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April 9, 2003

Governor’s budget delivers on promise to boost education, health care and public safety spending; solves $5 billion fiscal crisis
No hike in state sales or income taxes, consumer fees
Budget cuts $1 billion in waste and inefficiency

SPRINGFIELD, ILL. – Gov. Rod R. Blagojevich today unveiled a budget blueprint for next year that delivers on his promise to boost education, health care and public safety spending without any increases in the state sales or income taxes or consumer fees.

Speaking to a joint session of the House and Senate, the governor presented his first budget, one that solves a $5 billion budget crisis without an increase in the income or sales tax. Overall spending is down $345 million from the current fiscal year – the first time since 1981 that state expenditures will have declined.

“We could have used this crisis as an excuse to take the easy way out and resort to the tired old approaches of raising taxes and slashing critical programs,” Blagojevich said. “We did not do that. We protected the people of Illinois. We found ways to do more with less.”

Conceding the budget calls for a great deal of shared sacrifice, the governor, however, pointed out that the cuts he proposed and the revenue his plan generates are “reasonable, wise and prudent” and something the people of Illinois will embrace.

Blagojevich said the nearly $5 billion budget deficit he inherited was the result of rising health care costs, a tax structure based on industrial economy that has become a service economy and an economic downturn to which state government did not react quickly enough. These problems were made worse by shady accounting, rampant overspending and a pension fund obligation larger than that of any other state in the nation.

While the deficit was seen by some as an insurmountable hurdle in the absence of higher taxes and critical spending cuts, the governor saw it as an opportunity to bring about fundamental changes that the people of Illinois demanded when he was elected last November and “shake up a system in desperate need of reform.”

“If we do this right, we will do more than just balance the budget,” the governor said. “We will regain the trust and confidence of the people with fiscally responsible and honest management.”

Blagojevich said the only way the state can work its way out of the current fiscal mess is through bipartisanship.

“The problems we confront are way too big for us to be mired in petty partisan politics,” the governor said. “Turning this fiscal crisis into the an opportunity to regain the public confidence means all of us working together – both chambers of the legislature, both sides of the aisle. The stakes are too high to do anything else.”

A clear sign of a new, bipartisan spirit came last week with the passage of one of the cornerstones of Blagojevich’s strategy to balance the budget. The $10 billion pension bond financing plan, which will save an estimated $1.9 billion in this fiscal year and next, won super-majority support in both the House and Senate. It increases the state’s general obligation bonds authority and grants permission to use those proceeds to make pension payments to five state retirement systems that cover 590,000 current and retired employees.

Blagojevich proposed a budget of $52.4 billion for the fiscal year that begins July 1, compared with an estimated $52.8 billion in appropriations for the current fiscal year, which ends June 30. The governor is proposing an increase to $23.1 billion from $22.4 billion in General Revenue Fund appropriations.

Other budget highlights follow:


The governor proposed boosting the general state aid per student by $250 to $4,810, an increase larger than those in the prior three years combined and the highest since 1999, at a cost of $235 million. He also pledged to keep increasing funding until it reaches $5,665, the level recommended by the Education Funding Advisory Board. As outlined in his State of the State speech last month, Blagojevich included $29.9 million for early childhood programs to allow schools and community-based centers to provide services to an additional 8,230 at-risk children. This is the first installment of a three-year plan to bring early childhood services to an estimated 25,000 at-risk children who come from poor families or who have disabilities.

The budget includes an $87.5 million increase for school programs mandated by state law, such as special education -- $42 million will replace cuts from last year and $45 million will go to new spending. The budget makes good on a promise to make prompt payment on the final state aid payments to schools in June, calls for development of a technology system to allow parents to monitor their child’s progress in school, provides school districts with more flexibility to cope with financial issues by consolidating 24 grant program and service lines and proposes eliminating the regional offices of education at a savings of $20.2 million. School construction is funded at $500 million, the same amount as this fiscal year.

Higher Education

Plans for higher education are three-fold: cut administrative costs, protect financial aid and implement a strategy to curb tuition costs. Working with universities, $112 million in reductions have been identified to go towards deficit reduction. The governor also promised not to repeat the previous administration’s mistake in slashing the Monetary Award Program, a need-based award for college students. The governor will seek legislation to stop tuition increases at any public university students who completes their degree in four years. The tuition plan calls for a 5 percent increase for incoming freshmen; the resulting tuition amount would not change during their four years in school. Base subsidies to private schools would be ended, saving $21 million, and tuition costs for out-of-state students would be hiked to the same level as universities in other states to generate $20 million. Capital expenditures on university facilities will be limited to $48 million in repair and maintenance work, less than one-fourth of last year’s spending.

