “the financial implications of spending far in excess of available revenues,” according to the ratings agency.
Although the Illinois Constitution requires the state to have a balanced budget, Illinois politicians haven’t balanced a budget without resorting to borrowing and accounting gimmicks since 2001. Illinoisans have some of the highest state and local tax burdens in the country, but the state’s misplaced spending priorities, which place funding for government worker pay and retirement costs (including lawmaker compensation) above everything else, have led to skyrocketing debts, budget deficits, and a crowding out of funding for needy and disabled Illinoisans and students and seniors.
House Bill 3868, introduced by state Rep. Jim Durkin, R-Western Springs, would allow Gov. Bruce Rauner to reprioritize and cut spending to balance the state’s budget, as the Illinois Constitution requires. If the General Assembly sends the governor an unbalanced budget for fiscal year 2018, this bill would enable the governor to refocus the state’s spending on those most in need and to align the cost of government with what taxpayers can afford. The bill also includes important safeguards to prevent any abuse of this expanded executive authority.
How HB 3868 works
Under HB 3868, the governor could:
- Set aside money as a “contingency reserve,” which would allow the state to pay for core government services. However, amounts reserved for debt service and state aid to education and early childhood programs could not be used as contingency funds.
- Transfer unspent money from special funds to the general revenue fund, with certain exceptions such as federal trust funds and state retirement funds
- Modify statutory transfers out of any fund, except for payments for debt service or to the state’s road fund
- Reduce payment rates for service providers
- Delay payments for statutory continuing appropriations (except for debt service), such as lawmaker compensation
The bill further provides that the amounts saved or reduced by the governor through the contingency reserve, payment modifications, payment delays, and transfers from special funds shall not exceed the state’s expected budget deficit. Thus, the governor can only use these measures to arrive at a balanced budget, not to create a budget surplus.
The authority granted the governor under HB 3868 would expire July 1, 2018.
The regular budget process has broken down
Ordinarily, the General Assembly passes a budget, and the governor vetoes it or signs it into law. If a budget is enacted, the governor and executive branch agencies then carry out the spending allowed for under the budget, and administer continuing appropriations, such as state lawmaker pay, as well as special funds.
These are not ordinary times for Illinois, however. The state has not had a full fiscal year budget since 2015, and since then, state operations have proceeded under a patchwork of court orders, continuing appropriations, special funding laws and a stopgap budget.
Members of the General Assembly have not sent a full-year budget to the governor since he vetoed the budget they passed in June 2015, because it was unbalanced by $4 billion. In May 2016, Illinois House Speaker Mike Madigan pushed through a budget that would have overspent by $7 billion. Although that budget passed the House, the Illinois Senate rejected it. Budget negotiations in the General Assembly continue, but an agreement for a full-year balanced budget – or any budget at all – has yet to materialize.
The February credit downgrade explanation by Fitch specifically mentioned the state’s political dysfunction, as well as the financial crisis caused by high debt and unsustainable deficit spending, as reasons the state’s credit rating has continued to drop.
It is against this backdrop that Durkin proposed HB 3868. In the event another unbalanced budget is passed by the General Assembly, the governor would be empowered to uphold the state constitution’s budget requirements while protecting taxpayers and those who rely on core government services.
HB 3868 has safeguards to prevent abuse of executive power
It makes sense to worry about concentrating more power in the hands of Illinois’ executive branch. State agencies such as the D have already used their regulatory authority as a guise to rewrite laws. And a distressing number of Illinois governors have ended up behind bars for corruption and fraud.
HB 3868, however, has safeguards to prevent abuse of the expanded budget-cutting authority. First, the governor would not be arrogating more power to himself, but rather exercising limited budget-balancing authority at the direction of the General Assembly. Moreover, this expanded power is intended to bring the state in line with the explicit requirements of the Illinois Constitution and to rein in government, not expand government at the expense of private citizens.
Second, the actual power granted is limited to eliminating a budget deficit. Amounts cut by the governor pursuant to HB 3868 cannot exceed the budget deficit; the governor could not go on a cost-cutting spree to create a surplus.
Finally, the governor’s spending-reduction authority is time-limited. The authority granted under HB 3868 expires July 1, 2018, and would not apply to future governors.
The right thing to do is for the General Assembly to pass a balanced budget that has no harmful tax hikes and that prioritizes spending on core government services and Illinoisans in need. But if the General Assembly will not do this, HB 3868 would enable the governor to rein in costs and realign spending priorities on behalf of all Illinoisans.