A press release from State Senator Pam Althoff:
Senate Week in Review: January 21-25
SPRINGFIELD – Halfway through the state’s fiscal year, Illinois’ top financial officer is warning state agencies that they need to put the brakes on spending or face the prospect of running out of money.
Also, State Senator Pamela Althoff (R-Crystal Lake) said the day after the state dodged a financial bullet from one major credit agency downgrade, another weighed in and dropped Illinois’ credit ranking, putting the state in a tie with California for the worst credit in the country.
Illinois Hit with Credit Drop
Standard and Poor’s rating services announced Jan. 25 that they were downgrading Illinois to an “A-/negative outlook” rating, which is the lowest rating the state has ever received from S&P. The rating drop is now the 11th downgrade since Gov. Pat Quinn took office and is more than any other governors combined. The “negative outlook” is a warning that further credit rating cuts are likely.
The company cites the state’s $95 billion unfunded pension liabilities as the main reason for the downgrade, and also mentioned that despite the 67% income tax increase, little has changed with the state’s deficits. In issuing it’s rating, S&P gave a bleak outlook, warning that the best the state can hope for is to hold its ratings at the current low level given the size of its accumulated deficit and the liability challenges it faces.
Another Credit Downgrade Ahead? Unions Call for Summit
Fitch Ratings Services, one of three major credit agencies in the nation, held Illinois’ credit rating steady Jan. 24, despite an earlier declaration that they were putting Illinois on a “negative watch” in anticipation of lowered credit ratings. However, the rating agency cautioned that if there is no action to address the state’s massive pension debt in the next six months, the state will suffer a downgrade. when a major rating agency decided not to downgrade Illinois’ credit rating prior to a major bond sale scheduled for the end of January.
Meanwhile, a coalition of labor unions has asked for a Pension Summit with the Governor and the four legislative leaders in February. Controlling pension costs, Althoff said, is the single biggest challenge currently facing Illinois, which has the worst-funded pension system in the nation.
‘Erin’s Law’ Aims to Prevent Sexual Abuse
In other action during the week, Gov. Pat Quinn signed a law requiring schools to offer age-appropriate sexual assault and abuse prevention and awareness programs for children from pre-kindergarten through high school.
Previously in Illinois, only secondary schools were required to include sexual assault and abuse awareness education.
Known as Erin’s Law, House Bill 6193 is a bipartisan measure named after Schaumburg native Erin Merryn, Althoff said. A victim of sexual assault and abuse as a child, Merryn quit her job three years ago to dedicate her life to helping victims break their silence, educating children about sexual assault and abuse, and preventing them from becoming future victims. She is an author and activist currently working to get Erin’s Law passed in all 50 states.
Comptroller Warns State Running out of Funds
On Jan. 21, Illinois Comptroller Judy Baar Topinka warned that at the current spending rate, Illinois is on track to run out of funding for essential state services, Althoff said. Topinka estimated the shortfall at $1 billion and said funds for some agencies, including the Department on Aging, the Department of Children and Family Services, the state’s workers’ compensation program, and the state employee group health insurance will dry up before the end of the fiscal year on June 30.
Topinka’s warning focused only on the current year’s budget. The previous week, the Governor’s own budget office issued dire predictions for state budgets over the coming three years, Althoff said.
GOP Warned of Budget Problems
The budget shortfall comes as no surprise to Senate Republicans, Althoff explained. At the time the budget was passed by legislative Democrats in May 2012, Senate Republicans warned that it was out-of-balance and unaffordable.
That budget deliberately underfunded some areas of government, such as the cost of public employee health insurance, and also relied on the Governor aggressively implementing other cuts, particularly in the state’s Medicaid program.
Despite a bipartisan agreement for major cost-cutting reforms in the Medicaid program, the Quinn Administration has been slow to implement those reforms, making it unlikely that original savings targets will be met. Similarly, the budget assumed savings from a new union contract that the Governor’s office has been unable to negotiate to date.
Topinka recommended that state agencies create reserve funds from financially-sound programs to offset the anticipated costs. She said funds needed to fill the projected shortfall should be redirected from state agencies that have more cash on hand.
Health Insurance Case Set for Hearing
While it may seem hard to imagine, the state’s budget problems could get even worse depending on the results of a court case set for a Feb. 20 hearing. A judge in Sangamon County will then hear arguments
from four lawsuits challenging a new law that requires state retirees to pay premiums for their health insurance.
Senate Bill 1313 repealed the state’s health insurance subsidy of up to 100% (for retired employees with 20 years or more of service). Four lawsuits were filed challenging the constitutionality of the law. Those suits were consolidated into a single case in September 2012.
‘We are One Illinois’ to Host Pension Summit
On the pension reform front, the “We are One Illinois” Coalition has asked the Governor and four legislative leaders to a summit Feb. 11, at the Illinois AFL-CIO offices in Burr Ridge.
The group’s invitation said it “is intended to serve as a forum to share perspectives, as well as to initiate a structured process by which we can work together to develop legislation that addresses our state’s intertwined problems of inadequate revenues and underfunded pensions.”