Streamlining Government

Through the consolidation of agencies and of administrative and management functions, the state will be able to streamline government services, eliminate unnecessary positions, do a better job of delivering services and save $40 million. Included in the plan is the consolidation of 11 agencies into five, as well as combining eight bonding authorities. The operations of the Department of Lottery, Liquor Control Commission and Racing Board are to be merged into the Department of Revenue, the Department of Nuclear Safety will be moved to the Illinois Emergency Management Agency and the Pollution Control Board will be merged into the Illinois Environmental Protection Agency. Inaddition, legal services, internal auditing, information technology, facilities management, procurement, and the collection and administration of fees will be moved from state agencies, saving $132 million. The governor also proposed creating shared office service centers to provide eight smaller state agencies with shared office space, equipment and administrative staff, including accounting and payroll.

In addition, Blagojevich said that state vehicles will be used only for state business. The governor plans to reduce the state’s vehicle fleet by more than 1,700 this fiscal year and next. The state will save $11.4 million by canceling auto purchases, auctioning surplus cars, reducing vehicle operating costs and eliminating the Department of Corrections’ plane.

In February, Blagojevich had legislation introduced to streamline the number of boards and commissions and to cut back their spending by 60 percent, saving $5 million. The budget eliminates 11 boards whose functions were redundant, reduces the number of members on many others, slashes member per diems and requires full-time work from those who hold full-time positions.


The state currently collects non-consumer fees to cover costs for relevant services. Many have not been adjusted for decades and, consequently, they do not reflect the current cost of services they support and are well below similar fees in neighboring states. The governor’s budget begins to address that imbalance by identifying the largest non-consumer revenue generating fees that need to be changed to reflect the impact of inflation on fee-supported programs as well as other cost increases over time. Non-consumer fee increases will net an additional $342 million in state revenue. Blagojevich said more corporations that violate pollution codes can be fined to fund the Illinois Environmental Protection Agency. The governor proposed that polluters pay $21 million to clean up the hundreds of Illinois lakes and rivers they contaminate with their dumped garbage and industrial waste. Secretary of State fee increases are expected to generate $103 million and include from lobbyist registrations, personalized plates and filing of annual reports.

The budget also assumes $350 million from the sale of the 10th riverboat gambling license. Admission prices for gambling boats would increase from $3 to $5, raising $38 million.

The governor recommended closing a dozen loopholes in various tax codes, including the exemption for buying and selling private planes, graphic arts’ equipment and out-of-state purchases of natural gas by large in-state users, saving the state more than $320 million.

This budget places a reoccurring service charge on about 350 special interest funds like the Illinois Tourism Fund, the Illinois Beach Marina Fund and the Grape and Wine Resource fund to cover state services such as processing warrants, accounting, budgeting, billing and investing. The governor also suggested $144 million in unobligated balances in these funds be transferred to the General Revenue Fund.

State Employees

Blagojevich said the state would not be able to offer raises to managers, and the 12-year practice of the state picking up non-union employee contributions to the pension fund system would be ended, saving $42.6 million. The total number of state employees under the governor is set at fewer than 63,000 compared to the 69,000 who were on the payroll in FY03. By limiting agencies to replacing just one in three of the employees lost to early retirement, the state will save $60 million in FY04 alone. Another 4,000 employees are expected to retire this year. The governor also ended a system that allowed state employees to stockpile vacation days that eventually cost the state hundreds of millions of dollars.

Public Safety

The governor’s proposal provides funding for a variety of public safety efforts. To strengthen the state’s ability to respond to the threat of terrorism, the budget includes $1 million for the creation of a 24-hour, seven-day-a-week Terrorism Intelligence Center in Springfield that will be operated by the Illinois State Police and the merger of the Department of Nuclear Safety into the Illinois Emergency Management Agency to better coordinate monitoring of nuclear power reactors.

The budget includes $24 million to reopen Sheridan Correctional Center as a national model to deter drug crime; $2 million for Project X that would use a statewide tracking system to identify where the club drug Ecstacy is being sold and to crack down on its use; $6 million for Operation Spotlight, which will increase the number of parole officers by 14 percent, thereby tightening supervision of those recently released from the state’s correctional system.

The governor also has made $5 million available to aid families of National Guard members and reservists who have been activated to support military efforts in Iraq and to combat terrorism and $37 million for personal protective equipment for first responders.

Capital Expenditures and Asset Management

The capital budget of $10.7 billion in state funds is down $1.6 billion, a 13 percent decrease from FY03. School construction received $500 million in the governor’s proposal, the same amount dedicated this fiscal year, and capital expenditures for public universities is $57 million. The governor proposed a “sales-leaseback” of the James R. Thompson Center (JRTC) in Chicago, which will generate $200 million in cash. In a typical sales-leaseback arrangement, state-owned property is sold to a new owner at its fair market value and immediately leased back to the state for as long as it needs that facility. The governor also said, if a buyer wanted to make an outright purchase of the JRTC, he would be willing to relocate state offices to less expensive office space. Also suggested is the sale of the Illinois State Toll Highway Authority administrative building in Downers Grove to generate about $30 million. The governor’s road program – with a price tag of $1.7 billion – is $50 million less in transportation bonds than what is being spent this fiscal year. The governor’s pension bond financing plan involves selling $10 billion in general obligation bonds at low interest rates and using a portion of the proceeds to pay the state’s $1.6 billion pension contributions in FY04.

Health Care

The governor’s plan strengthens the state’s commitment to providing health care for uninsured working families and their children, expands seniors’ access to prescription drugs and doubles funding for breast and cervical cancer screening. Through the creation of a special drug advocate, Blagojevich estimates the state can save $120 million by finding better prices for the nearly $2 billion in prescription drugs purchased annually by state agencies and $49 million by purchasing generic substitutes for brand name drugs. As outlined in the State of State speech, the governor called for spending $23 million to expand FamilyCare eligibility to 65,000 working parents and an additional $4 million to expand KidCare eligibility to 20,000 more children. The budget also includes money to allow nearly 195,000 children from low-income families to access child care at affordable prices. Funding is increased for the Home Services Program by $56 million, to help 24,000 individuals with physical disabilities, developmental disabilities, mental illness, AIDS and traumatic brain injury remain at home rather than be institutionalized. Medicaid funding will increase by $689 million to allow payments to hospitals and nursing homes within 60 days of when care was provided.

Economic Development

Blagojevich wants the state to be proactive in developing opportunities for small business, creating jobs and keeping Illinois competitive in the global economy. Creating and promoting ideas to strengthen existing industries, investing in technology development and raising the minimum wage to help struggling families are all instrumental if the governor is to move the state forward. Central to his plans are creation of the $200 million Illinois Opportunity Fund that uses private investments to bring much-needed venture capital to the state; development of six new Centers for Entrepreneurship to provide, training, tools and resources to help businesses get started; $800 million in financial incentives to encourage power companies to use advanced technology so they can burn Illinois coal; and the consolidation of 30 economic development and job training programs within the Department of Commerce and Economic Opportunity, saving $16 million.

Budget Process Reforms

The governor pledged to initiate a “truth in budgeting” philosophy to establish a simpler, more straightforward budget process and a budget document that will be more understandable to the public and to legislators. Leading the way will be the Governor’s Office of Management and Budget (GOMB), formerly called the Bureau of the Budget, which will serve as the state’s internal management advisory staff to assist agencies in delivering services at a lower cost. GOMB will build upon the state’s current performance review system, which links strategic planning, quality improvement and measures to produce better budget management decisions. A management corps of pro bono private sector consultants will assist GOMB and the governor’s Council of Economic Advisors, who were appointed in January, to oversees the state’s revenue forecasting. The new budget process will encompass multi-year projections of revenues, expenditures and debt, and all agencies under the governor’s control will be required to set aside a 2 percent reserve of their general funds as a cushion for revenue shortfalls.

Agriculture budget ensures closer inspection of animal diseases

Banks and Real Estate staffing reduced

CDB budget calls for decreases in operations and capital projects

Consolidation, increased emphasis on enforcement of tax laws highlight Revenue budget

Corrections budget funds reopening of Sheridan Correctional Center

DCEO budget proposal to enhance workforce training, increase business investment

Department of Human Rights tightens belt; commits to enhancing public service

Financial Institutions’ budget reflects governor’s goal of deficit reduction

Fire Marshal’s budget focuses on safety and education, promotes efficiency

Governor proposes DCFS budget to meet new child welfare challenges

Governor recommends $18.6 million Arts Council budget

Governor recommends funding changes for Illinois Environmental Protection Agency

Governor’s budget calls for Professional Regulation to be funded entirely by license fees

Governor’s budget for CMS consolidates agency services

Governor’s budget proposes funds for bioterrorism, women’s health and HIV/AIDS in minority communities

Governor’s budget protects core services for seniors

Human Services budget increases funding for child care and for persons with disabilities and substance abuse problems

IDES 2004 budget reflects state streamlining

Illinois State Police budget calls for public safety increases, administrative decreases

Insurance budget ensures continuation of essential services

Labor budget reduced nearly 10 percent

Merger of the state’s emergency management agency with Nuclear Safety nets savings

Military affairs budget includes funding for military family relief fund

Natural Resources budget focuses on safety and keeping parks open

New Abraham Lincoln Presidential Library included in Historic Preservation Agency budget

Public Aid budget fulfills governor’s commitment to protecting health care for Illinois’ families and seniors

Transportation budget allows IDOT to maintain infrastacture and plan for future

Veterans’ Affairs budget maintains services for Illinois veterans


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